New Home Plunge Was Biggest Drop Since 1990
Some housing bubble news from Wall Street and Washington. “Sales of new one-family houses in December 2006 were at a seasonally adjusted annual rate of 1,120,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent (±11.7%)* below the December 2005 estimate of 1,259,000.”
“The seasonally adjusted estimate of new houses for sale at the end of December was 537,000. An estimated 1,061,000 new homes were sold in 2006. This is 17.3 percent (±3.4%) below the 2005 figure of 1,283,000.”
“Last year’s plunge in new home sales was the biggest drop since a 17.8 percent drop since the recession year of 1990. Sales of existing homes fell by 8.4 percent to an annual rate of 6.48 million units, it was reported Thursday. That was the biggest decline in the sale of previously owned homes since 1989.”
From Reuters. “Home builder M.D.C. Holdings on Thursday posted a fourth-quarter loss after charges for asset impairments and project cost write-offs, and said new home orders fell during the quarter. It said after-tax charges in the fourth quarter for asset impairments and project cost write-offs were $56.5 million and $4.1 million respectively.”
“It said its new home orders reflect a slowdown in the housing market, with 1,571 orders for new homes in the 2006 fourth quarter, with an estimated value of $515 million, compared with 2,405 homes with an aggregate value of $831 million a year ago.”
“Mandalay Mortgage, Woodland Hills, Calif., a top-30-ranked subprime wholesale originator, is closing its doors at the end of the month and will stop funding loans, sources familiar with the situation have told.”
“Millennium Bankshares will wind down its mortgage banking business to focus solely on core banking services, the company announced Thursday. The Reston-based bank has seven branches in Virginia, including five in Northern Virginia.”
“‘We were concerned about future volatility in earnings as a result of the soft housing market and wanted to eliminate, going forward, the risks normally associated with mortgage banking activities,’ says Carroll Markley, Millennium’s CEO, in a statement.”
“IndyMac Bancorp Inc., a big Southern California mortgage specialist, on Thursday said fierce competition and worsening credit quality may push 2007 profit well below analysts’ forecasts. The Pasadena-based parent of IndyMac Bank also said it has frozen all salaries, stopped hiring non-revenue-generating personnel, (and) plans to outsource 50 percent more jobs by year end.”
“‘People have been predicting disaster in the housing market, and for much of our competition, it is,’ CEO Michael Perry said.”
“The problems affect many lenders in California, which was a big driver of this decade’s housing boom, and which analysts say has many overstretched borrowers. About 45 percent of IndyMac’s mortgage lending is in the state, Perry said.”
“Lower borrowing demand ‘is creating fierce competition and affecting margins,’ Perry said. ‘You have excess capacity; a severely inverted yield curve; slowing housing prices, starts and sales; and credit losses returning to more normal levels.’”
“Loan losses rose to $9 million from $5 million in the third quarter. ‘We expect (loan loss) provisions will likewise be elevated in 2007,’ wrote Lehman Brothers Inc. analyst Bruce Harting.”
“IndyMac said 71 percent of its fourth-quarter mortgage loans were interest-only or adjustable-rate.”
The Indianapolis Star. “A California lender has filed a lawsuit against HMS Title Services of Greenwood and Affordable Lending of Terre Haute, contending their negligence forced it to foreclose on six Westfield and Indianapolis houses.”
“At least three of IndyMac’s Westfield loans appear to trace to Tamara E. Penn, who also is at the center of a federal grand jury inquiry into a massive real estate deal that failed on the Eastside. It pushed an entire neighborhood in the Windsor Village area off 21st Street into foreclosure last year.”
“The failed deal also led California lender Countrywide Bank to file a federal lawsuit in Indianapolis in June, contending it was a victim of a real estate conspiracy.”
The New York Times. “Wall Street’s big bet on risky mortgages may be souring a lot faster than had been previously thought. The once booming market for home loans known as subprime mortgages, is coming under greater pressure. The evidence can be seen in rising default rates, increasingly strained finances at mortgage lenders and growing doubts among investors.”
“Wall Street firms, which had helped fuel the growth in the market by bankrolling and investing in subprime mortgage lenders, have begun to pinch off the money spigot.”
“‘Pick a company — small, medium or large — they all have the same problem: capital,’ said Marc A. Geredes, who runs a small mortgage company in San Jose, Calif. ‘The economics of the business do not make sense right now.’”
“In one indication that investors are losing their taste for mortgages, hedge funds that specialize in mortgage-backed securities had an outflow of $1.8 billion in 2006, down from an inflow of $1.8 billion in 2005, according to Hedge Fund Research. It was the only category of hedge funds to have a negative flow for the year.”
“‘The pendulum swung too far the other way,’ said Guy D. Cecala, president of Inside Mortgage Finance, which publishes data and newsletters on the industry. ‘At some point, it comes back. But what it usually takes is a little blood on the road.’”
“If that is indeed how the story will play out, William D. Dallas, the founder and CEO of recent bankrupt Ownit, a lender based in Agoura Hills, Calif., would argue that his company has become an early case of road kill.”
“Mr. Dallas acknowledged that Ownit, like other subprime lenders, saw a sharp increase in defaults from new borrowers in 2006, compared with 2005 and 2004 — years when few loans showed early losses. But he said the defaults were still low at 2 percent and insisted that most of those borrowers had simply missed one or two payments because they were confused about where to mail payments, because many of them had two mortgages on their homes.”
“Mr. Dallas acknowledges that standards were lowered, but he placed the blame at the feet of investors and Wall Street, saying they encouraged Ownit and other subprime lenders to make riskier loans to keep the pipeline of mortgage securities well supplied.”
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
‘For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, Rep. Barney Frank, who believes ‘you shouldn’t lend (home buyers or refinancers) more than they can afford to pay back, and you don’t lend them more than their house is worth.’
‘According to Frank, ‘you can’t just make a loan and then sell it’ to investors, forget about it and expect no legal liability for putting people into a mortgage that never made sense for their situation.’
Looking at the PDF file available at the Commerce Department link, this is the ‘for sale at end of period, completed’ column, in thousands of houses:
115 12.05
119 01.06
125 02.06
130 03.06
131 04.06
128 05.06
135 06.06
142 07.06
150 08.06
159 09.06
168 10.06
170 11.06
172 12.06
That’s because Congress has a new top legislator for mortgage matters, Rep. Barney Frank, who believes ‘you shouldn’t lend (home buyers or refinancers) more than they can afford to pay back, and you don’t lend them more than their house is worth. According to Frank, ‘you can’t just make a loan and then sell it’ to investors, forget about it and expect no legal liability for putting people into a mortgage that never made sense for their situation.’
I am happy to see that at least one politician is bright enough to see the light.
After the fact, of course.
Is Barney Frank that homosexual congressman with no teeth?
I don’t know, but he could make some good $$$ on Hollywood Blvd.
People with a thing about gays must find it ironic that a gay congressman is the only one with enough balls to attack the REIC.
I don’t know if he is gay and I don’t care. I saw him a couple of weeks ago talking about something unrelated to the bubble but he impressed me as a really sharp minded guy.
I don’t care either but he seems like a bandwagon chaser to me. Stupid regulations are the last thing needed but I would be much more impressed if he was proposing them 2 years ago.
He didn’t have any power two years ago.
I wish we could say that for all the politicians.
My point, having heard him speak on several issues, was that his proposals all seemed like the horse-has-left-the-barn variety.
Since he has power now, shouldn’t he be introducing legislation to prevent rational headed savers from having to bail out all those stupid FB’s? That’s the next crime that’s going to be committed, shouldn’t he do something to protect all us helpless victims?
He’s a bandwagon chaser until proven otherwise.
“People with a thing about gays must find it ironic that a gay congressman is the only one with enough balls to attack the REIC.”
Truer words never spoken. I’m sure the same standards are applied to the straight shooting repubs who were in charge of Congress the last 6 years. NOT.
“Stupid regulations are the last thing needed but I would be much more impressed if he was proposing them 2 years ago.”
I think a return of the Rule of Law to lending is exactly the ticket, and I applaud Congressman Frank’s efforts.
Just in case some in the lending community who read here are unfamiliar with the concept of a Rule of Law…
http://en.wikipedia.org/wiki/Rule_of_law
GS, I think we will be seeing the return of the Rules of Economics and Physics shortly. They work fine without us monkeyboys interferring.
He still could have been talking about it two years ago.
Also, this isn’t a partisan thing. Lots of lending regulation takes place on the state level. Just think of all the blue states that have been at ground zero of the bubble.
What did the ultra-liberal California and Massachusetts legislatures do about it? Absolutely nothing. How about NY, NJ, PA, Vermont, Washington State, etc.? Nothing.
I am glad that Rep. Frank is doing what he is doing, but the fact of the matter is that he is demagoguing. This horse left the barn several years ago and neither he nor anyone else lifted a FINGER to stop it. It’s great that he’s trying to see that it doesn’t happen again, but he hardly deserves much credit. None of them do.
Waaah(ooo) you immature tool. You haven’t the slightest idea what you’re talking about. As posted above, Frank (who is openly gay, for the record, and good for him) is in the House of Representatives. The DEmocratic minority in the house had absolutely no power in Congress for the past six years (longer actually); the GOP would not even let them introduce bills. Period.
And good luck getting media attention when you (a) have zero power and (b) are going up against powerful moneyed interests such as the REIC.
So you’re welcome to your opinions, but recognize that you’re merely farting through your fingertips when you don’t understand the mechanics of government, or care to learn about them.
that is the irony of the House. you’d think they are our representative, but the way it works is basically a *tyranny of the majority*.
Yeah you’re right. I’m a little sketchy on the mechanics but I think the reason the democrats didn’t have a voice for the past 6 years is because no one voted for them. Yeah, I think that’s it.
But now that you’ve found your voice maybe you could tell me how this law is going to stop fraud?
People with a chip on their shoulders about gays must have a secret gay fantasy, themselves. I don’t care about Barney Frank’s orientation. I’m very conservative. I think he made a good point on this issue. To deride him because of his orientation is kind of, like, neanderthal?
Yes!
Barney Frank has cared about the ordinary person for a long, long time. As some posters noted - he had no power to speak of for the last six years.
I’m an ordinary person who cares about his right to contract. I don’t need Barney interferring with that right, good intentions or not.
“He had no power to speak”?????????????
You are kidding aren’t you? To my knowledge, Barney never lost his voice. If he had something to say he’d just dial up the Boston Globe or the NY Times and it would be widely, widely, broadcast.
Barney is a very bright guy. Bright guys, with “bright” ideas and media friends get broadcasted, not buried. Sure, a “pulpit” is handier but Barney is “beloved” by the media and a great “sound bite”. If he wanted to say something in the last six years its impossible to believe he couldn’t construct something very clever for a willing media to consume.
“I’m an ordinary person who cares about his right to contract. I don’t need Barney interferring with that right, good intentions or not.”
I am an ordinary person who cares about the external effect of illegal activity in other peoples’ contracts on the rest of society. Adam Smith (father of modern capitalism) himself said the government has a proper role of enforcing a rule of law. How that pearl of wisdom was forgotten during the Roaring 1990s is a mystery to me.
‘What we now know as the rule of law–namely protection of the rights of individuals and their property–widened, encouraging people to increase their efforts to produce, trade, and innovate. A whole new system of enterprise began to develop, which, though it seemed bewildering in its complexity and consequences, appeared nonetheless to possess a degree of stability as if guided by an “invisible hand.”‘
http://www.federalreserve.gov/boarddocs/Speeches/2005/20050206/default.htm
GS, I’m not following.
You want to protect my individual rights by making it illegal for me to borrow money from a willing lender?
If you are worried about external effects of illegal activity there are plenty of fraud and crime law that cover that.
“GS, I’m not following.”
Let me spell it out for you then. I want rampant fraudulent lending practices driven out of the system. Till then, nobody with a credit rating worth protecting should put their household financial health at risk by purchasing a home.
Calm down GS, I’m not attacking you. I treat comments in this forum like the hat a cowboy puts on a stick and raises above the rock. It may get a few arrows in it but you’ll be OK. Nothing personal.
If you want fraud removed from the system then shouldn’t Frank be opening up the fraud courts instead of closing the barn door?
Not allowing someone to lend money without proof of ability to repay is just going to change the type and location of the fraud. It doesn’t make sense.
GS I enjoy your posts and have learned alot here. You seem rational and don’t seem the type to disappear so let me ask you a question that gets to the heart of this Frank topic for me at least.
Exactly how thick do you want the rule book governing your children’s lives to be?
Personally, I was hoping that I could jot down all the rules my kids will need on a single page. Double spaced even.
Do we really need a law telling someone not to lend money to someone who can’t repay it?
“Do we really need a law telling someone not to lend money to someone who can’t repay it?”
I personally think it would be wiser to rescind existing laws telling someone to lend money to someone who can’t repay it.
http://www.whitehouse.gov/news/releases/2003/12/20031216-9.html
P.S. Don’t take the occasional bursts of passion in my posts personally
YaHooo, there’s a new Sherriff in town, big deal. I have seen Congressmen Frank speak off the cuff on several issues non-housing related, he didn’t fit my idea of “bright”. I am surprised that anyone on this thread, particularly the regulars, think that any politician will do a thing to expose and fix the problems that contributed to this housing mess. This is political grandstanding by Frank, period.
Yes, there will be many televised committee meetings and front page headlines coming with prominent politicians demanding action. Maybe a few high profile individuals will go to prison. When the elections heat up in a couple of years we will get TV an radio commericials showing us what candidate X,Y and Z did to protect us. The public will be placated and then it’s back to business as usual.
I believe that most politicians on both sides of the aisle are only interested in getting re-elected. They will say and do anything neccessary to stay in office. As someone wrote earlier “where have all of our overpaid political guys, and gals, been for the last four years while all this madness was going on”?
I’m with you on the rescinding part and roger on the personally subject.
Personally, I was hoping that I could jot down all the rules my kids will need on a single page. Double spaced even.
waah -
that tugged at my heartstrings. My dad died prematurely. When he knew his illness was not curable, he jotted down some Rules to Live By for his children.
The two I vividly remember:
Always wake up early in the morning, no matter what. You can always take a nap later in the day.
Drive a hard bargain.
“This is political grandstanding by Frank, period.”
He may intend to do nothing, but accidently start a bandwagon effect which inadvertently does something. A tiny shove of a lemming nearing the edge of a cliff can be enough to push it over.
As long as the FDIC exists and tax payers are holding the bag for the lendors moral hazard then by all means, the government has a responsibility to keep the lending clean.
Then the answer is to get rid of the FDIC. Then you would see some real interest rates with supertight standards.
What is being proposed by Frank is a band-aid on top of a band-aid applied in 1933.
As someone that makes a living every time some politician decides to regulate someone, the cure is usually worse than the disease. It really doesn’t make much difference which party they’re from. The only real question is which one of their buddies benefit from the regulation. The problem I have with government is that no matter how well intended, the people that benefit are the politicians, those that work for government and the lawyers, not those that are the intended recipients. Not that there aren’t times where appropriate, it is just that government tends to try to cut a diamond with a sledgehammer.
Oh, and here, the government and its free spending management of the economy creates the problem (or makes it worse) and then the politicians come in to help. Nothing worse than a politician coming to help.
Abolishing the FDIC would expose people who had *nothing* to do with mortgage fraud (ordinary bank depositors) to systemic risk that is totally beyond their control. I don’t see any social or economic benefit in that.
How about abolishing the GSEs, which are exposing the US taxpayer to default risk from $Trillions in dodgy MBSs?
Harm, I don’t want to put words in your mouth but you seem to be thinking about a world where the FDIC suddenly disappears instead of a world in which there never was an FDIC.
In a world without an FDIC how much money are you going to put in any one bank? What kind of interest rate would you demand to get for lending it out? Would you let a bank lend your money like we’ve seen it handed out lately?
My simplistic little noggin tells me lending standards would be a whole lot stricter without the FDIC.
And I’m with you on the GSEs.
I know that Homosexual Republican Congressmen Foley, Kolbe, et al will have the free time, now that they are out of Congress.
GS-
Screw Barney Frank.
All the hurricane warning flags are flyin’ on this one.
The clips of Frank in the Boston media got him saying he’s much inclined to a bail-out of sub-prime borrowers, because they are “victims” of an unscrupulous loan industry.
Of course all the middle class FB’ers will be left hangin’ in the wind.
This will be the perfect platform for Hillary C. to run on.
“This will be the perfect platform for Hillary C. to run on.”
And as I already mentioned, I expect deep-pocketed Republicans to make sizable contributions to her campaign war chest.
With sincere apologies to Matt_in_Tex, even DL sees the light (copied from Matt’s post in the bits bucket and pasted here because it is relevant):
David Lereah notes link between ARMs and mortgage delinquencies
http://query.nytimes.com/gst/fullpage.html?res=990CE5D71E3AF931A25750C0A963958260&sec=&spon=&pagewanted=1
“In the past year, 55 percent of all new housing loans were adjustable-rate mortgages,” said David Lereah, chief economist for the Mortgage Bankers Association in Washington.
Most adjustable-rate mortgages are “re-priced” every year, Mr. Lereah said. Interest rates have surged in the last 12 months. And, he said, such loans are most attractive to “consumers on the margin, those trying really hard to qualify.”
“Virtually all of the ARM-holders with one-year ARM’s will be repricing with 2-percentage-point increases,” he said. “That can mean a significant increase in monthly payments. Mortgage delinquency rates will be on the rise.”
(Pay attention to the date of the linked article!)
I vote for Jack Grubman to replace DL as NAR chief eCONomist. He clearly has all the right credentials vital to perform the pimping and lying so essential to the job.
Who do you think has been DL’s role model all along?
David Lereah is also the chief economist for the Mortgage Bankers Association? That two timing slut!
DL has been aware of the reset problems inherent with ARMs and by extension IO in an environment of rising interest rates since 1995 and the increased risk of foreclosures. I haven’t heard him say squat about foreclosures in 2007.
Maybe its just me but DL sounds a bit more conservative in his younger days before he became a pretty boy Realtor “TM”. Still a shill though even back in 1995.
gee, wonder if franky voted for community banking bill
This whole problem will self-correct in due time. No need for Franks to stick his nose in it.
Can somebody explain today’s bizarre front-page headline in the Washington Post: “New Home Sales Rebound in December”. Right under that the sub-headline says: “Data for 2006 Shows Largest Loss in 16 Years” WTF?
“If that is indeed how the story will play out, William D. Dallas, the founder and CEO of recent bankrupt Ownit, a lender based in Agoura Hills, Calif., would argue that his company has become an early case of road kill.”
subprime lending = roadkill. Great one!
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
He actually brings up a powerful argument, which is that if the rules of the game are rewritten to give a huge market advantage to subprime lenders, there will be new entrants to the industry who take advantage of the gravy train. Why not him?
I’m sure such arguments help him sleep at night.
As I’ve said again and again, its only begining. We haven’t even arrived at the timeframe for the “spring bounce.”
Last year wasn’t a hot sales year. Yet, thanks to OCrenter, we can see that many areas already have more inventory than they did last spring (which lacked the “spring bounce” too). Hmmm…
http://bubbletracking.blogspot.com/
I’ll be curious to see how sales track in 2007 vs. 2006. Let’s see… slightly higher rates… sub-prime loans have tightened requirements… my crystal ball hints to lower sales. (Not yet dramatically lower… soon. Mayb 3Q 2007?)
Got popcorn?
Neil
For the Virginia Beach/Norfolk metro area, the main page has the 50% asking price @ $350K. HUD data shows median household income @ $60K projected for 2006. But the table says it’s 4.0 income to afford median house. 240K versus 350K? 350K - 20% is $270K … am I missing something?
I’m sure the secondary market wasn’t saying give us fraud loans and fraudulent appraisals . Did a memo go out that said to the loan agents “commit any fraud you want on loans because the secondary market wants high interest adjustable loans” ? No , sorry ,I think the sub-prime lenders took advantage of a demand from the secondary market for loans .God , this guy sounds like “The Devil made me do it”.
The agents on the front lines are the parties that have to do the screening and underwriting and it doesn’t cut it to say that the secondary market gave them the go-a-head to not underwrite loans. These lenders made the loan packages look like the borrowers qualified and they made the appraisal look like they qualified ,simple as that .
‘Did a memo go out that said to the loan agents “commit any fraud you want on loans because the secondary market wants high interest adjustable loans” ?’
That comment goes straight to my point about the need to re-establish the Rule of Law in lending. Subprime borrowers who were encouraged to take high-risk loans in the guise of affordability products will become innocent victims when word gets out that their tranch of the MBS risk pool is rife with fraudulent loans, and interest rates adjust up in response to the blowback.
Well to some extant, by not investigating the underlying loans the bond buyers were saying exactly that. The problems is that people’s perceptions of risk are “sticky.” Several years of falling interest rates meant that prices went up to match and this meant that defaults on mortgage loans were at near record lows. They also gave many an expectation that appreciation would continue, leading to fearful buyers and greedy sellers. The decreased perception of risk by the bond market meant that loans could get dumber and dumber as RE prices overshot any reasonable return on investment. Now I’m not trying to blame the victim and say that double bucketfulls of fraud haven’t become incorporated in the loan market. I’m just saying that prudent bond purchasers wouldn’t have fallen for it, at least not at the pervasive levels that have become normal. Cars break down when you least expect it partly because those who don’t anticipate problems don’t do regular maintenance.
I think the sub-prime lenders took advantage of a demand from the secondary market for loans
HW…You got it nailed.
Those high rollers over at the GSE’s were so blinded by greed, they couldn’t have given a rats azz.
The background here is why does it pay more. Because of increased risk. So what are they paying for.
Well, maybe you’d backfund (save) the excess, or insure against the risk from ALL THOSE LOANS THAT WERE GONNA COME BACK!
(Instead of, say, blowing the money just like the suckers you got on the hook.)
Because the secondary market and lenders give higher commissions to the front line loan agents if he/she put a borrower on a loan that would go higher on the interest rates with time as well as have a pre-payment penalty in spite of the beginning teaser rate being low .
I guess the loan agents were so tempted by these higher commissions that they felt that alot of borrowers deserved to be lied to about the loan so they could get the higher commissions . Also ,these were the loans that the liar borrowers were able to get with the help of the loan agents and your friendly realtors .
Please , if your a good realtor ,I’m not attacking you but I’m wondering why you didn’t try to stop your fellow realtors from engaging/helping in inflating the market .
HW, good points.
Wiz-
“Please , if your a good realtor ,I’m not attacking you but I’m wondering why you didn’t try to stop your fellow realtors from engaging/helping in inflating the market .”
Since when did selling real estate become a team sport. You know as well as I do that this industry is individualistic and competive. How well do you think a conversation would have went if one Realtor tells another Realtor. “Hey Buddy, you know this market is just not right… prices are out of whack. Maybe you shouldn’t make that 15k commission. Let’s wait for another one to come around”
I’m sure we both know the answer to that. Compound that with the fact that only 5% actually feast and prosper while the other 95% scrounge for tidbits and just getting by and we are now seeing the end result. Especially with lending being fast and easy. The same thing goes for the the loan agents.
The interesting thing is that I have actually met 2 LO’s who say although they have written quite a few 2/28 thru 10/20’s they have never written a Option Arm to quote one. “I would never put a client of mine’s into that crap”. I was in awe.
“Since when did selling real estate become a team sport.”
Since never. Always has been and always will be “every man for himself.”
Ok , let me say this . If the realtors refused to send the borrowers to sub-prime lenders, knowing, that they didn’t really qualify ,than the sellers could not of kept raising prices and got anything they wanted .
The Realtors could of pre-screened for qualifying ,nobody
would of been able to qualify , demand would of went down and sellers could not of kept raising prices, where the sub-prime lenders satisfied the demand by their fraud .The fact that realtors went down the road of going along with this sub-prime bogus market based on speculation and the myth that real estate always goes up is a shame . Sure realtors made more money because they didn’t care that they were sitting up the gamblers ,but I guess I’m saying they should of cared .
So realtors and sub-prime lenders are now in a situation where the real estate market is a big mess . Was it worth it for high commissions for a while ? Could so many people be this short-sighted ? Great , lets have a ball for 5 years ,price everyone out of the market ,than watch the crash throw us into the greater depression . Oh what fun . I guess you could say that I don’t approve of realtors putting people into home when they know the lenders were commiting fraud on their loans in order to do it or taking the borrowers and making fake loan packages in order to do it .
“would argue that his company has become an early case of road kill.”
Almost fell out of my chair on this one! Damn, this sideshow it starting to main street.
Oh by the way, real estate sales are a team effort . Real estate is a conditional sale based on the borrower qualifying for the loan and the real estate taxes . If the real estate profession is professional they would realize that ,at least the real estate codes say realtors are suppose to act in this manner .
mrincomescream you are just confirming that realtors are money whores and not professionals ,so why does the MSM quote you guys so often ?
I know , I know , the money was just to good for realtors to just say no to unqualified buyers ,especially when the sub-prime gang would go on anything and had great hit the mark appraisers .
“IndyMac said 71 percent of its fourth-quarter mortgage loans were interest-only or adjustable-rate”
GET A CLUE YOU MORONS!
It gets worse. From the Reuters link:
‘IndyMac, one of the nation’s largest savings and loans, also said fourth-quarter profit rose just 3 percent, despite a 44 percent jump in mortgage loan production to $25.9 billion. That ended eight straight quarters of double-digit earnings gains.’
That line JUMPED out at me too. What is the POINT of those loans? Or am I missing something? I thought the reason you bought a house was to build equity and to cushion against inflation in rents. WHY on EARTH pay a bank interest-only, or take the risk of an adjustable rate?
So you can get a house, even if you can’t afford a fully amortizing loan. After all, real estate only goes up, and you don’t want to be priced out forever.
If real estate only went up, FOREVER, it might make sense. There were a lot of people that actually thought that real estate would go up forever.
You said it arroyogrande ,and that’s how the REIC were selling the loans and the property and the people believed that real estate was the sure-bet ticket to riches .
How long can they continue this prudent management style and stay in business?
I/O mortgages = Idiots/Only mortgages.
Marc, right on…
I have to disagree with you here, Marc. I/O mortgages are just another tool for the financially savy. It isn’t the right mortgage for everyone, and certainly shouldn’t be used by those at the margin to qualify for homes when they can’t using a traditional fully amortizing mortgage.
The benefit of using an I/O is flexibility. No where does the mortgage contract say you can’t pay principal and interest every month, it gives you a minimum to pay (the interest payment) and you can pay more if you want. The fact is the industry used I/O and Option ARMS as affordability products instead of the cash-flow management products they really are. Make everyone qualify using a fully amortized payment and you will see all these fools at the margins disappear.
I have to disagree with you here, Marc. I/O mortgages are just another tool for the financially savy.
*Ahem*… just how many people among that 71% of Indymac’s customers do YOU think were “financially savvy” Wall Street types? How many do you think were Howmuchamonth Casey Serin innumerate “it only goes up” ‘tards? If Indymac were actually QUALIFYING its borrowers vs. re-packaging the loans as MBS sausage (= no default risk to them), then I might agree with this statement.
It isn’t the right mortgage for everyone, and certainly shouldn’t be used by those at the margin to qualify for homes when they can’t using a traditional fully amortizing mortgage.
Understatement of the Year Award goes to Mr. Northeastener
Basic lender regulations would totally change this. When I bought in 1995 with an I/O the lender warned me at length that what I was doing was not recommended and they went over my financial situation, holdings, job, and other info with a vengeance. That kind of disclipline could have shaved a huge chunk off of this bubble. Now we need to make that law. Just waving hands in the air is no good any more. Too much criminal activity has been enabled with these repeated out of control booms, so some reasonably strict new limits need to be set up.
Hi Guys. This is a semi off topic comment, apologies, but I wanted to point out a new section of HousingTracker dedicated to affordability (disclosure: it’s my site):
HousingTracker Affordability
One of the things that I’ve heard over and over here (as well as often contemplated myself) is that it will not make sense to buy homes in certain areas until the affordability/valuation issue moves back in line with historic values or at least just starts to make some sense. With that in mind I have calculated a bunch of ratios for 150+ metro areas. The ratios are:
1. The percent of income going to a mortgage payment on a median priced home given the median family income. (a true measure of affordability)
2. The mortgage payment to rent ratio (assuming traditional lending standards — this somewhat downplays the significance of coming up with a 20% down payment and I may account for that later). This is like looking at how much sense it makes to be an investor in rental property.
3. The price to income ratio.
4. The price to rent ratio.
A fun thing to do is to click on the table column titles to sort by all the different ratio. You can quickly see which places are out of whack and which have done OK. My personal favorite ratios are 1 and 2. I think they take the most into account.
Thanks to all for reading, and thanks especially to Ben Jones for all the effort that goes toward maintaining this forum. Ben E.
Way to go, LA! We only need 63% of our income for a payment on a median priced home. We’re #1! We’re #1!
What’s 63% divided by cousins, siblings, friends of siblings, and grandparents on ss subrenting equal?
And you still have 37% left!!! That’s way more than enough for my Hummer lease payment. And who REALLY needs health insurance and those pesky dental visits, and clothes, and phone service, and food? I mean, come on, who really needs food? And vacations? Those are for whimps. And who really needs a vacation when you drive around in a Hummer. I mean, that IS a vacation, you know what I’m sayin’?
don’t worry thats what credit cards are for!
You guys are funny.
LMAO
And you still have 37% left!!!
Maybe not. I think that was based on gross (pre-tax) income.
I want to buy a house and rent it out in Santa Ana CA.
Price/Rent ratio = 403
Talk about a man-eating alligator.
Santa Ana = low density house occupancy.
Someone can get 5 of those and go broke in no time.
You need some very deep pockets to feed even 1 of those alligators…
Let’s see $1K/mo income in rent to cover
$4K in P/I
$700 Taxes
$250 in Ins
$200 in maint
Where do I get one of these Go-BK-Quick deals?
Excellent place to send would-be buyers to.
Ben E.
Interesting. I will track your site. I see you’re working quarterly… Good info.
The thing I love:
5 years ago in LA it took 28% of income to buy the median home, today 63%.
And the median home in LA is in a “spotty area.”
The stock market is rather flat today… Hmmm…
Got popcorn?
Neil
It is interesting! Couple of caveats, though, for the DC area. First, the stated definition of “DC Area” is so large it borders on ludicrous - not to be critical of the work done, but an analysis that openly includes the state of West Virginia is going to skew things (no snickering, please).
Second, the analysis goes back to 2001 to establish trend and provide perspective. It is important to understand that the housing boom was already in full swing at that time in DC. Some argue that 2001 represents fair price value, but residential prices had already doubled during the preceding three or four years.
Great job, Tracker!
Great site and great info - I agree, some areas were bubbly by 2001. I would be awesome to see data back another 5 years (1996) - I believe the trend would be even more dramatic.
Ben E. - you should find a college student in econ or stats who would intern for you - free labor for you and a great project opportunity for them.
Good point. A better starting point might be 1998/1999. Or thereabouts. But other than that, the site is very good.
Remember that housing prices were flat for 10 years. If you look at the longer trend in this graph (http://tinyurl.com/mld22) it can be argued that houss were priced fairly in the DC metro area around 1993, and then undervalued from 1994-2001. It wasn’t until 2001 that housing prices started increases (that is, they were flat — did not increase with inflation), and by 2002 housing prices were back to fair value (I can vouch for that, as I bought in 2002 and my mortgage PITI was similar to rent for the same place). After 2002, prices went haywire in the DC metro area.
Excellent info, Ben E. It really puts the focus on how out of wack things really are. Rochester, NY looks as if it is the only affordable place left in the nation.
Thanks for all the compliments guys. I’d love to bring the data back further in time, but I’m limited by what the government provides. Some data goes back to 97, but the rest only goes to 2001. Best I can do for the time being. It’s a start. Ben E.
“But he said the defaults were still low at 2 percent and insisted that most of those borrowers had simply missed one or two payments because they were confused about where to mail payments, because many of them had two mortgages on their homes”
What a pearl. No wonder his company went BK.
That comment caught my eye too. Never considered not paying my mortgage on time and then using “I was confused about the address” as an excuse!
This guy makes it sound like that’s perfectly acceptable. Who’d a thunk it?
The new substitute for “the dog ate my homework”?
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
It’s cheaper for me to steal a new car stereo than to buy a new one. But, somehow, I know what to do.
this response going in my “quote of the day” book.
You see things clearly.
We need that old boy from the last Indy movie saying…”He chose poorly.”
“But he said the defaults were still low at 2 percent and insisted that most of those borrowers had simply missed one or two payments because they were confused about where to mail payments, because many of them had two mortgages on their homes.”
We can judge the speed of the downfall by the increase in the lameness of the excuses. On the Lame-O-Meter, this one rates at a solid “9″.
On a scale of 1 to 8?
Its up there with the dog ate my homework excuse.
” confused about where to mail payments”
As if this was NEVER discussed during the approval interview. I am sure they were offered to set up a direct debit but declined, as they said they will “mail in the payments”.
People that say they will mail payments often will refuse to have a direct debit set up through their checking as they know most likely the money will NOT be there on the payment due date.
This is the sub-prime mentality and way of life.
SKB
“Mr. Dallas acknowledges that standards were lowered, but he placed the blame at the feet of investors and Wall Street, saying they encouraged Ownit and other subprime lenders to make riskier loans to keep the pipeline of mortgage securities well supplied.”
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
_____________________________________________________
This guy claims to be a “chrisitian” all over the NET. What would Jesus do?
Any time that you find out the religion of someone within 30 seconds of introduction (on the net or in person), grab your wallet and your spouse (if they are nearby). You are about to get screwed….
Does that include the religious crakpots in the Republican party and in the Whitehouse ? Well it’s too late.
LOL
“grab your wallet and your spouse (if they are nearby). You are about to get screwed”
Are you suggesting using your spouse as a shield?
Totally nonpartisan. If the shoe fits.
And I hadn’t thought of using the spouse as a shield….something to remember.
“It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.” (Matthew 19:24)
“Behind every great fortune lies a great crime.”
- Winston S Churchill
“Behind every great fortune lies a great crime.”
With apologies to Churchill, that’s Honore de Balzac’s line.
Honoré de Balzac wrote the same thing in his novel “Le Père Goriot” 75 years before. Think Winston was quoting Balzac.
That’s in Pere Goriot? I had a girlfriend made me read it once - I’d remembered the quote from, “My Early Life,” by Churchill. Talk about a pretentious title…
Well Churchill was maniaco-depressive. He had a tendency to embellish his accomplishments. All politicians are a little bit or a lot crazy. You have to be crazy to go in politics.
well, see what he got. nobel price in literature.
“It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.” (Matthew 19:24)”
I hope you are living in Nigeria, instead of America. Because from your quote, every American is rich, compared to most Nigerians. So…I guess it will also be difficult for you to enter the kingdom of God. How many TV’s do you have? Got a computer? A Cell phone? Do you eat 3 meals a day? You better start sweating son! - 47 year old atheist.
Don’t know, but interest is immoral in Muslim religion.
That’s why one of the biggest shareholder of Citibank is Saudi Arabian Prince Abdul Aziz. The first interest rates contracts in history were invented in Mesopotamia, ancient Irak. Don’t believe them. There is a lot of hypocrisy in the Muslim world on that subject. Economics and religion don’t mix even in the arad world.
wasn’t mesopotamia as a region named as that, predates islam?
Mesopotamia was the cradle of civilization and came thousands of years before Islam was founded on the Arabian Peninsula. Mark is a very confused person.
But blowing up a hundred women and children in a shopping market is righteous. Nice!
Interest (aka usury) is also immoral in the Christian religion; the Muslims don’t have a monopoly on hypocrisy.
“Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury.” - Deuteronomy, 23.19
Of course, Deut. 23.18 also admonishes:
“Thou shalt not bring the hire of a whore, or the price of a dog, into the house of the LORD thy God for any vow.”
I’m glad they cleared that up!
As usual, it depends on how you define “interest.” Point is that we tend to use a different standard for ourselves than others. And if it makes any difference, Jesus didn’t think much of hypocrites either. And Deuteronomy is Old Testament.
I want to see the memo where the secondary market said to Dallas to put unqualified ,liar buyers on loan packages and hire appraisers that will hit any number etc. etc. Don’t tell me that Mr. Dallas and is army of sub-prime loan agents didn’t do it because they made more money to commit fraud .
Make no mistake about it ,all companies push for big volume ,but they don’t say “commit fraud to obtain the results “.I don’t believe Mr. Dallas .
Make no mistake about the fact that a front line loan agent knows when the loan package is fraudulent (99% of the time ). The loan agents know how the packages are suppose to look to get by underwriting and they helped the borrowers make up these liar loan applications . It was all a criminal game to make pretty loan packages that would be passed off to the secondary market .
“”I want to see the memo where the secondary market said to Dallas to put unqualified ,liar buyers on loan packages and hire appraisers that will hit any number etc. etc.”‘
Wiz, we’re not walking around with our Mr. Naive sunglasses on today are we??
I’m just addressing this clown who is blaming the secondary market for the fraud his company and loan agents /appraisers with borrowers committed .
No , I really don’t believe that the secondary market was aware of just how much fraud was taking place on these loan packages . The secondary market knew they were taking on some risk ,but not to this level (like 8 loans to guys like Casey etc.)
mrIncomescream , the sub-prime lenders are dropping like flies and foreclosures are off the charts , and thats not because of business as usual as your suggesting .
Wiz-
The keyword here is “subprime” what exactly did these bonus babies think they were investing in with other peoples money. Garbage in garbage out. There may not be a memo but I would put a whole lot of money on the fact there was a whole lot of winking and nodding.
Yep. kinda like “junkbonds,” got that name for a reason. Ya gotta wonder what kind of doubling down desprate fools bets the farm on this stuff.
No , don’t think so, not this time mrincomestream .
My guess is that the secondary market had a realtionship established with the sub-prime lenders where they did give half-way decent loan packages for awhile . Than as the mania grew and they hired more punk loan agents and people began to find it harder and harder to qualify it moved into the high fraud loan package situation as the mania grew . Because there wasn’t alot of foreclosures yet the secondary market thought the risk was the same as in 2002 and 2003.
This guy claims to be a “chrisitian” all over the NET. What would Jesus do?
“Not everyone who says to me, ‘Lord, Lord,’ will enter the kingdom of heaven, but only he who does the will of my Father who is in heaven. Many will say to me on that day, ‘Lord, Lord, did we not prophesy in your name, and in your name drive out demons and perform many miracles?’ Then I will tell them plainly, ‘I never knew you. Away from me, you evildoers!’ — Matthew 7:21-23
I think there is a special hell for people like that.
Is Argent the next one:
http://bakersfieldbubble.blogspot.com
If true, it will be so great.
Another OC RE Employer going down. Remember it is different here!!
“But he said the defaults were still low at 2 percent and insisted that most of those borrowers had simply missed one or two payments because they were confused about where to mail payments”
Dude, you must be a master of Yoga because that is one hell of a stretch !
Here we go…the bitching, the moaning, and the finger pointing is starting in earnest. Who will win? Who will lose? Who will be who’s bunk mate in the Big House? Stay tuned for “As the REIC Turns” brought to you by the good folks at HBB.
With housing starts falling to, say, 1.8 million or so, I’ve written that historically 2.0 million is a big year for U.S. housing starts, while 1.0 million is a bad year. Well, we haven’t had a bad year for starts, but we have had a bad year for new homes sales, which did hit the 1.0 million mark in 2006. I expect a bad year for starts in 2007.
We are now way past the paint drying stage where evidence of the collapse was painful to watch evolve. It’s coming at a furious pace now, much faster than I was even expecting.
2007 will be a wipe-out year for RE as the walls all close in from all sides…
Disappointing Christmas sales in holiday season ‘07…is a consumer pull-back leading us into a recession?
Headline in early ‘08.
Man, I am so fookin’ glad I’m a tenant.
Talk about a world on the edge.
Having mobility today is virtually priceless
exactly!
not being able to sell, not being able to rent…just stuck for years to come! oh, what a feeling!
“Countrywide Bank to filed a federal lawsuit…, contending it was a victim of a real estate conspiracy.”
Free tin-foil hat from HR for all their empolyees that walk out carry a box of personal items this year.
“contending it was a victim of a real estate conspiracy.”
“Not only were the victims victims, but the one’s who victimized the victims are now victims”
Calling Denny Crane and Alan Shore…
Don’t you want that “re-fi?”
What is the story here:
http://www.marketwatch.com/tools/quotes/quotes.asp?symb=SBCF
“…The evidence can be seen in rising default rates, increasingly strained finances at mortgage lenders and growing doubts among investors.”
You ain’t seen nothing yet.
Nope. I am just soo excited to see the same thing happening in Paris and London.
Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., says he is working on legislation to prevent an “unprecedented” wave of subprime foreclosures and to give homeowners a grace period so they can get back on their feet. (sorry no linky- you need a password).
Yep, that’s right…get ready for new legislation to help the irresponsible, greedy, stupid,.etc…I’m not surprised that legislation will happen just surprised at how quickly it his happening.
No surprises there — the newly elected Democratic congress has to get started early on blowing the next Presidential campaign.
No problem for them, the R’s have been self imploding for the last few years. Not a bash, just an observation. I’m resigned to 4 years of Pres. Hillary, coming to office as a moderate, and then switching back to the left after the election. Sorry for the off-topic.
Dodd is desperate to find some justification/constituency for his Presidential campaign. Maybe he’s found one in FBs.
Hey, it’s Barney Franks’ buddy, Chris Dodd, friend of Bashir Assad of Syria!
Riding to the rescue!
“Hey, it’s Barney Franks’ buddy, Chris Dodd, friend of Bashir Assad of Syria!”
And this is worse than the Saudi royal family, intimate and personal friends of W and Dick, who continue to fund terrorism and Wahabism everywhere in the middle east–with their state imans calling for the death of Christians and Jews everywhere?
It’s amusing that you equate disdain for Dodd with a defense of W.
Do you think at all, or do you simply react in robotic fashion?
Glad you’re so easily amused…try to follow the thread, it begins at the top.
Did Mr Dodd just wake up from a 3 year hibernation? Someone needs to ask Mr Dodd how it is possible to prevent something from happening once it has already happened.
Maybe I am missing something but this chump appears to be getting in line early to sign up angry FB voters for the next term.
There’s still more proof yet of how serious this is becoming. The faster the politicians act the bigger the problem really is. And to think, the prols still actually believe and quote gov’t reports on inflation, unemployment, home sales, etc.
The prols will figure it out soon enough when they are standing in line for govt cheese.
Legislation will not help; it may delay the inevitable, but it will not stop the defaults. People still will not be able to afford the payments. They will just use the grace period to save up enough for first, last and security on a rental.
“They will just use the grace period to save up enough for first, last and security on a rental. ”
Actually, that seems like a pretty good idea. No bailout, but give the FB’s enough time to find a rental. Of course, they’ll actually use the time to rip out the fixtures and sell them for scrap.
This is good news. Anything that either party does to interfere with the FB collapse will only make things worse.
You are absolutely correct. These fixes always have unintended consequences that make the problem worse.
I doubt the consequences are unintended although they rarely remedy the problem.
What they always create are opportunities for new get-rich-quick schemes and that is ALWAYS INTENDED since the beneficiaries pedal the legislation.
This makes sense for banks when reset occurs. If FB has been making payments and is gainfully employed extend load for a couple of years rather than foreclose the house. The last thing banks want is RE in a declining market, they may not get all the money back.
chances of that legislation going forward is even slimmer than having an increase in the minimum wage.
Where is the link about Chris Dodd???
Denver Lenders Misread the market:
http://www.denverpost.com/economy/ci_5089610
They probably cannot read.
How could they misread in the first place ?
“‘The pendulum swung too far the other way,’ said Guy D. Cecala, president of Inside Mortgage Finance, which publishes data and newsletters on the industry. ‘At some point, it comes back. But what it usually takes is a little blood on the road.’”
This whole thing certainly has an Edgar Allan Poe feel to it.
It’s funny how the brain works sometimes. My first read through that quote I got “Insane Mortgage Finance”.
IMF International Monetary Fund ?:)
“In an instant the borrower had reached the extremity of the pile of closing documents, and finding his progress arrested by the clock, stared stupidly bewildered . A moment more and I had forced him to sign the papers. Throwing the links of subprime debt about his future income stream, it was but the work of a few seconds to secure it. He was too much astounded to resist . Withdrawing the closing documents I stepped back from the recess of my office.”
‘ Americans’ love affair with their homes has cooled, and retailers that jumped in to sell them merchandise during the housing boom are reeling, cutting prices and profit forecasts. ‘You could say the bubble burst in the housing market, and it’s had a dramatic impact on retailers who sell merchandise for the home,’ said Rosalind Wells, chief economist for the Washington-based National Retail Federation. ‘Retailers still will feel that impact this year.’
Trickle down bubbonomics?
And car manufacturers.
“‘Retailers still will feel that impact this year.’”
We told them, we told them, we told them…
“That’s very funny! A fly marrying a bumble bee.
I told you I’d shoot! But you didn’t believe me.
Why didn’t you believe me? “
Savings Banks’
“Consumers use their homes as their savings banks,” Wells said. “Without home equity cash-outs, consumers are not going to feel as affluent.”
Neither are Realtors, Mortgage Brokers, Construction workers, those thrown out of their homes for mortgage default…
This guy has a knack for understating the obvious.
That’s why I’m remodelling now and getting some serious deals in appliances, flooring, etc….as well as the subs who are begging to do the work. Just got a quote from a carpenter who just 8 months ago couldn’t even return a phone call…now, he can start work tomorrow. If anyone is in the market to do stuff to their home, it’s a pretty good time. Labor and materials are at least 30% off….
Yea, I’m finding it’s a great time to hire subs. I take great pleasure in raking some of them over the coals. One in particular especially.
‘Retailers still will feel that impact this year.’
Everyone who posts on this blog has already had a chance to say this (twice at least), but not everyone in the MSM has had a chance just yet…
This just in:
story of the NYC suburbs
it’s the way the local politics work out more than anything else that is responsible for the high prices
???
Prices haven’t increased elsewhere?
This has been the biggest QUESTION I continue to ask myself…when we bought…we looked for location , style / appeal / convience / surroundings / practical / and most of all AFFORDABLE…my old man made it very clear growing up that there are 2 kinds of debt - good debt and bad debt - in our society many new home buyers need the banks help in purchasing a new home - BUT - never loose sight that any debt can make life miserable - a 2.5X should be LAW, standard fixed rates with complete and proper documentation ….if it was a standard within the lending industry …DAHHHHH…we wouldn’t have such EXPLOSIVE runups in house prices cause the old adage…Supply and Demand….not everyone is making $250k a year…we bought within the 2.5X income and I honestly could have went to a 2X but liked our purchase to kick in a few more bucks….I see alot of focus on that homebuyers should be rightfully kicked in the #$@# but that wish could have some serious consequences for our Nation as a whole….this country needs stable - maintained growth … excess creates disaster….and it is with heart felt grief that so many who just wanted a place of their own, raise a family (family stability creates future generations of liked minded citizens) and just be content with what they have will be met with such a massive tidal wave and guess who will pick up the pieces…no..not government - but these blood sucking money serpans who will buy on pennies on the dollar, only to hold and sell once again …. these very serpans sliver and wait for the average american family to see nothing but the abyss …. if its only house prices that drop … .we got away lucky…eat that popcorn without choking on it!
Quit making me so excited. I am trying to wait patiently to buy from the overextended GFs. What is a serpan?
serpent?
*guessing*
“this country needs stable - maintained growth … excess creates disaster”
Agreed, but “the system” thrives on excess, the greater the excesses the greater profit. Of course you know that, but how many out there actually believe that our politicians and business leaders have actually tamed the beast? Isn’t it amazing how so many feel it won’t get that bad, that this “system” will endure into perpetuity?
“It’s a big sh*t sandwich and we’re all going to have to take a bite”
-Full Metal Jacket
I agree with you Dirty diaper ….Sub-prime loans use to be a small % of the market . Those borrower use to put alot more money down to offset the risk they wanted the lender to take and those borrowers pay higher fees and rate . Good borrowers with good credit and good ratios got the A paper loans and would qulaify for the lowest down payments .
When you don’t have a system that rewards good and bad correctly ,it will fall .
Here’s a quote from the indy story:
Foreclosures have festered across Central Indiana in recent years, driven by personal bankruptcies, aggressive lenders, high medical bills and illegal real estate deals, experts say.
They forgot to blame somebody (it seems like this always happens lately)- THE IDIOTS WHO KEEP BUYING CRAP THEY CAN’T AFFORD!
“If that is indeed how the story will play out, William D. Dallas, the founder and CEO of recent bankrupt Ownit, a lender based in Agoura Hills, Calif., would argue that his company has become an early case of road kill.”
David Lereah will be out there in the rain giving that fresh RE Roadkill CPR, a fresh Blue Dress and some new Lipstick before the next Reality Semi-Truck comes flying down the road of DOOM !
And he’ll explainspin that it is not road-kill, it’s recycled protein.
Early prediction: In the next boom, DL will reemerge as Chief Economist of the National Association of Home Builders. No wait — my crystal ball is starting to shake violently and shooting out sparks —
it looks like he will be …
Chief Economist of Fannie Mae!
Super executive summary about all this
http://www.itulip.com/forums/showthread.php?t=854
And more re interest rates:
http://www.itulip.com/forums/showthread.php?t=857
I guess we will probably continue to agree to disagree without any empirical evidence to settle the dispute, but I still maintain my hunch the PPT has evolved from a crisis-only management mode to an ever-vigilant daily-smoother of volatility. Why risk another Black Monday when you can preemptively guide the market away from any and all rough patches?
Did anyone notice that kid Casey’s website, http://www.iamfacingforeclosure.com is off today? The message on the site is now:
This Account Has Been Suspended
Please contact the billing/support department as soon as possible.
Oh, that is just golden!
jb
Ah the joy of renting:
http://www.nbcsandiego.com/family/10852557/detail.html
Basically if someone is assaulted or raped in the place you will rent, say if you are an FB looking to “sit it out during the correction”, expect some nice lawsuits too. And I bet that negative cash flow really allows you to also have a special liability insurance!!!
I think for most FBs renting out the least of their worries is someone who will trash the place.
Another point . Do you really think that realtors don’t know where to go to get a liar borrower passed ,or a inflated appraisal passed ?
Ask most of these sub-prime borrowers if they were just put on their own to find their own lender or if they were pushed to where to go to get the liar loan .
Realtors are suppose to pre-screen buyers for qualifying before they show them property .Realtors are not suppose to waste sellers time with unqualified buyers .
If the realtors and mortgage agents were being honest they would tell you everybody was doing it and a high % of agents failed in their duty because the money was just to easy and good .
Now the new game is cash-backs and incentive deals and there needs to be a public service announcement informing the public that it’s fraud to do some of these deals and to report any realtor or buyer that suggests it ,or we or going to get another round of bum deals just so the REIC can keep this false party going .
It’s a pretty bad statment to realize that the watch-dogs of real estate have to be watched now .
“Do you really think that realtors don’t know where to go to get a liar borrower passed ,or a inflated appraisal passed ?”
How else are they going to survive in the current market?
That’s just it GetStucco ,the market needs to correct and it’s not going to be pretty . The sub-prime lenders are falling and they will with time be taken away regardless of what the borrowers or realtors want . That leaves this market with even less demand .Hey, did everybody think that the secondary market could operate at this kind of a loss forever ?
Maybe everybody could talk the secondary market into giving 2% fixed 30 year loans .
I’m just wondering about the magnitude of the drop. My first guess was about another 35% (or 50% over valued) but that might be conservative. The rebound effect from all the layoffs in real estate, construction and lending might actually lower the median income. Rates will also begin to rise (7-8%) and that will futher limit affordability, not to mention all the financial wreackage floating out there.
Seems like a lot futher to go.
A 3/2 apartment in a decent area is around 1800 per month… Houses are 500-600 K in this range (or higher).
If the rates jump up to 7.5% from 6%… Another 40% to go tword break even.
“IndyMac Bancorp Inc., a big Southern California mortgage specialist, on Thursday said fierce competition and worsening credit quality may push 2007 profit well below analysts’ forecasts. The Pasadena-based parent of IndyMac Bank also said it has frozen all salaries, stopped hiring non-revenue-generating personnel, (and) plans to outsource 50 percent more jobs by year end.”
“‘People have been predicting disaster in the housing market, and for much of our competition, it is,’ CEO Michael Perry said.”
Translation: “I” am okay, as for my soon-to-be ex-employees - well that’s another matter…
“The Pasadena-based parent of IndyMac Bank also said it has frozen all salaries, stopped hiring non-revenue-generating personnel, plans to outsource 50 percent more jobs by year end, and has established a “SWAT” team to improve performance.”
Wow, an in-house swat team. If that don’t motivate nothing will
Outsource more jobs to India ?
Haven’t you heard, it’s the new “american” way. Americans no longer want or need to work. We have deemed that the stock market and real estate flipping are the only things worthy of our attention. Our arrogant asses will be outsourcing all jobs to illegal aliens and third world countries. You know those folks beneath us… untill further notice. Excuse my while I go open my new daytrading account with E-Trade.
That’s the line our leaders keep feeding us. Americans no longer want to work. That’s strange. Everyone I know gets up and goes to work everyday.
The reality is that Americans don’t want to work for the slave wages that corporations want to pay illegal aliens and third world citizens living in mud huts.
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
Well, now you’re bankrupt genius…What would I do? Uh stay in business.
“Mr. Dallas acknowledges that standards were lowered, but he placed the blame at the feet of investors and Wall Street, saying they encouraged Ownit and other subprime lenders to make riskier loans to keep the pipeline of mortgage securities well supplied.”
“‘The market is paying me to do a no-income-verification loan more than it is paying me to do the full documentation loans,’ he said. ‘What would you do?’”
So there it is………….”Freaking Wall ST”
What a bunch of low life.
I find it hard to believe that the final bagholder lenders wanted fraudlent high risk loans . The secondary market wanted to fund sub-prime loans at higher interest rate and fees that were a little higher risk but with solid appraisals and with borrowers who in the final analysis did have the ability to pay the monthly payments . The secondary market didn’t want to give someone a low down loan for a million who only made 2 thousand a month . Its more like they were looking for the guy who had a business who has alot of tax write offs, yet takes home a high cash flow .
Also, why would the secondary market think that borrowers would be so foolish as to want a loan that demands 75 % to 100% of their monthly nut and will continue to rise .These sup-prime loans were not designed for flat-waged people who would also lie about their wage .
Come on , a couple of months ago we had a example of a social worker that made $3,600.00 per month and the sub-prime scum put her on a 500k plus loan .The loan agent told her she had to out right lie and trible her income on the stated loan .
Believe me the damn borrower was part of the problem also in that she could not say no to the higher priced property that she clearly couldn’t afford .
‘Some housing bubble news from Wall Street and Washington. “Sales of new one-family houses in December 2006 were at a seasonally adjusted annual rate of 1,120,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.0 percent (±11.7%)* below the December 2005 estimate of 1,259,000.”’
December residential building permits (a leading indicator of the future new home construction rate) ran at 1,596,000 — 476,000 ahead of the published December 2006 new home sales at an annualized rate. And don’t forget the new home sales statistic includes cancelled orders.
Here is a link to Census’s December Census/HUD joint news release on new residential construction:
http://www.census.gov/indicator/www/newresconst.pdf
How can the builders clear inventory if building permits are outrunning the current rate of sales by 476K? Am I missing something here? Or is Eoin forgetting to do some necessary subtraction to put that 1.1m in proper perspective? And why is the FT printing US journalist propaganda verbatim? Did the NAR pay them off?
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US housing shows unexpected strength
By Eoin Callan in Washington
Published: January 26 2007 17:36 | Last updated: January 26 2007 17:36
The US economy showed signs of renewed strength on Friday as data revealed unexpected growth in the housing sector and orders for big-ticket manufactured goods rose.
Sales of newly built family homes rose 4.8 per cent last month to 1.1m for the year amid signs that housebuilders were beginning to clear excess inventory that has weighed down the construction sector.
http://www.ft.com/cms/s/f27e4744-ad5a-11db-8709-0000779e2340.html