Home Sales, Price Declines Encouraging
Some housing bubble news from Wall Street and Washington. “Total existing-home sales were 4.3 percent below the 6.75 million-unit level in January 2006. Total housing inventory levels rose 2.9 percent at the end of January to 3.55 million existing homes available for sale”
“Median home prices fell for a sixth straight month. The January decline was the third-biggest drop in history.”
“‘For the last several months I have been hemming and hawing on whether we have reached bottom,’ said David Lereah, chief economist for the Realtors. He said that the January report was an encouraging sign that the bottom for sales activity was reached last September.”
“But he cautioned that the warm weather in December boosted home closing in January, the activity that is tracked in the Realtors report. He said there could be a bit of a payback in coming months.”
“Prices of single-family homes across the nation were flat in December, the worst results since slight price declines seen in early 1996, a housing index released Tuesday by Standard & Poor’s showed.”
“S&P index committee chairman, David Blitzer, compared the decline to that of the early 1990s but said this one could be even more pronounced. ‘By most measures, the current slide is steeper,’ he said. ‘It could outdo the 1989, ‘90, ‘91 event. I don’t see any signs that we’ve hit bottom and are about to turn up,’ Blitzer said.”
From MarketWatch. “Government-sponsored mortgage marketer Freddie Mac is the latest company to weigh in on the growing concern over lending to unqualified homebuyers, saying Tuesday it’s tightening its standards for buying mortgages held by such borrowers.”
“Freddie Mac said Tuesday that it would stop buying those mortgages that have ‘a high likelihood of excessive payment shock and possible foreclosure.’ Freddie Mac also said it would limit the use of loans that don’t require income verification or other documentation, and will recommend that lenders collect adequate escrow for taxes and insurance payments.”
“The firm said its new requirements cover mortgages known as 2/28 and 3/27 hybrid ARMs, which currently make up about three-quarters of the subprime market. Specifically, Freddie Mac said it will require that borrowers applying for these products be underwritten at the fully indexed and amortizing rate, as opposed to the initial ‘teaser’ rate.”
“The company also will limit use of low-documentation loans, so-called ‘no income verification’ products in combination with the 2/28 and 3/27 hybrid arms. In addition, the company won’t purchase ‘no income, no asset’ documentation loans and will limit so-called ’stated income, stated assets’ products to borrowers whose incomes derive from hard-to-verify sources, the firm said in a press release.”
“‘There will be a reasonableness standard for stated incomes,’ Freddie Mac concluded.”
The Wall Street Journal. “David Radley wants to borrow $180,000 to buy a house he rents in Appleton, Wis., but he can’t afford a down payment and has a low credit score.”
“Finding such a loan was a snap until recently. Now mortgage broker John Waite says Radley needs to pay off old bills and put down at least 5 percent to qualify. Though Waite’s motto is, ‘We say yes’ when the banks say ‘no,’ ‘he is saying ‘later’ more frequently these days.”
“Investors’ loss of confidence is reordering the mortgage business. ‘A lot of loan programs that have been available for the past several years … are going away,’ says Jack Pevey, president of Integrated Mortgage Services Inc. in Denver. ‘It’s going to keep a lot of people out’ of the market.”
“No-money-down loans to borrowers with low credit scores ‘are going to be a thing of the past real soon,’ says Bob Moulton, president of Americana Mortgage Group.”
“‘We’re probably reverting back to guidelines that were in place’ four years ago, NovaStar President Lance Anderson says. The new guidelines wouldn’t have allowed as many as 25 percent of last year’s loans without more documentation or bigger down payments, he added.”
The Financial Times. “Repayment problems involving ’subprime’ US mortgage borrowers could have knock-on effects in the broader $8,000bn mortgage market and beyond.”
“The latest concerns centre on the Alt-A market, in which consumers with slightly better credit than the weakest subprime borrowers can obtain loans with loose terms - such as no proof of income. Late payments and defaults on such loans are running at four times the historical rate.”
“‘The delinquency numbers for the 2006 Alt-A originations are materially worse than a lot of people would have expected,’ said Charles Sorrentino, mortgage analyst at Merrill Lynch.”
From Inman News. “The Wall Street end of the mortgage business is entering an episode of distress at this moment, and we will see pricing and availability do some strange things in the next week or two.”
“The party most vulnerable to the retreat of housing exuberance is not housing, it’s the mortgage profiteers, at this moment the Wall Street co-dependents even more so than their Main Street lender-accomplices. As of Friday there are not enough buyers of subprime risk to cover loans recently closed or in process.”
“Trash, like other things, rolls downhill: Alt-A loans are closer to junk than trash, but high loan-to-value-ratio Alt-A loans are still trash.”
From theStreet.com. “Alt-A loans include option adjustable-rate mortgages, negative amortization loans and other nontraditional loans. These loans are made to homebuyers whose credit is generally better than that of subprime borrowers but worse than that of prime borrowers, on the basis of FICO credit-quality scores.”
“‘Everyone says these problems are contained in subprime,’ said Carl Tash, a portfolio manager of a long/short real estate securities hedge fund. ‘If you think about it logically, what is the difference [between subprime and Alt-A] ? Some arbitrary difference in FICO scores.’”
From USA Today. “Former Federal Reserve Chairman Alan Greenspan said Monday it is ‘possible’ the U.S. economy might fall into recession by the end of the year.”
“Greenspan also said he has seen no economic spillover effects from the slowdown in the U.S. housing market. ‘We are now well into the contraction period and so far we have not had any major, significant spillover effects on the American economy from the contraction in housing,’ he said.”
From Bloomberg. “Federal Reserve Chairman Ben S. Bernanke during his semi- annual monetary policy report to Congress said there are ‘tentative’ signs of stabilization in housing, and the slowdown hasn’t hurt other sectors of the economy to ‘any significant extent.’”
“Still, it is ‘too early to say this problem is over,’ Bernanke said. ‘Even if housing demand falls no further, weakness in residential investment is likely to continue to weigh on economic growth over the next few quarters.’”
“New orders for U.S.-made durable goods plunged 7.8% in January as nearly every category of manufactured goods declined, the Commerce Department reported Tuesday. This is the third drop in the past four months and the sharpest decline since July 2005.”
“‘With capital spending having been down in the fourth quarter, this trend is not something that makes one comfortable about the strength of the economy,’ said economist Joel Naroff. Economist Ian Shepherdson went so far as to say the factory rector was in a ‘recession.’”
The Globe & Mail. “For decades, the U.S. Congress and a string of presidents have struggled to make the dream of home ownership a reality for more Americans. Prodded by Congress, regulators operated on the principle that more mortgage cash couldn’t possibly be a bad thing. Bad credit history? No down payment? No problem.”
“Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School of Business, estimates nearly two-thirds of all home loans since 2003 have been ‘aggressive.’ But all this easy money hasn’t been without consequence.”
“Fannie Mae and Freddie Mac have seen a host of new players come into the market, offering big returns and steep risks. These subprime securities have become popular with the hedge funds, which are unregulated. No one knows with any certainty where all these subprime securities are stashed away.”
“Whatever happens, Washington’s fingerprints are all over this. It is, after all, exactly what they wanted.”
‘Green Welling LLP announced today that it filed a class action suit in the United States District Court for the Central District of California against New Century Financial Corporation and certain of its officers and directors, on behalf of all persons or entities who purchased the common stock of New Century Financial during the period between May 4, 2006 and February 7, 2007, inclusive.’
‘The Complaint alleges that New Century Financial improperly accounted for loan repurchase losses when it knew of, or recklessly disregarded, a surge in borrower payment defaults in 2006. Defendants’ improper accounting of its loan repurchases violated generally accepted accounting principles regarding the Company’s allowance for loan repurchase losses. In addition, the Complaint alleges that defendants concealed materially adverse facts from the investing public, including that the Company lacked requisite internal controls, resulting in material misstatements in the Company’s financial statements and press releases.’
I was watching builders and mortgage company execs dump stock hand over fist the last 6 months wondering how in the world they could be so brazen. There are going to be a lot more insider trading cases coming soon.
Insider trading? Everyone on this blog saw it coming and we had no access to inside information.
The difference is…
1. We weren’t telling people that everything was ok
2. We weren’t cooking the books so everything looks all rosey
3. We weren’t the ones that have created a paper trail a mile long showing all the illegal trades
The SEC might be slow and stupid but once they’re onto you you’re screwed.
And it will give absolutely NOTHING. It would be more efficient to take a contract against the people. I don’t believe in US legal system. Hired hitman would be better. Kill the crooks in a selective way.
That’s an intelligent position…
“… how in the world they could be so brazen.”
Next move: BK? Can’t squeeze blood out of a turnip.
read on M-ville that that the “weak bbb tranche” down another 10% today bringing ytd total to 40%
but, but… Lehman issued a report stating the worst was over yesterday?
That would imply an easing or credit policy.
Yeah after collecting on its shorts. This effing market is so fixed. Take a peak at my post in yesterday’s bits to get my drift.
LEH 12:47PM ET 74.29 Down 3.54 Down 4.55% 5,669,800
Worst is over?
buy qqqq puts..high Reward/risk ratio..
No. VX is up 20% today. I’d wait for a retrace from this down move.
Just MO and worth what you paid for it.
i am also thinking about EEM puts..do you have any opinion on it?
that could work. or you could find some individual stocks w/bad charts. The Indian ADRs last summer were excellent shorts for instance.
Zucchi on MVille covering 50% of EEM short and writing OOM puts. Just so you know.
I’ve got 30% of my index puts for sale but it’s going to have to come down more to get me.
Am I the only person here who finds it a bit more than a coincidence that all of the stock market turmoil in China comes the day after Greenspan opens his mouth and announces that he sees a recession in the US later this year? What he really said to them was, “At the end of the year, it’s more than likely that we won’t be going into debt to buy your cheap crap anymore.” I can see where that might spook some people.
IMO, all the global markets are controlled by a few (very leveraged?) entities. I believe the imploding mortgage market will affect markets across the globe.
Something many here have been waiting for — and expecting, unlike all the smarty-pants on WS.
Nice day for bears on WS. Congrats to all the “players” here.
I just can’t wait to get home and watch Kudlow & Company. They’ll probably just focus on how well the war’s going.
It’s a great day to be a free market capitalist in this goldilocks economy. Great buying opportunities abound! Didn’t you know?
Just a loyal banker answering the call. No doubt his PigMen counterparts have taken short positions while the sheeple shriek and squeal.
RE: PigMen
LMAO…a very apt description
It is a Russ Winterism. Russ links to his blogs here.
Russ’s blog for today is “Turkey Shooting” or something close to that.
“Am I the only person here who finds it a bit more than a coincidence that all of the stock market turmoil in China comes the day after Greenspan opens his mouth and announces that he sees a recession in the US later this year?”
Speaking of which, where are HFA and the other perma-bulls lately? Now even St. Greenspan, the patron saint of bubbles, is forecasting a recession which still has nothing to do, at least officially, with the eminent collapse of the credit debacle of which he was architect in chief.
I think I’ve spotted a trend: people in the public eye seem to shift their outlook/opinion by a few vague gradations every time they’re quoted. That way, regardless of what happens, they’ve been nearly right all along.
Let me go on record by officially stating that there may or may not be a recession, which may or may not be influenced by the questionable existence of a credit bubble, which may have never existed. Now please buy my new book or pay me lots of money to speak at your function.
Former Federal Reserve Chairman Alan Greenspan said Monday it is “possible” the U.S. economy might fall into recession by the end of the year.
Good job, Al. Wasn’t it big Al who presided over the Fed when interest was hostorically Low? His big plan was to mitigate fallout from the dot com bubble, but it’s unintended consequence was the trainwreck we otherwise call “the presant state of the housing market”.
The worst thing would be for housing to spill out into thegeneral economy and cause a recession. It’s going to effect the GDP, wheather it causes a recession is debatable.
What would be nice is if RE prices and sales fell to normal levels, a few banks and mortgage co’s crashed and burned, the, Mortgage/Banking industry as a whole took a hit, thereby realizing that, no it’s not smart to lend money to people who obvioulsy can’t or won’t pay it back and the housing market returned to equilibrium.
I hope the happens. That would be a good thing. Chances are better that it will recover after some pain, but there still could be that cliff ahead that we don’t see and the whole economy pulls a “Thelma and Louise”.
“Federal Reserve Chairman Ben S. Bernanke during his semi- annual monetary policy report to Congress said there are ‘tentative’ signs of stabilization in housing, and the slowdown hasn’t hurt other sectors of the economy to ‘any significant extent.’”
Is this individual this disconnected from reality? The problems heading down the pike where foreclosures and bankruptcies are concerned is unprecedented in recent history. This problem threatens the core financial establishments of our economy. Never mind what happens once lending standards not only tighten, but swing the other way.
Check out video in upper left hand corner
http://www.itulip.com
Wow…Go Ron Paul!
Great video….Thanks Txchick!
When they said there were WMD in Iraq, somehow my intuition told me there weren’t any WMD in Iraq, and my intuition (along with a few million others) was right.
When Bush said “mission accomplished” four years ago, my intuition told me that the mission was just getting started, and my intuition (along with a silent minority of skeptics) was right.
So when Bernacke tells me that housing is stabilizing and isn’t going to affect other sectors, I am sorry to report that my intuition, once again, feels exactly the opposite.
But hey, I’m just a nerd in LA … what the hell do I know?
Revenge of the nerds comes to mind.
You were right on all counts, vioviv. For me, however, the Bernanke statement is a more flagrant, out-and-out lie than either of the Bush admin’s statements that you cited. All three cases are “cheerleading,” but the first (WMD) was supported by some other govts’ evidence at the time, the second (mission accomplished) was Bush’s own delusional wishful thinking, while the third (stabilizing housing) is something Bernanke HAS TO know is a crock. He just can’t afford to say, hey, housing is now REALLLY going to go down the toilet without all those funny money loans. Such a statement would expose him to accusations of shouting “fire” in a crowded theater. (There IS a fire, folks …)
So instead of trampling each other, the sheeple will burn to death. Nice.
“the slowdown hasn’t hurt other sectors of the economy to ‘any significant extent.’”
I thought perhaps Ben (Jones) was making a point of his own when he followed up the aforementioned quote in his thread intro with this one from Marketwatch:
““New orders for U.S.-made durable goods plunged 7.8% in January as nearly every category of manufactured goods declined, the Commerce Department reported Tuesday. This is the third drop in the past four months and the sharpest decline since July 2005.”
“‘With capital spending having been down in the fourth quarter, this trend is not something that makes one comfortable about the strength of the economy,’ said economist Joel Naroff. Economist Ian Shepherdson went so far as to say the factory rector was in a ‘recession.’”
It makes you wonder why Greenspan, Bernanke still bother to make those statements when they are followed up in the same day by such contrary info. It just makes appear completely out of touch.
Just a question, if there is someone out there who would know.
Is the durable goods number indexed in any way to correct for the losses in the manufacturing base in the USA? Or is it just a raw dollar number? And is there a breakout for the amount of “Durable goods” imported?
He is doing his job, which has exactly one goal:
Preserve public perception of the strength of the US Dollar.
Basically he’s David Lereah for the US Dollar. The only thing truly dangerous about hyperinflation is the average Joe being *aware* of hyperinflation. As long as he can do his little jig successfully, and convince the sheep that the US dollar is looking good, housing is stable and the economy is growing — everything will be ok. The second people start to realize that he’s just a cardboard PR guy for a doomed currency is the second the US dollar really hits the fan. Bernanke would love to have us all believe that he’s actually driving this plane. But this train skipped off the tracks years ago and his job isn’t so much flying, its piloting the controlled crash.
The big loser in the coming financial crisis will be the little guy that holds cash and listens to Bernanke. The big hedge funds are diversified in foreign holdings, oil, gold and increasingly silver.
(plane, train… sorry for the mixed metaphor… doing too many things at once!)
As a little guy with about a spare 60 thousand dollars to invest would I be ok to invest in mutual funds. Specifically edward jones mutual funds.
Stay cash, $60K at 5% is nice income.
5% doesn’t even keep up with inflation.
Wealth preservation, yes.
Yes, if you want to watch your mutual funds go down with the DOW.
Take a look at the best stocks in your favorite mutual fund. Open a brokerage account.
Buy those stock directly (spread it out across industries and companies).
Why buy a mutual fund which will nickel and dime you every year, when you can directly own their best stocks? You just have to do a little research. If you’re afraid, stick to blue chips like Exxon, Chevron, Con Agra foods, Kimberly Clark, Coke, Pepsi, P&G, etc….
The year over year home sales for January is down by 4.3% compared to January 2006. As usual, the media is hyping the month over month sales that increased by 3.3%.
Thanks, I just updated the post with this:
‘Total existing-home sales were 4.3 percent below the 6.75 million-unit level in January 2006. Total housing inventory levels rose 2.9 percent at the end of January to 3.55 million existing homes available for sale”’
and Jan 06 scked
These are closings numbers for Nov/Dec sales. This is before the sub-prime sector tanked and standards ratcheted up (supposedly, but good luck finding buyers for the BS notes in the secondary market). Sales numbers are going to PLUMMET going into spring.
Yes, I awoke this morning full of an optimism I have not felt in a long time. Many times I posted some prognostication that the slide would be long and painful and sloooooooooow. With the end of repackaging Ne’er-do-well Notes, I have come to agree we may see a very rapid decline in prices. Starting right now.
Rah and rah, sis-boom-bah, FB on a bonfire, hahaha
And, January ‘07 had great weather!
Wait a minute! I thought the NAR always reported year-over-year to avoid seasonal variations. I just assumed the 3.3% rise WAS year-over-year.
The spinning is reaching desperate levels.
I thought the same. I was surprised to see this news, and expected to get some clarification on this site.
All I see are more and more homes for sale in my area. Most people are priced out of the market, while the others are waiting on the sidelines.
B’hamster, i just want to say I’m really impressed by you. My understanding is that you’ve recently bought a home in this falling market and yet, you seem to be just absolutely fine with watching it’s continued fall.
You are one calm, collected, and righteous person. Thanks. And welcome to B’ham.
Thanks for the nice words. We almost bought at the market top. Our house still appreciated ~5% (per zillow, whatever that means), but its affordable to us.
It’s either YoY or MoM, whichever is up.
Wonder what they’ll do when neither is up.
OK I reek of conspiracy-theorist on this point, but did you all notice the only place where sales were rising was the Northeast…and so I wonder how much undisclosed, unsubstantiated data from NYC realtors helped juice these figures…
But I suspect the juice has run out. The shady loans we advertise by the pageload up hear should be dissappearing in a couple months…
I was just thinking about this today. Imagine the loss in revenue to the advertisers when the subprimers tank for good. That alone will be a disaster in many markets.
All I see on the web are refinance crapola.
Great observation, dime. That would totally sink Florida. Option One still going strong on this site.
I am a festival of typos as of late “up here” i mean…
These stats are just plain annoying at this point. Why do they even bother?
even LIErah admits that’s from the super warm December shoppers
anyone have his condo purchase dates in FL ?
I wonder what larry goldilocks kuntlow has to say about today’s story never told.
Glad I didn’t take out a second on my home to buy Chinese stocks.
Glad I didn’t take out a second on my home to buy Chinese stocks
LMAO.
Do not be premature on the death of the Chinese market, up 13% over the last 2 weeks then a drop of 9% in a day! Up 150% over the last 16 months! Just because the US trades low volatility does not reflect on the world’s volatility. Check out the VIX that is up 30% in the US over the last 2 weeks.
“Do not be premature on the death of the Chinese market”
Didn’t people say this about housing a year and a half ago?
Mmmmm, bubblicious.
I agree that the world equity markets are in a bubble! But, there is an incredible amount of dollars floating/churning in the world. Some of this money is being used to provide real growth e.g. “Paladin Resources Ltd., whose stock is the world’s best performer the past five years, offered to buy rival uranium explorer Summit Resource Ltd. for A$969 million ($770 million) to increase its Australian reserves”, some is being used for bogus investments e.g. TXU being acquired and split up. Old stock market adage ‘he who picks tops ends up bald’.
Paladin Resources is nothing but a BreX with a different name ! They don’t actually mine anything !
“Paladin operates in the mineral resource sector with focus on uranium and has projects in Australia and Africa. In line with its long term vision to establish as a uranium producer, the Company’s strategy is to identify, acquire and evaluate advanced uranium projects. Since 1998, during a period of sustained downturn in global uranium markets, Paladin had been accumulating a quality portfolio of advanced uranium projects each having production potential.”
Identify, aquire and evaluate. Note it doesn’t say operate !
still the move in China was a 0.001% probability move. That is so small it wouldn’t even register on a probability diffusion of daily returns. But it did in fact happen. Also the daily limit for down moves in China (no country I know have has up move limits) is 10% so that would be supportive of buyers.
Derivatives are built around statistical probabilities of risky event occurring. I’m willing to bet that swaps and constant volatility forwards were never priced to protect against a 0.001% event. And, who says its over. The 10% limit made a convenient backstop for traders to try a long position. Today is a whole new ballgame.
In english: somebody got bloodied last night. Now we wait to see who shows up at the emergency room.
IMHO the statistical probability was probably closer to .0003, but the derivative markets were and are priced on emerging markets at ~0.001. The blood was in the small speculators getting into the market over the last few weeks. One of China’s stock investment laws “Banks in China are banned from lending money for stock investments. The regulator last month ordered banks to examine personal loans to prevent them being used to buy shares. The central bank carried out similar crackdowns on unauthorized margin trading in 1997 and 2001 after indexes surged.” The last time the China market dropped this much was when China cracked down in 1997.
Check out U.S. Global Investors China Reg Opp (USCOX).
A war that’s costing billions and billions; Detroit’s Big 3 are ready to implode; housing costs have doubled in 4 years; health care and higher education costs are triple the rate of inflation; thousands of illegals continue to pour across porous borders…am I missing something here?
http://www.washingtonpost.com/wp-dyn/content/article/2007/02/27/AR2007022700507_pf.html
Yeah, I think you forgot all the toxic loans and Social Security/Medicare time-bomb!
One other thing, we’re saving at -1%, so we gots no mon-ay to pay for anything anymore.
It’s always dangerous to apply a linear prediction to a dynamic (no linear) system.
Consumer confidence at a six year high! Hahahahaha…….
Citi just bumped my credit line another $8000 - I feel like a confident consumer - You?
It is a good thing I have not needed a raise in the last 6 years.
I think the Conference Board’s numbers are phrenological shi*t. Other than that they’re a great gage of the consumer. (sarcasm off)
I guess the point I was making US Consumer = Person + Platinum Card.
“In addition, the company won’t purchase ‘no income, no asset’ documentation loans and will limit so-called ’stated income, stated assets’ products to borrowers whose incomes derive from hard-to-verify sources, the firm said in a press release”
Drug dealers, bankrobbers, specuvestors, underworld kingpins… Congratulations! You guys can still get sh!t loans from FRE!!!
That a GSE could purchase NINA’s to begin with is ludicrous. Anyone who believe’s the ALT-A isn’t Garbage needs to give me the name of their Dr., so I can get on those high quality pharmecuticals also.
Oh, and I forgot to mention those with the toughest incomes to verify… Undocumented workers (AKA ILLEGALS).
Oh, heck, those “undocumented” workers have found a way around all of that. They’ll be able to pay cash, because now they are kidnapping children for ransom in our area. Google Clay Moore of Manatee County, Florida.
Speaking of which, maybe there will be a new wrinkle in the subprime market. Put your children up as collateral. Why not?
It’s a race to see if the border patrol can catch them before the lenders do.
Of course, the only problem with collateralizing your children is that there will probably be a clause in the loan that if your child gets kidnapped, then the bank reserves the option to immediately call its loan.
“The new guidelines wouldn’t have allowed as many as 25 percent of last year’s loans without more documentation or bigger down payments, he added.”
Maybe nationwide, but in big-bubble areas of the West and East coasts, I’d venture a guess that 75% of the loans wouldn’t have funded under the guidelines proposed.
nnnvtbrkr-
Agreed. A LOT larger than 25% IMO. 71% of all purchase deals our office closed in 2005 alone were 100%. 06′ was around 60%. That’s just purchases mind you. Refi’s? Don’t even want to think about it. But, there were a whole bunch of 2/28’s. Whole bunch with ppp’s. Lot’s of refi-refugees: those that keep coming back to refinance once every year when debt load kills them. But, no out of pocket expenses! Didn’t cost ‘em a dime out of pocket to do it. (just raid my phantom equity)
The humbling thing is, take away that gross income for my office and, well, you get the picture.
Pretty damn scary, eh? That’s why I’ve been preaching the word to my industry friends for several years now to stuff their acorns (honest acorns) away for the long, cold financial winter that lies ahead. Unfortunately, most did not.
La cigale, ayant chante
Tout l’ete
Se trouva fort depourvue
Quand la bise fut venue
The NAR is now forming the Great “First Time Buyer’s Hunt”. The Posse’s will originally be forming in Florida, California, Nevada, and Arizona. The one in Washington will not be called a Posse but a Committe and will take about 2 years before they get anything done.
Regulation’s now require that before these lowly renter’s are struck over their heads and dragged from the dwellings they rent, that a SS# needs to be identified, if one is not found one will be appointed. In the case of no English skills they will be moved to the front of the line at the “Fortunate Debtor Intern Sight” (F-DIS).
As a side note any American not useing a Credit Card in the Last Quarter will be required to make a recurring One-Time payment equaling the average interest of the average carried balance of the Average American.
The aformentioned Posse, will be spreading inland from both desired Coasts until Home ownership reaches 100% at which point we will be Anexing Mexico and the whole nation will go on non-regulated Pharmecuticals.
We Salute You (One Finger is displaced from the rest)
“non-regulated Pharmecuticals.”
Sh*t!! There goes my sobriety. Better tell the wife to start hitting her alanon meetings again.
“David Radley wants to borrow $180,000 to buy a house he rents in Appleton, Wis., but he can’t afford a down payment and has a low credit score.”
“Finding such a loan was a snap until recently. Now mortgage broker John Waite says Radley needs to pay off old bills and put down at least 5 percent to qualify. Though Waite’s motto is, ‘We say yes’ when the banks say ‘no,’ ‘he is saying ‘later’ more frequently these days.”
Lousy credit and no money down and until very recently it would have been a snap to get this guy a loan. Give me a break!!! Guys like these are who responsible people have been competing with in the home purchasing market. Stagnating prices and a credit crunch will keep current FBs from refinancing, and the credit crunch will keep a lot of new buyers out of the market, putting further downward pressure on prices.
In 1988 I attempted to buy my first home which listed at $80,000 in Chicago’s west suburbs. I had the 20% down payment handled, along with seven years as a governmental sanitary chemist, and a spotless credit history, yet the loan did not go through! What a change 19 years has wrought. Lending standards are about to acquaint themselves with with the reactionary past. Hold on tight.
I can relate…
Built a new house in 1998.
Contract price was $208k with $60k down.
I still had to use a 20 year connection I had with the financing institution to smooth some of the rougher edges, like clearing the contractor.
It was by no way a “gimme”, even with the 30% equity position I had.
Amazin’ how fast the lending biz went to crap.
That’s funny you should say that -
I remember as a kid, when people would apply for a mortgage, it was like applying for a job. You got dressed up, spruced up a resume that included work history and good payment history, practiced a “pitch” to gloss over any negative comments, and were generally nervious / excited about the process. As a single woman, my mom was a bit overwhelmed by the whole thing. Times have changed indeed.
I can remember having to be on my BEST behavior when my parents went to the bank for their home construction loan.
ca. 1970 they wouldn’t even count my income as part of the household income, even though my husband and I had the same job and the same pay. I would (according to the bank) be perpetually pregnant (in a 1000 s.f. house?!?!) and unable to contribute.
Yea - by te fact my mom was a single woman - she was deemed a risk. The male loan officer asked about the boy’s father and what happens when the boy gets sick. He also asked about how a woman would manage to keep the home up - afterall home repairs are a man’s job.
“About $824 billion in securitized bub-prime mortgages are outstanding, representing about 11 percent of total U.S. mortgage debt. Alt-A mortgages, those that fall shy of Fannie Mae and Freddie Mac standards and made with no income docs, investor purchases or interest-only and “option” ARMs, represent about $722 billion, 9.3 percent of total U.S. mortgage market.
This sub-prime mortgage market deterioration will affect the prices for U.S. housing. The migration of this credit event to the CME housing futures and options market has been slow. This is due in large part to the lack of multi-year CME housing futures listings and due in small part to the general downward stickiness of housing prices. If three or five year forward housing futures and options contracts were available for trading over this past month, they would have been busy - ABX, ABS and CDO traders for example would be looking to capture forward housing prices”
link: http://www.housingderivatives.typepad.com/
“In other encouraging news, the Conference Board, a private research group, said that consumer confidence rose in February to its highest level in more than five years”.
You have to love America.
Whistling past the graveyard.
That is not a “Cliff”, it is an “Acceleration Port”.
LOL!
Yep, just had to check, gravity is a pretty effective accelerant.
Remember, speed doesn’t kill impact does.
9.81 m/s^2 to be specific
‘If you think about it logically, what is the difference [between subprime and Alt-A] ? Some arbitrary difference in FICO scores.’
Yes, we had a string on this a couple of days ago. If your payment resets and you can’t afford it, it doesn’t matter what your FICO score was when you got the loan. The carnage will spread beyond subprime, perhaps at a little slower rate, but it will spread. Short sales and foreclosures impacts everyone’s values in a neighborhood, not just the subprime houses.
“Freddie Mac said it will require that borrowers applying for these products be underwritten at the fully indexed and amortizing rate, as opposed to the initial ‘teaser’ rate.”
Anyone else think this is a big nail in the coffin? How many people can afford the fully amortized payment? Isn’t that the whole reason they got the teaser loan to begin with?? Then sell or re-fi before the loan resets?
If you think stated loans are going to go away, think again. Recently, my real estate buddy went on a few calls with an in house BofA mortgage guy who told him about one of BofA’s new loan products. It is purely FICO driven with no docs required. Anyone with a 720 or above can get a loan at 95 LTV with no PMI. I almost died when my friend mentioned BofA wasn’t in the NO-DOC loan business. I asked him what BofA would call it then. Something stupid that sounded a lot like Freedom Fries.
should be “if you think no-doc loans are going away”
BofA is now offering credit cards to customers without a SS to get the illegal alien biz.
Imagine the scams evolving from this bit of marketing, which Joe Q. Sixpack will finance with his checking account and late payment fees.
I saw an BofA ad. on tv and was disguisted with the whole thing. It was squarely aimed at illegals. Imagine we like the same shows as some illegals.
I think No-Doc, Stated, NINA, and the like will always remain, but the guidelines will go so pucker-butt that they might as well have vanished in comparison to yesteryears landscape. The days of doing these deals at 100%, 95%, or even 80% will go, and with it so will the market these deals propped up for so long. If we go back to pre-2000 underwriting guidelines, the purchase market is super-TOAST, instead of just toast!
Yup. As a long-time no-doc lender, I have been turning down lots of requests from people who want to increase their LTV from 60% to 80%. No deal.
Two things:
One- David Lereah was in Santa Barbara last week as a guest “speaker” at a $120 a plate “lunch” held at Fess Parker’s Doubletree hotel. At this “lunch” it was stated with uncanny precision that real estate would appreciate precisely 1% in 2007. Now he’s saying that he’s been hemming and hawing about the market.
Two- Last week, citing strong December new home sales numbers, Greenspan stated that “the worst is behind us”. Now, he’s predicting a recession.
I have lost all confidence in “experts”. A college degree in economics is worthless. People who wear suits and sit on their asses and make economic “forecasts” are worthless.
I have lost all confidence in “experts”. A college degree in economics is worthless. People who wear suits and sit on their asses and make economic “forecasts” are worthless.
Google Karl Popper’s, “the problem with induction”.
Clear, I have one of those college degrees in economics. Over the years, it has been useful in terms of being able to see through the BS that’s spouted by people in government and business. Including those who are…
…economists.
But, as far as helping me earn a living, it’s been a big, fat zero, except for one crappy job I had 20 years ago.
He might be worthless to the robotic masses but he sure can prop then move a market when requested.
Wasn’t it an economist that gave us the oxymoronic “AAA rated subprime mortgage backed securities” designation?
No. I’m afraid we owe that descriptor to zzz-germans and Orwell’s 1984. Now, hard landing means not a soft landing but harder than a soft landing and a recession is called a Goldilocks like situation.
It was not an economist, it was a group of very clever financial professionals. One of the people who pioneered the asset-backed security for credit card debt was one of my college professors. Turning sub-prime debt into AAA-rated bonds does seem like nothing short of financial alchemy, but it does work–until it doesn’t.
The problem is that securitization is so complex that only a few people understand it–and most of those people are on the originating side and do not have an incentive to clearly explain the risks. It’s the economists and the accountants who are on the other side, who issue the ratings on the debt, who don’t completely understand it and are willing to give high debt ratings where it’s not always warranted. The problem is not that the economists are complicit, it’s that the financial professionals are always many steps ahead of them, and the economists don’t figure things out until they’ve already happened.
lol I m trying to get a Ba in economics. I like economics it isn’t useless we are using it here every day. A whole study can’t be bad because of the way some people practice it.
You’ll be OK as long as you don’t lie to yourself or to other people. The truth will set you free.
Talking to a Realtor in SoCAl and they have moved to a new listing system. Cannot put in new listing, was seeking help and put on hold for more than 2 hours yesterday. Had two listing expire and is very mad at the new system. No sales and a “new” listing system. Should help out! Anyone else have any info?
Hope he/she like Ramens. Buy now before the run.
Hmm, I wonder if the listing services are re-working their systems to prevent the re-listing game. The old “pull the house off the MLS and re-list to hide the fact that it’s been on the market for months” trick has become so well-known that I suspect the reputation of the listing services has begun to suffer for it. Be interesting to see if they have a way of fixing it.
I wonder if they are changing to a new system so they can claim that the huge drop in prices is somehow because agents have to work with an unfamiliar system.
That sounds far fetched, but then again so do all the other silly reasons I’ve heard for low sales.
Let them claim whatever excuse they like, as long as prices do in fact drop!
Outstanding day! The dip buyers rejected for the first time in I don’t know how long! The carnage is on!
Those penny quotes on the QQQQ options sure make a difference for us little retail investors.
How about the headline - “Dow Falls 180 on Fear of a Correction.” In other words, market goes down on recognition that the market can go down.
My boss has been telling me for months and months that the market will continue to boom in ‘07. He said Brinker told him so……….
brinker was correct in identifying last stock crash but he’s totally off on this one.
“The Trend is Your Friend” bought PHM Jan 08 Puts back in Aug, 2006 Been confused at the pricing of PHM going up since then when all the news and numbers said the housing market was bubbling. I kept charting and couldn’t see any trend but down. Finally, a little salvation.
It’s an excellent start.
Another few days like that and we may yet see the NAHB-SP correlation confirmed!
According to Lereah, the bottom for sales activity was reached last September?
Sales activity didn’t go up in a straight line, and there were many false peaks on the way up. Did he ever once “call a top” while sales activity was on the rise?
And since when was “sales activity” the important metric anyway? Oh, right — it is if your primary concern is broker commissions. Which is why he should only be quoted in trade magazines. Shame on the media.
Home sales up! More sheep being led to slaughter paying for overpriced homes.
Freddie Mac new rules will accelerate the carnage. And that will be a good thing although the rules dont take place until September I think. Plenty of time for more suckers to financially kill themselves.
Q: What’s the difference between the Titanic, and the housing market?
A: The Titanic found the bottom.
A. The Titanic tried to miss the iceberg. The housing market rammed the ‘berg intentionally.
I read once that, if the Titanic had not tried to avoid the iceberg in the last moments but steered towards it, the Titanic wouldn’t have sunk, because one(?) compartment of the ship less would have been flooded.
You are assuming that the Titanic compartments had actual “floor” to “ceiling” walls between them. Like subprime mortgages, the were designed to leak.
thanks for this, I’m going to repeat it in the outside world
Only one had a “soft landing”
Here’s some poetic justice:
‘Shares of McGraw-Hill Cos Inc., the owner of Standard & Poor’s, and Moody’s Corp. were cut by Credit Suisse on concern that rising subprime mortgage defaults will slow demand for ratings of securities backed by home loans.’
‘This is the first real threat to a major source of growth the ratings agencies have had in a long time, so we think the stocks may have a difficult time until we have more clarity into the implications for these issues,’ Credit Suisse analyst Brandon Dobell wrote.’
“…slow demand for ratings of securities backed by home loans.”
Wow! The real estate and credit bubbles affect so many obscure areas of business.
Looks like Wall Street finally “got the memo” today.
They seem to have been off a little bit on their ratings, judging by the ABX. Safe to say they were asleep at the switch. S&P might as well not even bother.
““Median home prices homes rose in January by the largest amount in two years. Median home prices, however, fell for a sixth straight month. The January decline was the third-biggest drop in history.”
Anyone care to explain this? Sounds contradictory to me?
Thanks for pointing that out, I corrected it.
Just on CNBC…finally…..analyst pointed out that the subprime explosion will take more buyers out of the market, and the recent spike in foreclosures hasn’t yet hit the market yet…so more inventory at the same time there are fewer buyers. Said the market was no where near bottom. Said the impact of the subprime market has NOT been felt yet, but it’s coming.
From what I know about foreclosure, they can take months and months of dealing with the bank and non-payment before the home is actually taken from the occupants.
My guess is that it will be at least another 18+ months before we the glut of inventory resulting from this. JMO.
NYSE up/down volume 26(down) to 1 (up)
Nasty 11 down to 1 up
Shows you how much real conviction there is in these markets
S&P 500
498 Down…2 Up….
A second Freddie Mac spokesman said Tuesday that the giant mortgage backer would continue its efforts to quit sniffing glue, to stop sending money by email to nice-sounding Nigerian ex-diplomats in urgent need of cash, to limit its practice of being mean to puppies and grandmothers, and to form a committee to stop hitting itself, why is it hitting itself, stop hitting itself. “Hindsight is 20/20, you know,” said the spokesman. “We probably should have thought of these things sooner.”
Actually, no. They dont want to “disrupt the markets”, so they aren’t actually going to stop doing those things until SEPTEMBER!!
This from Freddie Mac:
In keeping with its statutory responsibility to provide stability to the mortgage market, Freddie Mac will implement the new investment requirements for mortgages originated on or after September 1, 2007, to avoid market disruptions.
So hurry, hurry, get yer subprime’s while ya can!
Sooner. LOL. I read somewhere tonight that what they really said (not the summary) was that they would stop buying them SEPTEMBER 1st.
The ship of debt takes a long time to answer the helm.
Dow is doing the limbo.
A whole bunch of homedebtors are doing too.
Subprime is yesterdays news. Look for Alt-a (subprime in a bad suit) and Prime mortgage companies to start taking it in the shorts!
F#%k! I am going cross-eyed. I can’t tell which is worse the 3.5 pct drop in home prices or the rapidly spreading carnage on Wall Street.
It’s all good. CNBS said it’s a buying opportunity…..for the PPT.
Can you see this?
Support is here
https://image.minyanville.com/assets/FCK/File/SG/sg465444.gif
200 down on the Dow. Wake me up, I must be dreaming.
Keep dozing……approaching -260 now…
Try -471 on for size.
TX - do you see this as a change in trend or a blip ?
I’m making money on “SRS” (4.8%) but my greed is seeing more potential gains in “QID” (6.3%) ! The grass is greener on the other side
A second Freddie Mac spokesman said Tuesday that the giant mortgage backer would continue its efforts to quit sniffing glue, to stop sending money by email to nice-sounding Nigerian ex-diplomats in urgent need of cash, to limit its practice of being mean to puppies and grandmothers, and to form a committee to stop hitting itself, why is it hitting itself, stop hitting itself. “Hindsight is 20/20, you know,” said the spokesman. “We probably should have thought of these things sooner.”
“Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School of Business, estimates nearly two-thirds of all home loans since 2003 have been ‘aggressive.’ But all this easy money hasn’t been without consequence.”
Great to see a big-name real estate economist come out in the open on this subject…
Well, if Susan had said this a year ago it might have actually meant something.
Now?
Not so much.
“But he cautioned that the warm weather in December boosted home closing in January, the activity that is tracked in the Realtors report. He said there could be a bit of a payback in coming months.”
Funny, isn’t it, how a little unseasonably warm weather can wreak havoc on the downside? Because back in Summer 2005, FL condo flippers were out chasing deals in the tailwinds of hurricanes…
“‘The delinquency numbers for the 2006 Alt-A originations are materially worse than a lot of people would have expected,’ said Charles Sorrentino, mortgage analyst at Merrill Lynch.”
Not to worry — quarantine measures are already in place to stem the contagion (right???).
scottrade shut down for oders
Must be the glitch everyone is talking ’bout.
Here’s a re-post for Jan 3rd 2007
Ben,
Descriptive adjectives are beginning to get “Bubbly” 3 days into the New Year of 2007
Copied & pasted from the text: “The Beginning Of The Domino” In California
“Plummeted”, “severity of the fall was a surprise”, “the sudden screeching of the brakes”, “a grinding halt”, “beginning of the domino”, “a year of adjustments”, “sales and prices will keep plunging”, “vulnerable to outside influences”.
Thought these housing “terms of endearment” might work for the market today.
“Prices of single-family homes across the nation were flat in December, the worst results since slight price declines seen in early 1996, a housing index released Tuesday by Standard & Poor’s showed.”
Terrible news — December home prices failed to attain ever-more-stratospheric levels of unaffordability…
Yeah I know. It’s a bummer isn’t it?
I was hoping, along with so many other Americans to dive in on the deep end this year into a totally unaffordable home.
Oh well, win some lose some. Looks like I’ll have to settle for something in my income range with a downpayment.
Has anyone noticed that the past few weeks there has been more and more public talk about how declines in home prices will be good for Americans? A couple days ago I heard it again on CNBC. This is on the verge of becoming a rallying cry.
So different from last year when dcreasing prices were viewed as catastrophic! This turn in sentiment is some of the most positive news we’ve had in a while.
Yes, I’ve seen that & thought it interesting, based on how “gloomy” declining housing prices were viewed last year (& many years before).
Guess, since it’s obvious now, everyone wants to get on the “yeah, we expected it and like the housing downturn” bus.
Oh well, at least we know who the honest economists were over these years.
The long awaited (broker hyped) spring selling season - is not looking very good right now
Who the heck would pay big bucks for a property now?