“For Many Home Owners, Tomorrow Has Now Arrived”
It’s Friday desk clearing time. Connecticut. “Gene Fabbri, owner of Independent Mortgage in Fairfield, sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location, proximity to New York City and Long Island Sound.”
“‘Everything is cyclical,’ Fabbri said. ‘When the market overheats it becomes a seller’s market then has to cool off some way. The mortgage business is slow, but there’s no panic, no bubble bursting. The downward trend in housing was like the flu epidemic that had to run its course. Everyone has to retrench and accept a little less.’”
From New Hampshire. “Russ Thibeault said the first nine months of the year left realtors nervous because prices and the frequency of sales declined while housing inventories continued to rise. ‘Until we know we’ve hit rock bottom, it’s hard to say increases are on the way,’ said Ralph Pope, office manager for Coldwell Banker in Dove.”
“New home sales in the metro Atlanta area dropped almost 13 percent in 2006. With fewer people buying and builders still building, the area became flooded with new homes. ‘My personal feeling is that the market started to slow and builders didn’t stop building,’ said Realtor Lin Stadler-Perry.”
“The old adage that if you give someone enough rope, he’ll hang himself seems to be behind the high rate of foreclosures in the Memphis area. A recent story published in Memphis Business Journal found that there was one foreclosure for every 1.06 homes sold in 2006 in the Memphis MSA. Specifically, there were 19,738 homes sold in 2006, and there were 18,155 residential foreclosures last year.”
From Australia. “House prices fell in the three months to January this year, Land Victoria figures show. The median sale price fell more than $15,000, 5.3 per cent, to $280,000, and follows a $20,000 drop between July and September. The median price peaked in April-June last year at $345,000.”
“Are we beginning to witness a fall in real estate prices in the Cayman Islands? The classic conditions for a fall in price. Witnessing the number of For Sale signs, both their concentration in a given area and the length of time they have been there, is perhaps a rough-and-ready measure of the number of homes that haven’t sold, and looking around, one can see many For Sale signs, and many of them have been up for quite a long time.”
“The property boom which has gripped Latvia since the small Baltic state joined the EU in 2004 is unsustainable and likely to slow in the nearest future, experts warned on Monday. ‘This is the classic form of an economic bubble,’ said Andris Strazds, lecturer in economics at the Stockholm School of Economics in Riga.”
“The Northshore Marina Tower Condominiums, complete with 360-degree views of Slidell and Lake Pontchartrain, were once expected to be complete by mid-2008, said Realtor Henry Aparicio. Yet sales have stalled and some buyers have backed out since 49 of 89 units were sold before Hurricane Katrina slammed Slidell.”
“‘Prices have pretty much outpaced consumers’ ability to afford them,’ said Randy Varuso, president of the St. Tammany Homebuilders Association. ‘And condo sales are in the toilet nationwide.’”
“Missoula County, a Montana hot spot, saw home prices increase by 11.3 percent during the same time, better than the 10.1 increase during the same time from 2004 to 2005, but cooler than the 13.7 percent increase from September 2003 to September 2004.”
“Shelby is seeing an influx of new workers for the private prison and government jobs, said (realtor) Brenda Longcake. ‘We also have people from out-of-state who are investing in real estate here because it’s affordable,’ she said.”
“Hawaii’s housing market was red hot a couple of years ago and many buyers found themselves in bidding wars over high-priced properties. Now times have changed and it is no longer a seller’s market.”
“Real estate agent Maggie Walker is showing a three-bedroom home in Hawaii Kai which is listed for just under $800,000. It is deliberately priced lower than several similar properties. Walker has heard of other homes languishing on the market. ‘They’re all over priced or they don’t show well,’ said the realtor.”
“Subprime loans have attracted wide attention, and Thursday, Warren Buffett, chairman of Berkshire Hathaway, told shareholders that the slowdown in residential real-estate markets partly stems from weakened lending practices in recent years.”
“‘The ‘optional’ contracts and ‘teaser’ rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs,’ he said. ‘But payments not made add to principal, and borrowers who can’t afford normal monthly payments early on are hit later with above-normal monthly obligations.’”
“‘This is the Scarlett O’Hara scenario: ‘I’ll think about that tomorrow.’ For many home owners, ‘tomorrow’ has now arrived,’ Buffett wrote.”
This ended up being a very positve reporting week! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
This week was prime because of subprime.
as it turned out the subprime atm machine was making big players like goldman sach and gangs rich in the last few years. they were getting rich from securitizing junk loans and selling it to hapless chinese with load of cash from selling cheap stuffs to americans. it’s funny how american finally get some of that cash back from the chinese. anyhow, as this atm machine sputters and dies, it’s dragging down the whole economy and financial confidence. the real blows are just around the corner.
“the real blows are just around the corner.”
I think you are right on two counts.
First in the housing market itself, credit is tightening as we speak and that will mean fewer buyers, more inventory and extreme pressure on house prices.
Then in the financial markets, the mortgage originators, consolidators and MBS buyers are all going to feel some pain as this thing unwinds.
I don’t think this week cleared anything up, other than to show us that sooner or later all things come to bear as they should !
correction….”I don’t think this week cleared anything up, other than to show us that sooner or later all things come to we bears as they should !”
*chuckle. Yeah, that too ! I’ve been hanging out here for 2 years now. We saw it developing even back then. Its incredible how right the board was on all this. Its like a new phenomenon, group forecasting by common sense and fundamentals.
Now in their managed accounts they are busy buying each others sh.. delinquent mortgage products. Of course!
{personal experience noted here} It’s f’in criminal!
Our managed account found on 2/28/07 Bear Stearns CMO BBB- toxic waste piece of sh.. in our protfolio, complements of the worhtless sh…heads from WellsCapital! Probably right out of the recent take over of one of those fallen angels (subprime}lenders, that I read owed Bear 113 million.
PS these guys are desparate!
Pardon my french!
And who is the #1 Sub Prime lender - Wells Fargo of course.
With very little reserves to booth. The mother ship looks wobbly. Fallen angel equals swap or short story.
What are you talking about? They bought suprime MBS in your account without your permission?
The policy is broad!
They have CARTE BLANCHE within minimal parameters!
My theory, give them enuff rope to hang themselves.
It was only $100k in a $20mill portfolio….which is less than 5% of what I am running!
At the last “so called UPDATE” meeting I question them on a Rali MBS that within the week they sold! All I asked was WHY did you buy this? Their response was alot of “himing & hawing”..so their boss must have told them to sell it.
BUT couldn’t they smell the COFFEE?
guess not………………..the rope is tightening!!
Oooh, so that’s where Wells is putting their sh*t–in their customers’ managed accounts. And to think Wells used to be one of the most ethical banks around.
Well, they may be cynical now, but they’re still clever. They originate a lot of subprime, but they sell it off real quick. And they’ve reduced their total consumer mortgage holdings and chargeoffs in the last year. There must be a whole lot of GFs out there…
The under-takers writing the scrips.
After the closing bell some Really Bad news came in about New Century and Fremont. It just keeps getting worse and because the salesmen are in charge, you won’t hear bad news until bodies start falling out of closets. That’s why you better adjust your investments accordingly because Monday could see a big crash as the Great White Mortgage Industry takes another huge bite out of the stock market.
“We’ve needed a correction”, “This was expected”, “Stocks are cheaper now”, “Step right up and buy in”, “Bend Over now”, “Brace yourself, Daddy’s coming in baby!”.
Well, you get the idea.
“‘The ‘optional’ contracts and ‘teaser’ rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs,’ he said. ‘But payments not made add to principal, and borrowers who can’t afford normal monthly payments early on are hit later with above-normal monthly obligations.’”
Couldn’t have said it better myself. (In fact, this is pretty much what I have been saying over and over again for a couple of months now…)
well:
here’s the keys pal! Go for it!
On another note, the speculation continues. Land is still be gobbled up at an alarming rate, and at alarming prices in the Northwest. This rolling bubble is far from deflated. Each purchase represents future financial pain. While land is historically a long term investment, many were using it as a short term get rich quick flip. Parcels were purchased, and many times resold in less than a year for more than 100% profit. In certain areas, I am seeing an acre selling right now for more than what 5 acres were selling for, a year ago. The Kool Aid is stronger than ever in the greater Seattle area. The only thing that can protect these fools from themselves is a tightening of the money supply. It will also destroy many of them in the process.
Good. Anyone rich enough to buy land on speculation has too much money and is about to contribute it to the greater good.
It’s about goddamn time that people who produce nothing, but make money get what’s coming to them.
Unfortunately, by that definition, anyone who receives interest from lending to someone else … or who receives income from merely owning something (e.g. landlords, stock owners) will “get theirs” too.
As most of us have some investments or assets (homes, bonds, stocks) that pay us something for doing nothing, you should be careful what you wish for.
The truth is that EVERYONE wants to make ALL of their income for doing nothing. This is mathematically impossible: Those who live purely on profit/interest require an abundant supply of people who 1) Actually produce value and 2) Live primarily in debt.
There’s a reason the true “rentier class” is a small percentage of the population. Joe Six Pack has been hoodwinked into believing that he can join the rentier club by going into grab-his-ankles levels of debt.
Hey, what’s the latest on Fremont? I thought they’re just late reporting, but I could of swore I just heard it was game-set-match for the big-time subprimer.
Your new handle debuts!
Look its as simple as this!
The Sub Primers are dead
Why becasue the Bears, the Merrills & the Goldmans have pulled the plug!
The word came down from on high read…the Bank of England .., or The BIS - take your pick, its HARVEST TIME.
If you owe dough you LOSE~!
Market expansion Limit
Naturally the culling
Spiralling black hole…
Sir Isaac was right
Gravity sucks
Lights out!
‘tomorrow’ has now arrived,’
Thanks, but I think I’ll wait another year.
Ben Jones……you…..complete…..me…..
Good weekend all!
well, tomorrow is still 4 months away! =) get yourself for the inventory explosion this summer. check this one out: 1 home on sale on Hillhaven Drive in San Marcos. but 4 NOD’s, all of them are NOT on the MLS. Why? because they are all underwater or close to it and have all but given up. Just imagine what the inventory would look like when all these NOD’s become REO’s in 4 months.
BMIT on Phantom Inventory
That phantom inventory is going to be… scary.
The impact will be… interesting…
As to REO’s in 4 months? YAWN.
I’m waiting for the REO’s triggered by the surge of REOs that hit between now and end of August. Now there is a market worth waiting for!
Got popcorn?
Neil
I am reminded of the movie
“The day after tomorrow” -
Give things two more years - It won’t be at the bottom yet, but the pattern will be clear for all to see.
Thanks Ben.
Take a moment to think about how many good people youknow who are going to be burned by this mess. well-meaning, intelligent young people starting out in life, trying to build families, are going to be behind the eightball.
When all this goes through the wringer, I want to see a lot of fraudsters (the crooked brokers, realtors, appraisers, and casey serins of the world) in jail.
That which doesn’t kill you makes you stronger.
Pardon the vitriol, but I hate that saying. It sounds like the tripe Kiyosaki would spout: sounds great until you actually think about it.
A friend fell while climbing. Broken leg, torn rotator cuff, several smashed ribs. Not dead, but after the healing this person was neither physically nor mentally stronger. A once vibrant outdoorsman can’t do the things he used to, and won’t even try.
Yeah, I have to agree with this Backstage. We will not be stronger as a nation because 20 and 30 somethings have mortgaged (and student loaned) their futures away. I know of a young couple without children who just signed up for $200K+ mortgage here in VT for a house outside of the “hot” zones. What happens to them in 5 years under this back-breaking mortgage when inflation doesn’t do it’s “magic”?
My sister is considering selling her duplex (good) and buying this summer (very bad in VT - we’re still about 1 to 1 1/2 behind the bubble curve). I have urged them to rent (for a lot of reasons, including the fact they don’t like maintenence). She did listen politely, but I’m not 100% convinced that she understands that the rules have changed. If she gets in over her head because our parent’’s mortgage was inflated away, how is she better off or stronger?
If anything, I suspect that it will already increase the bitterness directed at the baby boomer generation. Heck, I’m already bitter about the whole student loan experience (ie - I felt I signed up for loans without fully understanding their impact on my lift) and compared . What happens to the generation that is expected to pay for the baby boomer’s retirement when it’s not a 100% clear that the baby boomers care about what happens in ours?
Hahahahaha. 200k? That’s like a months rent out here in California. I know young couples who got into 500k-800k houses here.
When California crashes it’s going peg all the dials. We’ll be in uncharted territory folks. I’m not sure you all understand what’s happening here. In Los Angeles proper, prices went up 4x to 7x their pre-bubble values. All this with almost no increase in salaries.
You do the math.
Netherlands is up 6x-10x from pre-bubble times (1990 or so) with official inflation at 1-2% yoy, go figure…
I’d have more respect for you children if you’d quit b*itching about the boomers and what they did/should be doing and DO SOMETHING with your own lives. Let me remind you we boomers got you kiddies the right to vote at age eighteen, for all the good that did. You just sat on your hands and whined.
Bed. Made. Lie.
You think that was a good thing? 18 year olds shouldn’t be allowed to vote. They either have 4 more years left in the brainwashing industry or have just finished 13 years of it. Either way, not acceptable voters.
oh please we scrimped and saved for YOUR generation’s college education. Even to fore go our own 401k & retirements.
But here is the lesson if your still young.
Inflation is not magic, it is monetary. Banks lend money from your borrowing it. Before you borrowed it it didn’t EXIST.
It wasn’t sitting in someones depostory account, just waiting for you to sign on the dotted line, for a student loan OR sub-prime mortgage.
It was done through their right to lend money from nothing, and best of all they get to charge YOU interest.
You have the right to contract, as do they!
You agreed to pay them back the money they gave you that they never had plus interest.
And you are blaming a Baby boomer?
It is a fractional money supply system. Gaurenteed to devalue 75% or more every generation @ 5% inflation.
Only the monopoly money creaters and banksters make out in this monetary world, the rest of us STIFFS get our labor taken one way or the other.
Then we have to pay for their accomodations. Better for them to spend the rest of their lives on one of society’s lower wrungs where they will too busy just hanging on to cause anymore trouble.
Agreed. I don’t want our money feeding those a-holes. As for the well-meaning people who are going to get burned: they should have thought a little harder before signing onto a price point WAY beyond historical norms. As the Marines say: pain is weakness leaving the body. Think of it as a lesson in character building.
“Experience keeps a dear school, but fools will learn in no other.”
- Benjamin Franklin -
And the entire church said.
“AMEN”
I agree but see things a little differently.
A lot of young families, including my own, have been stuck renting POS apartments. The bursting of this bubble will finally give us a chance to buy a decent home without incurring a soul-crushing level of indebetedness.
Most of the people who will go down in flames, IMO, are greedy Boomers who just HAD to have that new 4,000 sq ft McMansion, even though their old 2,400 sq ft 4BR/3BA house was more than adequate for their needs, and rapacious flippers who have been driving up prices for everyone. I certainly won’t be sorry to see them go down. They don’t get one bit of sympathy from me.
While I do feel sorry for the handful 20- and 30-something suckers who bought into this madness, I saw it coming — why didn’t they? You don’t have to have a MBA to realize that $500,000 is a lot of money, more than you can afford, or that an interest-only loan is a bad idea.
To me, the bursting of the bubble is not tragedy — it is LIBERATION. The madness is finally over. Soon I will be able to afford a house. It’s wonderful.
“Soon I will be able to afford a house”.
And the tooth fairy exists.
If he’s average, he must be able to buy an average house. Otherwise the markets fail to work. That is what we are seeing now: affordablilty was based on taking on more debt that must be repaid sometime. If the salary does not increase, but the mortgage payments do, the money’s got to come from somewhere. If there’s no equity left, then there’s less food and clothes, and chinese manufactured goods. It’s simply become an unsustainable shell game.
No, we are not going back to the 50’s wiht dad working to pay the bills while mom stays with the kids, but we are going to see the avarage family being able to afford the average house.
I still think the Fed will lower interest rates to try and rescue home buyers who cannot make their adjustable mortgage payments.
However, as usual it will be too little, too late. The lower interest rate will tank the dollar and allow gold to resume its rise.
If he’s average, he must be able to buy an average house.
Like in the Netherlands, where the median home price is 8x median income (and has been around that number for a few years now)? It simply does not compute, and as long as we have central banks I’m afraid this pyramid game will continue. Times have never been so good for debtors and liars.
JoeSchmoe:
Congrats! here is some advice !
Save your money! Read about deflation! (current instructions from Japan for 20+ years now……………RE down 17 straight years until 2003.
Get educated in the art of real money!
Work hard and wait until at least 35% of every home on your block is for sale by FNMA or Freddie & has been REPOed twice!!!!!!
It’s goin’ to to feel like a life time
…..but then listen to your wife,
she will intuitively know when the timing is right!
Already read book twice.
Shelf staples bare.
Unwinding already.
What are you carrying?
Mossberg riot SGn. savage 21 etc & 9millimeters shells
Buying gold in an accumulation plan & hoping for a 200/$ perOZ..before backing up zz truck! {Imust admit though the cow may be out of the barn?>
Shelves are 1/3 full !
AND absolutley no interest or rent payments to a single bankster!
Just waiten to wring in the sheeves!
I have no sympathy for anyone who bought a house after 2002, when the prices were starting to get ridiculous, especially young families. Better they find out early in life the consequences of making stupid financial decisions. Americans have been sheltered far too long from seeing the effects of bad decisions.
Connecticut. “Gene Fabbri, owner of Independent Mortgage in Fairfield, sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location, proximity to New York City and Long Island Sound.”
“‘Everything is cyclical,’ Fabbri said. ‘When the market overheats it becomes a seller’s market then has to cool off some way. The mortgage business is slow, but there’s no panic, no bubble bursting. The downward trend in housing was like the flu epidemic that had to run its course. Everyone has to retrench and accept a little less.’”
Someone call Gene in two years and see if he still says the same thing. No area will immune in a recession. The prices are still ridiculous and headed down for several years.
Using his flu metaphor, I suspect this ‘downward trend’ in housing is going to be more like the Pandemic of 1918: everyone’s going to know someone hurt by it…
Honestly, when I read that quote from the broker I wanted to fly to Fairfield and knock his lights out. I am so sick of people claiming their locale is immune. Listen, unless there is gold, diamonds or platinum beneath your dirt, it IS NOT special! You are not immune Gene, and while most may catch the flu, mortgage brokers are going to catch the black plague. Idiot!
Figures indicate that 100,000 people are hospitalized, and 20,000 people die from the flu every year in the United States. It is the 9th leading cause of death. SO, maybe the analogy with the flu is more accurate than they realize.
IAT
Wall Street layoffs caused by the credit contraction will be WORSE than most other fields.
I can understand why he might say that, even though he’s wrong. I just got back from Connecticut recently and prices are still stuck at a high and people are still buying, at least where my family is. I was in Fairfield County and saw about the same number of real estate for sale signs I’ve always seen over the years. One of my relatives bought a couple of years ago. Someone else bought next door to her just recently and got less of a house for a higher price. So the bubble is alive and well up there.
But will it last? No, especially not if Wall Street catches the sub-prime flu.
Here’s another data point that contradicts yours. One of our friends recently relocated to Texas from Stratford (in Fairfield County). He originally put his house on the market in Spring 2006 for about 660K. After several months with no offers he lowered the price multiple times and eventually accepted an offer for 550K - more than 15% below the original asking price.
CA guy:”correction”
editors note!
Please read in-place of “catch the plague”
“Caught the plague, and have been granted a tomb, coming near you soon!”
How did it go down?
Like the hand of “subprime” on the back of her head.
““Gene Fabbri, owner of Independent Mortgage in Fairfield, sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location, proximity to New York City and Long Island Sound.”
The top places in Fairfield like Westport, Darien, Greenwich, Wilton, Weston etc. are not immune, but they are about as close to immune as it gets. A 10% nominal drop in these areas would be a big one.
I’ve got family both in Greenwich and Bethel. You are right, Billy, the towns you name are about as close to immune as it gets. Bethel, Danbury, New Fairfield, etc. will probably feel more pain. Lots more pain.
I hate to be a party pooper, but unless the hedge fund goes the way of the dinosaur, the FED is dismantled and Wall Street becomes extinct (you never know, though, it could happen), the better parts of Fairfield are pretty well insulated. I know this based on my involvement with family real estate up there.
The good news is Bethel has Stew Leonard’s.
Amen, Billy. Stew Leonard’s=good eatin’. Actually, I think it’s in Danbury, isn’t it?
You understand the area. I enjoyed your post on the Hamptons.
Sure they will be substantially less shocked, these folks have the resources to stand their ground or at least hod on by their nails. These communities have seen less of the activity that has caused the run-up in prices: speculation, sub-prime lending, toxic loans. When you are far away from the germ, you are less likely to get the flu.
When the market is falling, however, certain things happen:
1. Move up people can’t sell their homes, so there are fewer people to buy.
2. People do not want to buy into a market they see as declining or possibly declining. Uncertainty does not make for comfortable buyers. Once again fewer buyers.
3. Sellers don’t want to lower the price and are willing to wait it out. Fewer homes are for sale.
At some point the market locks up and the sales volume becomes ultra slow. Still, some people MUST sell their homes (divorce, death, relocation, etc). Some people still can buy, but seeing a weak market won’t pay as much. This lowers the comps.
I’d be surprised if the market, considering sellers paying costs and negotiations, isn’t down 10% already.
I’m in this area. Fabbri is full of shit. Zillow shows the averages down 20% from peak. The realtor rhetoric is especially strong with this one.
Well, there’s Fairfield as in Greenwich, Darien, Westport, etc. and there’s Fairfield as in Norwalk, Bethel, Danbury, etc. Two different animals in the same county. Much more diverse than Westchester. There was out-migration from Greenwich/Darien to Bethel/Danbury by people who seriously couldn’t afford the costs of living in Greenwich/Darien.
It does get boneass cold in the winter, but it really is an attractive part of the country. You can’t beat the spring up there. Gorgeous.
Except that is doesn’t come until mid-May
“Zillow shows the averages down 20% from peak”
In what towns?
To clarify: to the extent possible, I would like to see the NAR and NAHB execs prosecuted on fraud and RICO charges. At the very least, civil charges.
I don’t think Lereah, Seiders, et al should get a free pass. I would like to see documents subpoenaed and published. I’d love to see if (as I suspect) they knowingly lied about market conditions.
Hmmm. Not being a publicly traded company, the NAR is under no obligation to tell the truth. What country do you think you are in?
Anyone who listens to numbers from them is a fool and deserves what’s coming to them.
Lereah never lies. He just makes wildly implausible prognostications about the direction of the market - exactly what Wall Street shills have been doing for decades.
You can’t lie about the future because it hasn’t happened yet.
And as someone else pointed out, NAR is just an industry lobby group, has no public customers or shareholders, and has no fiduciary interest to anyone except its members.
I hate to be so facetious, but I dont feel sorry for people. I’ve been telling people for the last 4 years that the market is going to implode at some point soon. Only now, have people stopped laughing at me. Yet, now I absolutely say nothing about it. I giggle inside, while I hear these sob stories.
However, I do hope that these bankers, realtors, and appraisers are sent to prison but I know better. Its the small guy that takes the heat.
zackly. how many generals in jail for Abu Grahib? oh, none. just lowly none-2-bright private Englund.
‘Until we know we’ve hit rock bottom, it’s hard to say increases are on the way,’ said Ralph Pope
I’ve tried to come up with a stinging retort to this bit of nonsense but I’ve failed. It will stand on its own in the “WTF” wing of the pantheon of idiotic sayings.
We will know when we have hit rock bottom, because everyon will have given up all hope of increases ever.
Does anyone else feel that this week was absolutely ginormous for us bubble-sitters? The worm is really freakin’ turning now.
Any week the Fed chair, former fed chair and a fed member have to jawbone the market up (albeit greenspan did the opposite the day before) when trading curbs are imposed multiple times on wall street makes me a bit nervous about how quickly this could unwind, bubble-sitter or not
Jawbone….hmmm….didn’t the one monkey in 10021: A Space Odyssey use a jawbone to kick the crap out of the other monkey?
Samson killed a thousand Philistines with the jawbone of an ass.
Lereah killed a million household balance sheets with the jawbone of an ass.
I knew there was a housing bubble joke in there somewhere, but I was too lazy to flesh it out.
Congrats!
Right on spot, Stucco. You deserve the best of weekends for that one.
Lereah killed a million household balance sheets by being an ass.
Nice one!
Q: What’s the difference between the Titanic and the housing market?
A: The Titanic eventually found a bottom.
2001 duh!
BB = good cop
AG = bad cop
No such thing as a good cop!
They all ridin dirty
bb and ag? Ridin’ dirty?
More like:
http://youtube.com/watch?v=-xEzGIuY7kw
That was an AWESOME video! Thanks!
>>19,738 homes sold in 2006, and there were 18,155 residential foreclosures last year.
Unbelievable! What would you imagine happen to Memphis area? Will it become a city of homelessness or what?
question for those in the foreclosure/REO…does foreclosure/REO count towards montly sales number?
Latvia? Latvia? Who knew there was a bull market in Latvian real estate? And was that subprime driven as well?
sorry gap
but it was ALL CENTRAL BANK driven.
Part of the plan to get all the ASSETS!
Latvia, Lithuania, Estonia- We’d better get pre-approved and get over there!! They ain’t making any more former Soviet-satellite, Baltic states any more!!
no, the bull market in Latvia is caused by easy money in Old Europe; same story as other Eastern Europe countries. It’s all caused EU speculators and EU property funds buying up the more attractive properties, hoping they will appreciate 5-10x in the next years as all the EU money pours into the country. It has absolutely nothing to do with financial conditions in Latvia itself.
““Shelby is seeing an influx of new workers for the private prison and government jobs, said (realtor) Brenda Longcake.”
Just what scenic Missoula needs, a prison to take your eye away from the abandoned sawmills on the outskirts of town.
Which group is worse - suicide-assisted doctors or suicide-assisted loan brokers?
Loan brokers, by far.
Doctor assisted suicide doesn’t hurt, and it’s all over in a few minutes. Loan broker assisted suicide takes 20 years to kill ya’, and you’ll be screamin’ for mercy in the first 5 seconds.
That’s a movie reference, can anybody name it?
–Shannon
I can. And hopefully without giving it away, it ain’t Fritz the Cat…
“But if you let me down, or if you hurt my friends, especially the broad…”
“The cake, the building on fire.”
“New home sales in the metro Atlanta area dropped almost 13 percent in 2006. With fewer people buying and builders still building, the area became flooded with new homes. ‘My personal feeling is that the market started to slow and builders didn’t stop building,’ said Realtor Lin Stadler-Perry.”
How true. Working with builders and other parts of development I have come to the conclusion that builders have the following mentality, “I am a builder, therefore I build.”
Exactly. What else is a publicly-traded homebuilder going to do but keep building? I remember reading in school about how the Great Depression started with surpluses generated through mechanized agriculture, which produced its own negative feedback loop: prices fell, which meant that farmers had to produce more to survive, which caused more price decreases. Then the degraded soil blew away. We’re seeing a negative feedback loop taking shape right now, and I think we’re going to have a lot of things blow away. Subprime lending already has.
I know what you you’re trying to say, but you really mean positive feedback. Negative feedback doesn’t cause a ‘vicious cycle’, positive feedback does. (Pardon my pedantic ways; I just can’t help it…)
You’re right. I got a little carried away trying to express the idea.
Why shouldn’t they keep building? They were making money back in 2001 weren’t they? They will keep building until the market price drops right below the cost of materials, labor and land. And all of those inputs are falling too.
“‘This is the Scarlett O’Hara scenario: ‘I’ll think about that tomorrow.’ For many home owners, ‘tomorrow’ has now arrived,’ Buffett wrote.”
And… The Oracle has spoken. Someone please cue The Fat Lady.
Yes “the Oracle”, Mr. Buffett has spoken but his hands are a little sullied by the subprime mess as well.
He has owned H&R Block, of “Option One” subprime fame and, assuming Block can unload it at book value, his hit in this debacle (via Block’s error) will probably be minimal.
Just goes to show you, even an “Oracle” makes mistakes.
jag,
I’m with you on this one and my gut-feeling may be misplaced, but prior to the recent spate of quotes/reports (particularly this one), we bubble-believers have been discounted as ‘doom and gloomers’ by many. Talk about an impending subprime debacle was looked upon by the RE ‘faithful’ as mindless babble. We simply didn’t understand the ‘new paradigm’ because we were on the outside. The concept that the wheels were falling off and there WOULD be a day of reckoning was discounted, poo-poo’ed and ridiculed by many. Now that its being stated by someone with THE track record and credibility within the market, I think that the message will finally be listened to. ‘Bout damn time. Neil, how about that popcorn?
Actually, Buffett and his right hand man Charlie Munger have been publicly bearish on real estate for well over a year. They spoke about it at last May’s annual shareholders’ meeting. They said they expected large problems. Warren even sold his Malibu, CA home because he thought it was way overpriced (and its not like he needed the money, right?).
I agree that I doubt Warren is hard up for cash. I must have missed the media attention given his comments from last May’s shareholder’s meeting- do you have a link? This is the first time I recall the MSM putting out quotes like this from him, although I’m not a devoted acolyte.
I was surprised to learn, while checking the lins in today’s stories, that Warren has a large stake in Wells, the #1 subprime holder. -
I was surprised to learn, while checking the links in today’s stories, that Warren has a large stake in Wells, the #1 subprime holder. -
“‘Everything is cyclical,’ Fabbri said. ‘When the market overheats it becomes a seller’s market then has to cool off some way. The mortgage business is slow, but there’s no panic, no bubble bursting. The downward trend in housing was like the flu epidemic that had to run its course. Everyone has to retrench and accept a little less.’”
Everyone has to “Retrench:….I LOVE that ! A trench is like a Rut. And a Rut is just a Grave with the ENDS KICKED OUT!
Retrench you greedy HomeDebtors…While the potential Buyers stand back and Kick dirt into your faces while you GET Buried Alive for Being So STUPID.
Oh yea …
“Gene Fabbri, owner of Independent Mortgage in Fairfield, sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location, proximity to New York City and Long Island Sound.”
Lets see …
Arctic Tundra … Check.
Overpriced for wages… Check.
Near another waaaaay over priced for wages …. Check.
Commuter hell …. Check.
No real cool factor or night life like New York … Check.
Very unfriendly for seniors … check.
Lots of retiring boomers live there … check.
They are all counting on House value to fund their next 100 years of fun in florida or some other retiree heaven …. Check.
Heck a hundred other factors probably but I am tired of typing even these …
Yup no chance of decline …
only a total wipe out.
Cool.
Cow_tipping.
“Gene Fabbri, owner of Independent Mortgage in Fairfield, sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location, proximity to New York City and Long Island Sound.”
I think there should be an archive of all of these people and their “but it’s special here” comments. Then, when massive price declines are “in the bag”, they can be called on their BS, subsequently destroying their credibility forever.
im moving to this area, but wont be buying for a while. i think it is a great area, but it is way over priced.
Fairfield county is about as desirable a place to live as there is. It’s a four season area with beautiful forested rolling country sitting on Long Island Sound. Many of the towns have absolutely top rated schools and the area may have more blueblood old money than most anywhere. Many of the homes are incredible, replete with country stone walls and wonderful gardens sitting on 2-4 acres, and sometimes more. The town amenities are first class, e.g., Westport has a town country club, with tennis, pools, golf etc. Early risers get up and see deer out their window and then go fly fishing before work.
It it pretty obvious that you don’t know the area well - particularly when you describe it as commuter hell. Less than an hour in a comfortable seat will put you in Grand Central Terminal - total efficient laptop heaven.
It’s every bit as nice as Westchester but the taxes are considerably lower.
Also, why are retiring boomers a negative? Would you prefer invading illegal aliens in some third world state?
Many of the towns have absolutely top rated schools and the area may have more blueblood old money than most anywhere.
Yeah I’d really want to live around people that have a lot of money that they didn’t earn.
i have inherited nothing in my life, but id rather live around old money than nouveau riche bling bling idiots
this was an amazing week! Wall street shills saying sub-prime won’t be affected, but sub-prime spreads went from 400bps to 1600bps in just 3 weeks!! apparently payment shortfalls were widespread in January. February appears to be a bit better (yeah right). Alt-A spreads beginning to widen, even before most of the resets kick in. But apparently nothing to worry about, all’s well here. Housing’s going to be a cash market by Jan. 08. Time for all the smart guys here to show what they’re made of in 08/09, by offering cash at 75% off 05 peak prices to see if there are any acceptances.
I can only pray for that day.
My zip was up significantly today on NODs again. I show no sign of topping on this trend.
BTW, I love FMT this week. They are by far my favorite group of numb skulls, mostly because I couldn’t get any shorts in NEW. I now agree with txchick, my year is made. It’s gravy from here on in.
We have a close friend who was a builder in the Cayman Islands a few years ago. He was talking about the massive amount of construction and the escalating real estate values.
I noticed that as of this year he’s back at a teaching job.
I was surprised, considering the rebuilding that I thought would be needed after the big hurricane in ‘05. But it seems that construction isn’t panning out anymore.
I saw this on a anti Homeowners Association website and couldn’t resist posting it here.
We’ve seen all kinds of excuses Florida owners list for the reason their values are going down. Now the residents in one Naples subdivison say it’s because an 85 year old WWII veteran is selling homemade dominos from his residence. I know we had a domino theory during the Red Scare days, but this is out of sight.
http://www.ccfj.net/condodominoes.html
The link to the hoa is http://www.rivieragolfestates.org
Yet another reason why I’m glad I didn’t buy in an HOA community.
And they just don’t see that maybe this WWII veteran might be the only one to know how to set up a Marshallplan for Naples.
According to the first article you linked, “The committee also told him that the media attention his case has generated — Smith was the subject of a January Naples Daily News and naplesnews.com profile — is having an adverse affect on the community and its property values.”
Unbelievable.
Listen carefully. DO NOT EVER, AND I MEAN EVER, BUY A HOME IN A HOA ADDITION. HOA’S ARE EVIL.
Shelby is seeing an influx of new workers for the private prison and government jobs, said (realtor) Brenda Longcake
Just what we need, more government employees and prisons. To paraphrase Mencken, this country is going to get it good and hard.
…subprime news is getting boring these days…
Fremont to Quit Subprime Lending; New Century Discloses Probe
By Bradley Keoun
March 2 (Bloomberg) — Fremont General Corp., a California lender and thrift, said it is in talks to sell its subprime mortgage business, and it agreed to a cease-and-desist order with federal regulators tied to improper lending practices.
Separately, New Century Financial Corp., another California- based mortgage lender, said the U.S. Attorney is conducting a criminal inquiry of “trading in the company’s securities, as well as accounting errors.”
http://bloomberg.com/apps/news?pid=20601087&sid=a.FdV5GVn5fA&refer=home
wow, what NEW news.
http://money.cnn.com/2007/03/02/news/companies/new_century.reut/index.htm?postversion=2007030219
Another article on the Meltdown after hours;
New Century made $39.4 billion of subprime loans from January to September 2006, while Fremont made $25.8 billion.
New Century shares closed down $1.20 at $14.65 and then fell to $13.70 after hours. Fremont shares closed down 39 cents at $8.71 and then fell to $7.19 after hours.
Few Billion here, few Billion there, soon were talking real money.
The news is always anounced after hours on Friday, Goldilocks seems to be on vacation currently, Monday could be ugly.
Crap, I sold my FMT puts earlier.
BUT! I bought some Countryslide puts. Investors keep feeding that turkey and it’s going to be juicy and plump when it tanks.
FMT report release:
Stock TANKING after hours!
Down 20%
Music to my ears. I hope it sends a shock through the market Monday morning.
Black Monday?
I scared my wife with my insane laughter after seeing that news. CHA…CHING!!!
They promised to file explaining why they hadn’t filed, they missed the deadline, and got a cease and desist. I couldn’t have hoped for better.
Wow! You know, I knew, you guys knew, and I think they knew that this was coming, but man, it’s getting spooky.
I agree, I think this is the closest I’ve felt to clairvoyance in my life. The truth is that we are just reasonable and haven’t lost our heads. It was said earlier today that the great majority of americans (and I’d substitute “investors”) have quit putting schemes to the #1 huckster test. Is it too good to be true? This is another measure of this correction.
BTW, my pick for the next big lender not yet discounted by the market, WM.
This is happening much faster than I expected.
Not fast enough for me. I want to see the neighborhood crash & burn.
Half the FMT office was laid off in Tampa I’m told. They do the SE loans. All the people there who work for FMT drive Hummers, Navigator’s, Escalades you name it. All of them have after market 20 inch rooms… 22’s… It’s ridiculous… Anyone need an SUV? I know where you can probably get a good deal on those gas guzzlers.
Guess they should have saved their money for a rainey day… But nope they thought the party would never end… oh well… I hear McD’s is hiring.
Check out the Friday close front page photo on marketwatch.com while it lasts… (Also note the silver lining story in the list at the middle: “Better chance of a Fed cut”)
http://www.marketwatch.com/?refresh=on
I don’t get all this “chance of a Fed cut” talk. I’ve always thought they had to take into consideration that if U.S. interest rates are below that of the rest of the world, all the foreign money will get sucked right back out. I never hear that connection mentioned; it’s as if there is a universal agreement among U.S. talking heads that Fed cuts are “good”, as are ever increasing home prices.
Reminds me of when I was a child, and I use to wonder why there were poor people, since the government could just print money and give it to everyone. It seemed awfully mean of them not to.
a rate cut this time will only do one thing, FUEL the next leg of the commodity bull.
US interest rates are relatively low, but still among the highest in the anglosaxon world. Only NZ has significantly higher rates, but just look at the charts for their currency and you know why (think Iceland …). The US dollar cannot tank because the euro and Yen are even worse. And besides, the FED doesn’t are about a declining dollar, it has already declined more than 95% after they took control so why not go the full 100% now?
Nice article on the housing bust in slate.com by Daniel Gross, with this fantastic tidbit (sorry if this is old news, but I think it’s great):
http://www.slate.com/id/2160973/
“(David Lereah, who published a book in 2005 telling readers how they could get rich participating in the endless housing boom, published a book in 2000 advising readers how they could get rich from the endless information technology boom.)”
No! You’re kidding!
Really?
What stock is that?
It’s true.
———————————–
From the WSJ:
Things That Go Boom
By ROBERT J. SHILLER
February 8, 2007; Page A15
It seems that no one in the 1990s forecast the doubling of home prices since 2000 in cities in the U.S. and many other countries. Harry S. Dent published a book in 1998, “The Roaring 2000s: Building the Wealth and Lifestyle you Desire in the Greatest Boom in History,” which was a New York Times best seller. Wouldn’t you imagine from the title that it predicted a huge housing boom? It didn’t. It said of the suburbs that “there will be only a modest appreciation of home values, despite a booming economy.” The book concluded only that some “select real estate” should be part of one’s portfolio. Mr. Dent was really preoccupied with the stock market, which was booming when it was written.
Books really predicting the housing boom started to appear only after it was well underway, when their forecasts were simple extrapolations. David Lereah, chief economist for the National Association of Realtors, published “Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade — and How to Profit from Them” in 2005. In contrast, his book “The Rules for Growing Rich: Making Money in the New Information Economy,” written just before the very peak of the dot-com boom and published in June 2000, spoke first about the stock market and then added only that “real-estate investments have proven, over the years, to be worthy additions to anyone’s portfolio.”
Ya gotta love economists who trip up liars in their tangled webs, using the spider’s own writings no less!
here’s another bubble article from today, not sure if this was already posted either…
http://www.slate.com/id/2160973/
“Bubble, Bubble, Toil, and Trouble
Uh-oh. The housing bust is just beginning.”
FMT now down 25% after hours.
TIMBERRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
And my little engine that could closed at a 3 year high today. Cracking me up.
Where do you find this info CC?
http://www.marketwatch.com/quotes/fmt
Crispy thanks for the updates here and on CR. I’m wondering if the sub-prime banking fall-out will look like a speedy version of the Texas bank crisis in the early 90’s. Our bank sent due-diligence teams to look at bank acquisitions there sometimess 2x a month.
I took 200k out of FMT yesterday,i lost 2k in withrawal fees but better safe than sorry.I just hope the check they wrote clears the bank.
There it is! LMFAO!
http://www.amazon.com/Rules-Growing-Rich-Information-Economy/dp/0812930568/sr=8-2/qid=1172675978/ref=pd_bbs_sr_2/102-3067168-8106556?ie=UTF8&s=books
this is too funny, and you can buy it for $0.38… man! its cheaper than TP, ….
$0.38……………and that is still way over priced
Everyone is familiar with King Midas and his golden touch, but Lereah is actually King Fecus and everything he touches turns to …
hahaha…….Love it
Now THAT’s comedy!
This bozo must have been born rich and then over educated hinself with his families money…… buy internet stocks in 2000 and then buy RE in 2005. unbelivable.
“must have been born rich”
Dunno about that. Many prostitutes actually have rather humble origins. (Not sure about fluffers, though…)
Who keeps buying those Deutsch Marks?
http://www.marketwatch.com/quotes/c_dem
I can’t say I was expecting these Memphis stats! (Point of clarification - the statistic is for 10 counties including several in Arkansas and Mississipi, Memphis being right on 2 state borders.) I’d guess that a disproportionate amount of the foreclosures stem from mortgage fraud, because lenders are relatively conservative here, to hear my spouses’ co-workers tell it.
Data points: Zillow says the house we rent has tanked about 14% since early ‘06. Our landlord’s house, about 30%. This in one of the “posher” Memphis suburbs, which would be the equivalent of - well, no place in California (pricewise), but in terms of education, culture, quality of life - somewhere pretty danged far out on the BART line.
And yet there is little negative RE buzz here, no real gloom/doom talk (in polite company, anyways), no stalls in construction on the 750K zero-lot floodplain (BUT-ITS-A-GREAT-SCHOOL-DISTRICT!!!) crackerboxes - though there did seem to be a brief pause this last fall. I suspect that the bulk of the foreclosures are in the most depressed urban areas - when I perused the foreclosure pgs back around November, maybe 2-3 foreclosures in the suburbs vs. 100-200 inside Memphis city limits. Keeping in mind that Memphis is perenially a leader in foreclosures, I can understand the myopia, I guess. Plus, here folks are used to price stagnation and even depreciation on a fairly wide scale.
So whether the unwinding has started here in earnest or not, it’s noteworthy that psychologically, we’re still months and months away from
“denial”, much less “anger” or “bargaining”. I could show this article to a dozen of my neighbors and they’d just kind of cluck and say, “Yep, that’s Memphis”, and not give it a second thought - excepting maybe the ones trying to sell.
I think Florida is actually the easiest state to rescue from the bubble… If another hurrican hits and destroyes the empty houses they could just be plowed under or made into coastal dumps where other coastal states could ship garbage. This way the banks could sort of sell out into CO-OP garbage administration zones and recoup some investment. (since insurance is gone)
Cyppok, This has already happened…The northeast has been shipped its garbage down here for years…I have met many of them….And they have ruined our culture.
shipped should be shipping
NEW down 24% After hours:
New Century Financial Corp., one of the nation’s largest subprime lenders, announced that it has been informed of a federal criminal inquiry into its accounting and trading in its securities. New Century also said that a failure to obtain waivers from lenders could prompt its auditors to warn of “substantial doubt” over its ability to remain in business.
http://users1.wsj.com/lmda/do/checkLogin?mg=wsj-users1&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB117286729439625151.html%3Fmod%3DMKTW
TIMBERRRRRRRRRRRRRRRRRRRRRRRRRRR
Soon the forest will be empty….
Just a guess, but there are a lot more office lights on in NYC than usual on a Friday night.
woohoo!!!!!
Fremont served with Cease and Desist by FDIC
http://www.sec.gov/Archives/edgar/data/38984/000003898407000003/form12b25.txt
WOW! Just this week on CBNC there was talk about Fremont
if they would go under would cause another shockwave in the
markets. This is deep stuff…
So does Countrywide survive or not?
OK, any bets on the market fallout next week? The FMT and NEW news was obviously not priced in . . . and the consequences for their warehouse lenders, etc.
Does anybody else have the feeling that today’s news regarding Fremont and New Century could qualify for the top ten developments of the Housing/Credit bubble implosion?
Just looking for confirmation (or not). It seems like a huge deal to me for the #2 and #5 sub-prime players to, essentially, admit to death sentences.
So far, I would say top ten. I reserve top spot for Wells/Wamu just in case. Personally, I feel somewhat vindicated for my prediction that the OFHEO/FDIC/Fed/OCC/NCUA letter in December 06 was a HUGE development. Tell me again about guidance to bankers having no teeth… I can’t place all the developments in this meltdown, but here’s a start, for Friday night fun:
1) Wells/Wamu (not yet manifest, but c’mon, it’s gonna happen)
2) The OFHEO et al. letter
3) Florida hurricane season/insurance (kind of like ‘26 all over again)
Some fun developments that should have been red flags to any sane MSM people: Santa Barbara realtors ceasing dstribution of sales figures in 2005, Bob Toll’s TOL sales, Sam Zell pocketing a fortune, Wamu closing loan centers in 2005/2006, Freddie Mac’s CEO calling just about all of California a bubble in September 2006…
Ben, back to the office!
LOL
NEW said they would file by the close of business. They have 15 minutes…
File what? I’m assuming they were getting a “going concern” qualification from what I’m reading (make that scanning).
Press Release: New Century Financial Corporation to File Form 12b-25 With the SEC
New Century Financial Corporation (NYSE: NEW - News), a mortgage real estate investment trust (REIT), today announced that it expects to file a Form 12b-25 with the Securities and Exchange Commission (SEC) with respect to its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. The Form 12b-25 will be filed with the SEC on March 2, 2007.
Told ya the reits could be shorted. I didn’t realise that this was the worst market week in 4 years. It was one of the best I’ve had in years.
me too..but man I bet so little.
You’ll get another chance. I wouldn’t be surprised if we gap down and reverse on Monday.
Same here. I put half of my 401K in QID a few days ago and the other half I “borrowed” so I am completely short the market in my retirement accounts. I expect a 20% decline in the indices over the next few months as the banking systems sees some shock n awe.
The rest of my money is shorting the subprimes and Alt-A lenders and AMZN.scam
first it was the homebuilders, then it moved into the lenders. pretty soon wall street is going to wake and realize how much the banks are exposed to subprime through various ways.
I only short in my marketocracy “portfolio” though.
I think this is it?
http://sec.gov/Archives/edgar/data/1287286/000119312507045551/dnt10k.htm
Thanks!!
Although a full review is ongoing, the Company currently expects that the modifications to the allowance for loan repurchase losses will result in restated net income for the first three quarters of 2006 that is significantly lower than previously reported in the Company’s 2006 interim financial statements.
Today’s events are all very impressive. I wonder if it matters that this happened on a Friday, late, and if anyone is noticing?
Stay tuned Monday morning. They will not forget this…
I keep forgetting west coast is 3 hours behind. D’oh!
New Century says it will breach covenants
Last Update: 8:07 PM ET Mar 2, 2007
SAN FRANCISCO (MarketWatch) - New Century Financial Corp. said late Friday that it will likely breach a major lending covenant with its financial backers, becoming the latest sub-prime lender to slip into crisis.
NEW14.65, -1.20, -7.6%) were down almost 25% in after-hours trading Friday, at about $11, after falling more then 7% in the regular session to $14.65.
The company said in a regulatory filing that it expects it will not report at least $1 of net income for the two quarters ended Dec. 31, as stipulated in covenants with its lenders.
New Century said it has received waivers from six of eleven of these lenders, though it has not received waivers from the remaining five.
Some of these waivers will take effect when New Century gets similar waivers from the other lenders that have the two quarter net income covenant, the company said.
New Century also said it is delaying the filing of its financial report for the year ended Dec. 31. The company has previously said it will restate financial results for the first and third quarters of the year to correct errors in the accounting and reporting of loan repurchase losses.
John Letzing is a MarketWatch reporter based in San Francisco
Uh-oh!
Just heard this too. Holy crap is this mess unraveling fast. This catastrophe is gonna register with the general public next week. Finally.
I’m not sure why any leders would grant a waiver. You’d think they would see what’s happening and quietly bow out.
Sounds like it needs a 2/3’s waiver on a financial covenant. Just the tone of all this seems more serious than some of the waivers I ran into when I was doing corporate lending. More than a “ooops we blew the debt/ebitda by a tad.” If they approve they’ll be asking some big amendment fees.
IIRC, wasn’t this the thing that finally tipped Enron over? Besides the fact that they were crooks, my recollection is they were still keeping the doors open until their lines of credit were pulled.
Going Concern Opinon of for NEW - from the SEC filing:
In the event the Company is unable to obtain satisfactory amendments to and/or waivers of the covenants in its financing arrangements from a sufficient number of its lenders, or obtain alternative funding sources, KPMG has informed the Audit Committee that its report on the Company’s financial statements will include an explanatory paragraph indicating that substantial doubt exists as to the Company’s ability to continue as a going concern.
Can any of the CPA’s out there comment on whether this is normal operating procedure for blowing a financial covenant - a public warning of a going concern qualification to come?
I was a commercial lender . . . we had pretty stringent underwriting standards in my area.
A going concern opinion is the accountant’s way of saying: “RUN!”
It is the kiss of death.
I’m a CPA. This is not common and it’s very bad news for NEW. Issuing a qualified opinion for substantial doubt about an entity’s ability to continue as a going concern (to stay in business) is akin to issuing the execution orders. Issuing a going concern opinion is a last resort for audit firms. They try to look at all the possible scenarios to see whether the company has a shot a living. The fact that KPMG is already warning the audit committee makes me think the decision has already been made. NEW, you are NOT a going concern unless you get waivers. Bad news. The death spiral continues.
Fabbri sees Fairfield County as immune to any serious downward trends in real estate because of its desirable location - proximity to New York City and Long Island Sound.
“The area is just a highly desirable place to live,” MacKenzie said. “We have great schools, beaches and attractive towns. People want to live here. ”
Any or all of this might be true, but tell me … which of these things was NOT true in the year 2000? Is it now closer to N.Y.? Did the schools suddenly get significantly better, and the towns more beautiful?? Did they ship some sand in and build a few new beaches??? Then why-oh-why are the prices so much higher than they were in 2000? Anyone who has a good answer for that please drop me a line. Thanks.
IMO, selling that desirability was a large part of what happened in this boom. How hard could it be to convince the same crowd who dropped billions on the worthless time-share “investments” from the 80’s, to see this housing craze as the next great thing to get into? You don’t even have to get them drunk this time.
Fabbri’s pitching “It’s different here” now, does look pretty pathetic.
I bet stocks get killed on Monday because of the subprime Mortgage meltdown.
CFHI, FMT, NEW are all toast. So is Toast. Right behind them is the builder stocks TOL, DHI, WCI etc… This sector is toast.
Yep.
My reason for thinking this is that on CSNBC tonight they had a major ‘pump the RE business’ segment.
For the first time I sensed that, under it all, they believe that the RE debacle is going to overwhelm the market. Are they going to say that? No. But it was there, IMO.
Wow. I’ve read this blog and thought it was on the money all along but sometimes when things really begin to unravel, you breath in the full impact of it.
This is going to be very bad and I’m still not sure I appreciate the full impact of it.
Without Subprime, where are all the poor smucks that will buy? The market is gone. Sane people will sit back and wait for prices to come back to reality. It is really very sad but no one wanted to stop it. Everyone wanted to make money. The greed took control. We hate booms because they lead to busts…. Even housing booms will eventually lead to busts…. David Lereah and everyone said we were all wrong… because prices kept escalating and all we kept saying was it is going to bust.. but it will be that much worse, because it went that much higher. We knew where things would go, we just didn’t know where they would come from… we just watched it go higher and higher and now… KABOOM. We told you so.
“David Lereah and everyone said we were all wrong”
Actually it is better if someone says you are wrong than if they ignore you. My impression is the REIC pretty successfully pretended this blog did not exist.
And I for one am very happy to see them coming a cropper for all of their lies, damned lies and cooked statistics used to hoodwink anyone who would believe them.
I need to know what’s the next sector out from Ground Zero. I’m all short on lenders and want to buy some puts on the next dominoes to fall.
I think TOL, DHI, WCI stocks can be shorted. This will domino into them and people have had pretty wishful thinking. The valuations are low the, P/E’s are low but I think the P/E’s are about to be readjusted downward as earning continue to evaporate.
You can then count on retail spending to slow down. Your wal mart’s might do ok as people move towards low end away from high end. So big ticket item places and maybe Best Buy? Ford is priced low but GM went from 18 to 36 and is seeing a sales increase. Not sure how this will affect them but I think if all dominaos fall in place, they could erode. Then business spending dries up and construction. Businesses cut back on expenditures. Technology stocks and commercial lending dries up (This is the other half of FMT’s business that they say they will live on). Tech stocks, think of Microsoft, HP, DELL, IBM, Oracle. Not sure how this affects Apple but it has to.
One simple word… RECESSION.
Another one… Potential Depression.
You can blame Bernanke and Greenspan for letting this Gravy train run on way too long. As for me? I’m going to the Bahamas and going to ride this thing out on the beach. I’ll be rubbing elbows with Robert Nardelli and Lee Raymond.
You can throw the comptroller of the currency in with them.
demand LIErah’s head
http://www.realtor.org/Icreqonl.nsf/Feedback?OpenForm
70% of American households own RE. That’s a heavy vested interest in bullish RE news. Considering most folks in the media own RE and have a vested interest in it going UP value wise, I would not expect to see much interest in creating information that paint anything but a rosy picture. The fact that this BLOG and others have presented the other side of the story is very unique.
same story in Europe. Despite all the turmoil in the stock market, our TV news didn’t spend one word on the bad news; just like they have never mentioned problems in the US housing market of the last year. But any tiny bit of positive news about stocks or RE gets massive TV news coverage, there is never a better time to buy stocks or a new home. As far as the Dutch TV news is concerned, it will be Goldilocks forever (at least they got their 10-40% pay increases again this year thanks to all their spin for the banksters, RE mob and government; probably it works like that in the US media too).
Domestic Bank:
“Due to the current extreme market turmoil, we have temporarily suspended acceptance of loan applications in our wholesale lending division. Authorized personnel can log in below. We apologize for the inconvenience”
http://bakersfieldbubble.blogspot.com/
Yes, they are burning the midnight oil on Wall Street tonight. Fremont and New Century are suddenly and completely defunct, for all intents and purposes. So, what questions are keeping the investment bankers up late tonight? Here are my guesses: How many bad loans did FMT and NEW sell us in 2006 that we expected them to buy back? Who’s really holding the bag on each and every pool of bonds now that there’s no one to do the buying? Will the CDO market actually function and make good on these bad loans? What’s our actual exposure as of this moment? This thing has happened so fast, I wouldn’t be surprised if there are some guys who really don’t know the answers to these questions as of today, and are trying to figure them all out by Monday when the markets open.
Yah. Those questions will have very interesting answers.
The real problem is not that - many IB’s have played both sides of this. Tough time figuring out whether the CDO trading desk and the mortgage banking desk have interests against each the other.
Watch out for the PPT team. Maybe they’ll collude and coerce the waivers. Maybe NEW is too big to fail. They’ll need to be careful though, since there is a criminal probe going on.
I took a look at Washington Mutual’s 10-K today and also read a recent presentation on their strategy for dealing with a slower housing market.
In their presentation, WaMu offered their strategy for compensating for fewer loan originations due to a slower housing market; they intend to increase originations of “high margin products” including option ARMS and subprime loans to 80% of total loans originated.
In their 10-k, they also say that in previous years, option-ARMs were only allowed to grow to 110% of the original loan balance due to negative amortization before it triggered a requirement to pay off principal. In 2007, that limit will be raised to 115%.
I’m stupified. I thought lenders would start getting a little more conservative at this point.
Hilariously sarcastic recounting of New Century’s announcement today by someone who listened to the call. Sounds like he could be a poster on this here blog.
http://forum.themarkettraders.com/read-m/71/3023
Sorry, too much wine. It’s a recounting of a quarterly analysts call with New Century some time ago, but it was re-posted today because of the announcements about criminal probes, etc.
n their 10-k, they also say that in previous years, option-ARMs were only allowed to grow to 110% of the original loan balance due to negative amortization before it triggered a requirement to pay off principal. In 2007, that limit will be raised to 115%.
Holy Sh!!t. Can you imagine if this begins to happen.
The subprime fiasco made its way into more and more stories on CNBC this week. I think they must know, on some level, what’s coming and are going into CYA mode…make sure they’re “on the story” before the trainwreck becomes too obvious for The Goldilocks network to ignore.
There were a few mentions of subprime bleeding into Prime, but that school of thought is still pretty much dismissed. Hmmm…maybe by Summer the tide will have turned on that one.
Really bad news on NEW late tonite:
New Century says it faces criminal probe
Subprime-mortgage lender warns it will likely breach lending covenant
http://www.marketwatch.com/news/story/new-century-says-faces-criminal/story.aspx?guid=%7BC13DE0D3%2D528C%2D4CD1%2DBAE0%2D73BD1FC7D8F5%7D&siteid=yhoo&dist=yhoo
oh. stock trading at 10.42 after hours. Ouch!!!
Of course, what’s happening to NEW and FMT (and the sub-prime residential mortgage industry as a whole) were expected and predicted (even if not the exact companies)…
However, think what is happening behind the scenes to the COMMERCIAL RE financing sector, as the bank examiners continue to make their ‘friendly visits’ to the commercial RE banks wanting to review their portfolios…
As RunDMC used to sing:
“It’s TRICKY”
What has arrived, is harvest time for the bubble waiters.
I’ll be buying McMansions for pennies on the dollar soon. I won’t have any sympathy as I evict the squatters (previous owners). I hope the snow is still on the ground as the little tikes cry, “Daddy, why is the sheriff taking our furniture?” to which I’ll reply, “Daddy mortgaged your future out of stupidity and greed and Mommy’s whining to buy a house, that’s why. Now that you know what happens, you be damn sure not to repeat the same mistake when you grow up ok?”
But the EU housing bubble is still expanding … In Netherlands prices rose in januari at 7% compared to jan. 2006, while sales numbers declined 2%. Sales declined a whopping 38% compared to december 2006, but that’s probably because people were scared into buying with the suggestion that the new government might make some changes to the 50% HMD (which of course they didn’t after the elections). The median home price in Netherlands is now EUR 243K, which is a little over 8x median income. UK, Belgium and France (to name a few) still show rising home prices as well. It aint’ over until the fat lady sings, and the fat lady definitely is Europe and not the US.
Nope. I think it’s over, globally. After Monday the cheap loans are all going to dry up. In fact, at this point, I’m pretty sure Monday is going to be a major crash for the U.S. Stock Market.
I hope you are right but I seriously doubt it - mortgage rates are declining, and in Europe (which is a far bigger market regarding volume and overvaluation) there is NO sign of bubble trouble; at least last month loans were still getting easier to get than ever. And some more trouble in the stockmarket is all Ben B needs to seriously lower rates (and the ECB will follow him without a doubt) and blow a new bubble (maybe an even bigger bonds bubble?).
How much of the run up in Europe is related to them really not having a suburbia? They confine themselves to building in cities and doing little expanding. So not only do many of these countries have little land to begin with but they then almost refuse to build much housing on the land outside of the major cities.
People use the exuse of land shortage here in America to justify the run up. What land shortage?! How much of our land is truly developed? Advances in farming techology (maximizing yield per acre) opened up hundreds of millions of acres. We no longer needed to committ so much land to agriculture.
What does Buffett know?