Bits Bucket And Craigslist Finds For March 6, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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The Plankton Theory Meets Minsky / PIMCO on ponzi schemes
very very good! focus is on subprime and housing
http://immobilienblasen.blogspot.com/
i have added a must see video!
colbert on cramer, subprime, sirius, stock market etc !!!!!
The Steven Colbert video is hilarious! I have found my investment guru. Linked here for easy viewing: http://tinyurl.com/27nvjm
On a housing note: Subprime is now on Colbert as material for comedy. This is not the first inning anymore.
Boy, The evangelicals will be pissed when they discover that the rapture was for bees only.
We must invest in bees! Yes.
hi we rent,
i´ve never seen the show .
is this snippet really representative of “mad money” ?
if it is, it should not be fair for the us to point fingers to the chinese “daytraders” etc….
hi we rent,
i´ve never seen the show .
is this snippet really representative of “mad money” ?
if it is, it should not be fair for the us to point fingers to the chinese “daytraders” etc….
Yes, only Colbert has more valuable insights than Cramer.
it is nice to see McCully & Co acknowledge the risks, but I’m less happy with his conclusion. Just like others he sees this as a strong incentive for the FED to lower interest rates in the months ahead. Obviously PIMCO (and other big players) are betting on lower rates in the future, and if that is true I don’t think this bubble is finished (although a downward spiral from here may end the subprime madness for some years to come). Lower rates in the US would make the bubble in Europe even worse, because the credit markets worldwide are more connected than the housing markets.
hi nhz,
that was also my thought/fear.
the big question mark will be the reaction from the $
the reflex seems to be always the same…….
fed to the rescue…..
yeah … I hope PIMCO gets severely punished by the market for their part in driving rates down and making this bubble even bigger (too bad for all their pensioners, but that’s a worldwide problem anyway). With all central banks pumping like there is no tomorrow, the only way for rates to really go up is huge risk premiums or simply a total lack of buyers for this kind of crap. Still a long way to go
I think you should read PIMCO’s column’s written by Bill Gross before talking about punishing PIMCO.
From Aug 2006
The End of History and the Last Bond Bull Market
“…this cycle in particular has been dominated by the accelerating trend in housing prices – making consumers feel wealthier and able to borrow/spend more money than ordinarily is the case. And so it has been a particular focus of PIMCO (and the Fed as well) to concentrate on the fate of housing in order to forecast the future of the economy, inflation, and therefore the bond market. It’s not looking that good folks – housing that is. …
The important idea is that such a forecast speaks to eventual reflation, inflation, and declining bond prices sometime out there in 2009 and far beyond as the U.S. seeks to address its enormous future liabilities concentrated in social security, healthcare, and foreign holdings of U.S. bonds. But that is a story for next month’s Outlook – I promise, I’ve already written it. For now, and for the next few years, however, enjoy the gradual, then more rapid progression of our “last” bond bull market. It should be a great experience and – while it lasts – a marvelous destination.”
http://tinyurl.com/3aou3z
Bill Gross is of the Hyperinflation persuasion and is currently 53% in short term (less than 13 months to maturity) incredibly short the dollar and not very optimistic after the next couple of years.
I have read several years of Gross & McCulley articles and think I know very well what I’m talking about. They are, just like Ben Bernanke, betting on far lower rates in the next 1-2 years. And we need far HIGHER rates so that there comes a definite end to this bubble, and people think twice before they borrow loads of money for something that they don’t need. Just the statement that PIMCO is making these bets is enough to lower rates I guess.
Where are the bond vigilantes??
About those interest rates:
It seems to me that Ben has been going out of his way to let us know that he will not be lowering interest rates. With statements such as “the market is working the way it’s supposed to”, I don’t know why everyone is predicting this decrease. I was quite befuddled a few months ago when everyone was also predicting a decrease that never happened, then folks responded to that by predicting an increase, which also never happened.
We’ve got slight pullbacks in all investment sectors and inflation seems to be in check. Since it’s Ben’s main job to keep inflation at target and to keep the banks from failing (NOT to dangerously prop up the stock and housing markets), I think he’s done!
Big V: inflation in check, LOL!! You must be living on another planet; even in some heavily manipulated government numbers inflation is now seeping through.
nhz, I don’t think I’ve ever told you how much I appreciate your posts from the Netherlands. Sometimes, as an American, I tend to be somewhat insular and it is good to get a perspective on what is happening in your neck of the woods and how the US affects your area.
General question: what do you think is the sentiment in the Netherlands regarding globalization?
first of all: I like visiting this blog for getting the US perspective (not only on the housing bubble, but also many related issues).
regarding globalisation: I think it strongly depends on how you define the word, and who you ask. The most obvious example is the little ‘globalization’ that is taking place inside Europe. Both the Netherlands and France voted against the new EU constitution, despite all the scare from politics and media that all hell would break loose after a ‘NO’ vote. I think many people here support ‘Europe’ in general, but they are scared (and they have every reason to be scared) that the ‘Europe’ of the politicians is going to take away their freedom, jobs and relative prosperity for the benefit of big business. And some people simply voted NO because they are scared that the muslims will get too much influence (Turkey joining the EU - which now seems very unlikely).
The Netherlands is too small to ignore the rest of the world, and I guess the thinking here is more ‘globalized’ than in the US - but certainly not in favour of the current neo-colonial flavour of globalization as favoured by the US (and Dutch) Government, IMF, Worldbank etc.
I’m with Palmetto, nhz, I really appreciate your comments. I’m still waiting for your online debate with GetStucco…
I “third” that motion. nhz, your contributions are highly valued!
Newly elected Massachusetts Democratic governor Patrick tried to arrange a bail-out financing for Ameriquest.
http://tinyurl.com/2boyt5
In the conversation, Patrick vouched for the “current management and the character of the company,” said Kyle Sullivan, his spokesman. Sullivan said Patrick told Rubin that he was serving as a personal reference for ACC as its owners pushed for the quick cash infusion from Citigroup that would stabilize their struggling lending firm.
If Patrick truly held the character of Ameriquest (of which he was a board member) in high regard, we citizens of Massachusetts have a lot to worry about…
Patrick was brought in as a Director in order to deal with the fallout from illegal and unethical sales practices, including a kind of reverse redlining that put minority buyers in loans that were designed to eat them alive. I don’t know whether he did a good or ethical job of dealing with this, but he can’t be blamed for the business policies that caused the problems to begin with.
He definitely made a lot of money in the process, so you have to give him credit for that much.
But to be fair, since when has the governor of Massachusetts NOT been a sleazebag?
Thinking … thinking … can’t think of one.
Good morning, campers! What do the markets have in store for us today?
Fade the opening
Brillian, Hoz. Right comment in the right place. I hereby appoint you the stage manager for the trading day.
I meant “Brilliant”.
Brillo may be better
The WSJ says Wall Street firms and moving in and scooping up the subprime business.
In a way this makes sense. There are perhaps millions of former prime customers who had previously been neither financially incapable nor irresponsible who are going to have their credit trashed by going bust on exploding Alt-A mortgages for overpriced houses. Once risk premiums get back to normal, it will be possible to gore them with higher rates if they ever want to buy a home again on more normal terms and, if they don’t repeat the same mistake, they’ll probably pay those loans back. By that time, housing prices may also be back to normal, and rising.
On the other hand, if careful oversight of credit histories come back in vogue, it is possible that mainstream lenders will declare a “do-over” for bubble-era mortgages for those with no other financial liabilities, leaving the usurors with the same sketchy customers in the future that they had in the past.
You have to think one scam ahead with Wall Street. What if these firms make lots of contributions to Congress, and instead of the new regulations prohibiting lending more money to people than they can pay back, the new rules prohibit the mainstream lenders from lending to subprime customers at all, leaving them forever in the clutches of the equivalent of payday lenders? And under the harsher bankruptcy laws to boot? Just a thought.
Right and that’s why it crossed my mind that the big firms are probably behind some of the implosions that you’re seeing now. And why I think outfits like Countrywide are not buys now and will go down, at some point they will be buyable for the next round. I bought Countrywide after the last RE bust and it was a huge winner after a slow start.
But none of this is today’s business. Maybe in the next 2-3 years.
don’t you think it will be a whole lot harder for human loan”advisors” to get dumbos to cough up spreads like in this round ?
I think it will be 3 clicks to a no margin deal w very few humans involved- RE agent commisions will get impacted too
“The WSJ says Wall Street firms and moving in and scooping up the subprime business.”
Part of it is gaining after the carnage market share but more importantly maintaining conduits to subprime borrowers. As subprime originators crash and burn, there will be less and less originators willing or able to lend to this segment of borrowers. Ask any subprime mortgage broker and they’ll agree.
The other part is hiding some of the bodies (malfeasance, scandalous underwriting, and so on) and maintaining the ‘intergrity’ of the MBS market. If FCBs and other MBS buyers lose confidence in the underwriting and securitization process and the MBS market in general, the big houses lose fees but more importantly the highly touted asset backed securitization risk dispersion methodology takes a giant hit.
So, yes it makes sense but with so many dominoes falling all around them, I wonder how the big houses manage to stay standing? They are not even wobbling. HSBC took a shameful 11 billion dollar charge with promises of more to come and fired their US leaders as a result. Are US investment banks really that good at managing risk OR are they simply too big to fail OR are they better at hiding bodies?
Are US investment banks really that good at managing risk OR are they simply too big to fail OR are they better at hiding bodies?
“Too big to fail” is a happy horsepucky myth. There’s no such thing as “too big to fail”. Ask any dinosaur.
That wasn’t a dig at you, by the way, mrktmaven. Those are good questions. Door #3, better at hiding bodies. At least, until the stench of decomposition becomes too ripe to ignore.
Of course not; I know better; it is a reference to one of the assumption Moody’s uses to rate large financial institutions. Moody’s claims some institutions are Too Big to Fail; the govt will intervene on the institutions behalf; therefore, they receive favorable ratings.
URL: http://www.bloomberg.com/apps/news?pid=20601087&sid=abohn9cD2fIw&refer=home
As Housing Goes Bust, Lenders Become Predators?: Caroline Baum
Bloomberg
There is nothing predatory about “improving the collectability of the loan,” says Scott Valentin, managing director, specialty finance research, at Friedman, Billings, Ramsey & Co. in Arlington, Virginia.
Loss-mitigation tactics are fairly standard: Extend the terms of the loan, and if that fails, sell the loan for pennies on the dollar. There’s nothing predatory about either. It’s loan management. And it’s in both parties’ self-interest to find terms that can be met because “no one makes money foreclosing,” Valentin says.
Cause or Cure?
He estimates the loss of foreclosing at 40 percent to 50 percent of the initial value of the loan.
The problems in the subprime market may be just the tip of the iceberg, given the depth and duration of the housing bubble — and the money tied up in it.
“We’ve created an unproductive asset,” says Joe Carson, director of global economic research at AllianceBernstein. “A house doesn’t produce income.” ….
Mortgage debt rose by $4.7 trillion from the end of 2000 through the third quarter of 2006, according to the Fed’s Flow of Funds report. “We created as much debt in housing in the last six years as we did in the prior 50,” Carson says.”
http://tinyurl.com/2wdthb
He estimates the loss of foreclosing at 40 percent to 50 percent of the initial value of the loan.
In other words, home prices will fall 40-50%.
No, that’s not what that means.
Chuchundra:
Can you please tell us what you think the 40-50% loss on forclosure will mean for house prices? It does seem like said loss translates into a discount. What is your take?
Much of it goes to expenses of holding (REO-ing?) then selling. Clearly, the sales price is higher than that deep discount.
Hoz (quoting BB article): “We’ve created an unproductive asset,’’ says Joe Carson, director of global economic research at AllianceBernstein. “A house doesn’t produce income.’’
If you rent the house out, it does produce income. It may not be enough to cover the mortgage payment and property taxes, but that’s another story. Very strange comment.
“You have to think one scam ahead with Wall Street.”
This remark triggered a thought:
The Donald is saturating the airwaves here in the L.A. area with ads about his Wealth Builder System and how one can become a Real Estate Guru by phoning for his Free Tape.
The sceptic side of me thinks this is The Donald in action who will steer and prod callers into buying property he or his cohorts want to dump.
So, whatdoyathink?
paulson and cramer agree- sub prime is peanuts and can be burried at a site like the grand cayon and covered over
That’s gonna be the spin because they’ve all got stock to distribute. That’s why I’m long now and looking for a rally. Not much of one but one nonetheless.
Hey TX, I have to thank you for posting your positions. I feel naked when I cover my shorts so it’s nice to have company that is more knowledgable than I.
I’ll be sitting on the sidelines for this rally looking to go short again.
I think we’ll see a probe into negative territory after the open at which time I’ll buy the other 50% and probably dump the whole load at the close. I’ve made good money, no sense in giving it back.
I’m thinking the desert outside of Las Cruces, alongside all those Atari 2600 cartridges.
Wouldn’t mind hearing the groupthink at your shoppe, hint, hint.
Hey, don’t knock my pole position and qbert! lol
OR MY FAVORITE atarti 2600 KABOOM!
i watched cramer last night and he was going on and on about how minor the subprime problem is. he said the housing problem will be much more minor than LTCM, the S+L crisis, etc., etc.
For context, I guess we have to keep in mind that cramer also said there was no housing bubble.
Yes, and for further perspective on Cramer’s timing and market sense, see his two classic columns on RealMoney
Get Out of the Market! (dated Oct. 8, 1998 at the very bottom of the LTCM market bust)
Winners of the New World (dated early 2000 listing stocks you “had” to own, all of which either went to zero or dumped 80% or more)
He’s a clown.
txc: Yes, and for further perspective on Cramer’s timing and market sense, see his two classic columns on RealMoney
Get Out of the Market! (dated Oct. 8, 1998 at the very bottom of the LTCM market bust)
Winners of the New World (dated early 2000 listing stocks you “had” to own, all of which either went to zero or dumped 80% or more)
He’s a clown.
Cramer’s more of a trader than a buy-and-hold kind of guy. Very few people caught the bottom of the LTCM bust. (I bought a few stocks into and out of the bottom, but they were just nibbles). As soon as Cramer saw the technicals strengthening, just days later, he urged his readers to start buying again. If you want to buy a stock and hold it for the next six months, Cramer’s not your guy. Still, a guy who came up from nothing and made $100m for himself can’t be all that bad a market player. He’s certainly no Donald Trump, who inherited $20m and went into bankruptcy.
Brokeroutpost and Brokeruniverse posts indicate that smaller subprime lenders have been exiting the business since yesterday morning in droves. They are talking about yesterday like it was the 29 crash and there will be no 100% LTV after this week, or perhaps it is gone already. One idea they are floating to pick up some slack is a seller second of 5% so the loan is 95% LTV but still no money down for buyer. This could work for sellers with equity. Any thoughts on how prevalent this may become?
Any thoughts on how prevalent this may become?
Not very. Seller actually has to have 5% to loan back.
They could loan their equity. I don’t think seller would need cash.
At closing, equity is cash. But they have to be above water by 5%+6% commission. Many sellers are not going to be able to.
And as a buyer with cash on hand, I would immediately use this tactic to lower the price by another 5%, since they seem willing to part with the money for a while.
Not sure cash is king here. Lets say $500K house, so subprime borrower offers $475K cash and $25K note to seller. Probably the seller would prefer $495K cash or even $490K cash, but maybe they’ll prefer a $25K note over $10K cash (at $485K). You certainly aren’t going to outbid the subprime guy at $475K.
I didn’t make my point clear; it was more a comment on sellers than buyers. On the $500K house from above, the seller must be in the clear by 11% (5%+6% commission) for the seller’s bank to sign off (cuz the seller’s mortgage must be pain-in-full.) So they need to have 55K of equity.
I am saying that many sellers will not have 5% in equity to bring to the table, let alone 11%.
hmmm, this “seller 2nd” would be a good mechanism for licensed agents to get back into the buying game, putting their 3% commission break into the loan, essentially allowing them to buy for 2% down, or a seller note of 2%.
“hmmm, this “seller 2nd” would be a good mechanism for licensed agents to get back into the buying game, putting their 3% commission break into the loan, essentially allowing them to buy for 2% down, or a seller note of 2%.”
That would be great. I want to see more of these dolts catch a falling knife. This market is years from bottom and has only just started. Another 20% down this year minimum. Yee Haa!!!!
“One idea they are floating to pick up some slack is a seller second of 5% so the loan is 95% LTV but still no money down for buyer. This could work for sellers with equity. Any thoughts on how prevalent this may become?”
Sellers with equity are fast going the way of the dinosaur.
But…but… that nice young man with the soul patch at the lending company promised I could refi.
He meant refi…gure out for yourself!!!
Remember that commercial “I can use my minutes when? Never!”
What is a soul patch?
http://en.wikipedia.org/wiki/Soul_patch
Does anyone know which FICO scores qualify for “A loans” versus “Alt-A”?
My understanding is that FICO isn’t the differentiating factor between prime and Alt-A. In other words, you can have a FICO of 800, but if the LTV is 100%, you’re Alt-A. Your creditworthiness is spotless, but the loan has non-traditional risks associated with it.
That makes more sense than what I heard on the radio two days ago, which was that it was the FICO and that Alt-A was below 640.
That is correct. Anything that puts you outside of traditional Fannie and Freddie is Alt A. If you have a credit score above 660, debt ratio under 36% and payment under 28%, then DU and LP (automated underwriting) will generally approve you and guarantee that the GSE’s (Fannie and Freddie) will take the paper. These two underwriting systems will spit out the doc & closing requirements.
So generally, when you have good credit, but you are buying above your income qualification (as based on the debt & payment ratios), then you will be Alt A or some other program with up to a 50% debt ratio and maybe qualifying at 1% above the start rate with an ARM.
This is why when the shills on CNBC state that the implosion will be limited to subprime, they are full of it. In So Cal for instance, just drive out to anywhere in the I.E. and the OC and you will see people with good credit, but all used Alt A type financing and/or ARM’s. These people will have 500 credit scores before all is said and done. They bought into the hype and overpaid. Some will be able to hang on, if they have stable employment, but the majority will be screwed. As the economy slows, these will people will be in the next round of foreclosures and mark that we are in a recession. I dont know when, but this will take place.
I have a question for you:
I keep reading that the problems are all limited to the subprime loans and that they are only a small part of the market and I also read about all the fraud and funny business going on with the approval of these loans. It seems to me that the asssumption is being made that all the A loans were made by these same mortgage brokers with the highest degree of integrity. Is is possible that the same fraudulent brokers could have sold A type loans that weren’t really?
Traditionally, the wholesale lender would rerun the credit and verify the VOEs (verification on employment) and maybe verify other info like seasoned funds to close and bank deposits. They would do this right before funding. I can remember a few times when I would get a call that my idiot borrower just went out and bought some new appliances at Sears (say a few weeks prior) and we haven’t even closed yet, and it was already on the final credit report. So it would throw the ratios out of whack.
I dont know if wholesale lenders still verify the info that is provided by the brokers. I would assume that some of the more shadier lenders have not been doing so. They obviously don’t want to discover something before wiring funds, like the borrower really doesn’t have his own catering company and he only makes $12hr. Or that he really doesn’t have a second job and the VOE and paystub are phoney. They just want to package the crap and sell on the 2nd market. So it’s just my guess, but I would imagine that there is also much fraud, in regards debt and payment ratios, in the Alt A stuff as well. Probably not as bad as the subprime stuff, but the loan officers are the same.
That’s one of the main reasons that I got out of the mortgage game. You never know if your guys/gals are putting you in a crappy position as the principal of a firm. Then you are on the hook when the paper comes back.
Hey TL are you in Philly?
Absolutely. You?
No OCNJ but know someone looking for office space in Philly area if you come across any deals in your sightseeing.
Word of the subprime disaster has reached the “quick read on the John” set via USA Today.
http://www.usatoday.com/money/economy/housing/2007-03-04-mortgages-1a-usat_N.htm?POE=click-refer
The interesting thing here is a table showing metros with housing market price declines and the share of subprime loans that face interest rate resets by the end of 2008. I’d love to see the share of ALL mortgages issued from 2004 to 2006 that have interest resets in the next few years. They are, in a way, all subprime given the prices the houses were bought at (or refinanced to).
Here is a sob story from that article
“That’s partly why he can’t help Anita Furakh and Bobby Pervez this time. Tucker helped them buy their first home near Denver two years ago with an ARM that covered 100% of the $195,000 purchase price. The young couple, with two children, made their payments on time until December, when Pervez traded in his car for a new one. That month, they were late on their mortgage. The timing couldn’t have been worse. They needed to refinance their mortgage before the rate started rising this month. But their home’s value hasn’t gone up, and their credit score has gone down.
“I don’t know what I’m going to do,” says Furakh, 24, who was bathing and feeding her two daughters after work. “I’m trying to work on my credit, but sometimes you can’t be that good. I’ve got two jobs. I’ve got two kids. Sometimes, I am just late.”"
I hope everthing goes down very quickly so we can move on.
I am starting to wonder when the Titanic will slip below the water.
24 with 2 kids and a 200K house. Unbelieveable. When I was 24, I was a slacker who could barely roll out of bed on time in the morning. Early 20s are for having fun, or they used to be, not being yoked to the obligations of someone 20 years older.
If you can remember your early 20s you were never young.
ah 24 I was in my 6th year of college. One year later I got my Bachelors.
I concur. When I was in 20’s, I didn’t want that financial committment. Too much to see and do. I guess difference is a white collar vs blue collar lifestyle. In 20’s, I was fresh out of college and new to my career. If you don’t go to college, you start work @ 18 or so.
However, at age of 40 I still barely roll out of bed in the morning.
Ah, nothing like early twenties and dodging bullets in Viet-nam.
24 with 2 kids and a 200K house… and just had to have a new car….
Oh, and they bought the house 2 years ago = at age 22!
The only reason you would be buying at 24, especially if you were living payday to payday, is because you thought you could score easy money (because houses only go up). Like most of you I was just out of college at 24 and rented until I was 39. It never made sense to buy before then (I moved around every few years) and when I did buy I had plenty of $$ for a 20% down payment and a decent nest egg to boot. During the bubble most of the buyers didn’t purchase with any rational thought, only with the idea that they would make money by doing it.
Thats the big problem here! Lenders changed the rules for lending to allow for the higher prices. If people buying starter homes had to qualify correctly, the prices of home would have HAD to come down. Not keep going up as lenders pulled “products” out of their asses!
Yes, they should have been able to buy a home at 22! But prices should have been lower accordingly.
good point - Japan “saved ” jobs for 15 years
better to cut fast
ROFLOW help them
From the names in this article, I gather that Bobby has not bothered to marry Anita. Maybe she should let the bank foreclose, but then get Bobby to marry her and buy a new house at cheaper prices later using his credit. Of course, that assumes that Bobby will go for it. Probably not.
Yesterdays news
Productivity for 4th quarter revised to up 1.6% from original 2.1%, Reuters reports. Details soon.
Unit labor costs way over expectations. 6.6% v. 3.2 exp
Immediate little glitch in Europe, markets are neeeeervous!
http://www.euronext.com/index-2166-FR.html
U.S. Productivity Rose 1.6%, Labor Costs Jumped 6.6% (Update1)
By Joe Richter
March 6 (Bloomberg) — U.S. worker productivity last quarter grew less than the government initially estimated, and labor costs accelerated more than forecast, suggesting inflation pressures persist.
http://bloomberg.com/apps/news?pid=20601087&sid=aKLG0.frUC0o&refer=home
Don’t bet on interest rate cut…
The rise in such costs “mostly reflects new assumptions about bonus and stock-option earnings in the fourth quarter,” Patrick Newport, an economist at Global Insight Inc., said in a note to clients. “It far overstates the underlying increase in labor costs.”
Not so sure about that inflation! Maybe this increase was all the bonuses Wall Street gave out. Also how can all of you folks think that there will be inflation when the RE bubble has clearly broken and is rapidly deflating?
Inflation while the housing market goes down, yes good question it should be deflationary as debt has to be paid back. I fear inflation because of what the FED may do to prop up the housing crash, like drop interest rates as in after the aftermath of the nasdaq crash.
Thought house prices weren’t a direct part of the “inflation” calculation?
And this makes ITulip seem optimistic
http://itulip.com/forums/showthread.php?t=1040
And this, with new California data
http://www.itulip.com/forums/showthread.php?t=1034
the MA story is even better 19+ vs 17k foreclosures in 1991
and 1991 was nasty !
1991 was nasty !
Yes it was but not nearly as much leverage as now….
Nice post Chic….
Here is an interesting article on HB’s,
http://tinyurl.com/28f3wc
Great article for the Florida thread, oc-ed. Hope Ben picks it up. Having lived in So Flo, I would watch Related very carefully. If they are putting their fingers into the Miami Dade public funding pie, watch out!
YEEE GAWD…….$159K for CONDOZE??????
You mean i really dont need to Streeetchhh and Man Up to buy a 1500 sq ft Luxury Kondoze for Me and the GF?
Who would have thought we could happily live in a condo 2/3 that size, and with No Granite or luxury aplliances…
Here is the Lofts:………Already some Flipper talk!!!!!!!!
http://www.preconstructionprograms.com/real_estate/florida/miami_real_estate.php
Koreans come to rescue US housing market… killing their own market?
S. Koreans Snap Up U.S. Homes, Sparking Capital Exodus Concerns
By Kim Kyoungwha
March 6 (Bloomberg) — Kim Jong Hyun, a Seoul software programmer, is looking to invest $1 million in a four-bedroom house with three-car garage and swimming pool — in New Jersey.
That sum would buy only a three-bedroom apartment in the South Korean capital, where real estate prices hit a four-year high in 2006. The U.S. gives him “a better quality, more spacious house,” said Kim, 32.
http://bloomberg.com/apps/news?pid=20601109&sid=agHLFlBk_HQo&refer=home
http://www.euronext.com/fic/000/019/426/194261.pdf
Europe Bond issues.
One of the reasons why the European Union does NOT and will NOT work!
Once things screw up, they won’t pay for eachother!
I hope things screw up sooner rather than later, before we get the NAU and the Amero. If the EU has some sort of market meltdown, that would be a good lesson.
I can’t speak for others, but I’ll never submit to NAU.
I agree. Our Canadian government is rapidly paying down the national debt; the debt:GDP ratio has dropped by about a third over a decade. It would be a shame to see that accomplishment damaged by profligate neighbours ;->
NR
When has Sir Greenspent ever used terms like 1/3 / 1/4 / 5/8ths?…What’s happen to his boxes index for crystal ball clarification?
I think he’s coined a new verbiage: “Irrational Fractions”
Greenspan sees 1/3 probability of U.S. recession
http://www.reuters.com/article/ousiv/idUSSP22033420070306
Ah, the magic of Trump…this scenario could be a reality show.
http://www.sptimes.com/2007/03/06/Business/Frustrated_buyers_sue.shtml
quote from the article:
“When the market comes off a hyper-boom, all the investors and nonresidents disappear, which is the case now,” Cantor said. “The challenge is to attract qualified residents who can afford and appreciate downtown living. That’s why Trump Tower is questionable.”
Ah, and therein lies the rub: “qualified residents”. No one who could afford the price of a Trump condo would spend their money in Tampa. Tampa does have an economy of sorts, but not that kind of economy. It is not New York, LA, Las Vegas or Miami.
Tampa should lose the “World Class Wannabe” syndrome and concentrate on being more of what it is, a laid-back small city on the bay.
How about accredited infestors who can afford to lose their entire investment?
I mentioned last night Taco Bell Jeff looking for new credit cards. I actually think that’s a good snapshot of the mindset of these newbie RE masters of the universe. Jeff has never lost a dime if you believe what he says and is equity and cash flow positive on everything (yeah right). So why is he looking for credit lines?
He thinks the market is “cheap” now and wants to buy more houses. He didn’t say that, that’s my take. And he can’t get HELOCs on the properties he has because they aren’t worth what he paid anymore. Jeff’s a good example of the stupid money that is out now looking for “bargains” in California.
I think Jeff’s confidence is shaken and he’s hanging on to the phantom equity as ego defense. Seriously doubt he’s looking to buy more properties.
BTW one of his realtw*res is named Suzanne.
Don’t you mean Clownifornians?
Is that Jeff from the SDCIA board ? I think hes in trouble, he was cash flow negitive on all his rentals by his design though he would make it up with HELOC as the properties went up in value. His assumpution was if his properties were spread out some would go up even if some stayed flat or went down.
Well it was a crazy plan and now he is cash flowing more negitive than he thought and his florida RE is really down.
I think there are many many “investors ” who were doing this and until they all get flushed I wouldn’t touch RE. A nation of speculators.
Speaking of Credit Cards, this is pretty interesting.
The first credit card in general use was Diner’s Club. It was for the wealthy and debuted in the late fifties. Carte Blanche and Mastercard came in for the ride a bit later. The Visa card debuted in the early seventies (’71-’72). I remember this. I also remember when having a Sears card meant you had good credit.
Of course, you also used to need to put down 20% on a house, then beg them to loan you the rest.
Interesting how this all developed with the memory of many poster’s on this blog.
Paul
Speaking of Credit Cards, this is pretty interesting.
The first credit card in general use was Diner’s Club. It was for the wealthy and debuted in the late fifties. Carte Blanche and Mastercard came in for the ride a bit later. The Visa card debuted in the early seventies (’71-’72). I remember this. I also remember when having a Sears card meant you had good credit.
Of course, you also used to need to put down 20% on a house, then beg them to loan you the rest.
Interesting how this all developed with the memory of many posters on this blog.
Paul
Even home mortgages are a 20th century phenomenon. James Grant wrote a book about how they started out with 5 year terms with a balloon payment at the end. Home prices have skyrocketed relative to household incomes, as mortgage terms went out to 10, 15 and then 30 years.
Trump’s in LA this weekend with his Learning Annex Millionaire Real Estate crap. Expect 60,000 more Jeff’s to bring their special brand of BS to throngs of wannabee’s. Got a freebie VIP pass, so just might check it out.
I think you are spot on Chick (as aways!). These cheeseballs flout their “success” and will go to any means to make sure they are seen as successful. How many of these tourons have we seen on this blog? RE King is one that comes to mind. Lying is one of their tools so I would not in the least be surprised to see this idiot red faced and nekkid when the tide goes out. Your favorite, Casey is another prime example.
I love Taco Bell.
NEW up over 20%. Damn, sorry I didn’t take that shot. That was a nobrainer.
I just bought a few more puts… will see if it makes a cheap intraday play.
“NEW up over 20%.”
What, did Jesus lay hands on the dead man and say “Arise and Walk”? Well, I guess the second coming happened and the rapture is upon us.
NEW up over 20%. Got barfbags?
You can make money on stuff like that. Happens all the time.
The only reason I didn’t buy that yesterday in the premarket is I was worried it would be halted midday for a bankruptcy filiing.
Oh, I’m not saying you can’t make money on it. I wish you had. I’m just saying there’s something really stinky that a company on life support would have a rally. Just shows the extent to which the markets are gamed. At least you’re aware of it and know how to work with it.
U.S. Jan. Factory Orders Fall 5.6%; Fall 2.9% Ex-Transport
By Bob Willis
March 6 (Bloomberg) — Orders placed with U.S. factories declined by the most in more than six years in January, reflecting weakness in manufacturing as companies worked off bloated inventories.
http://bloomberg.com/apps/news?pid=20601087&sid=a5phQR9mbIuQ&refer=home
Pending home sales for January were just released. Here’s my write up on ‘em. There’s also a chart showing the longer-term term trend at my blog …
http://interestrateroundup.blogspot.com
January pending home sales fell 4.1% from December, according to the National Association of Realtors. The Bloomberg forecast called for a drop of 1.2%. In other words, the decline was more than three times worse than expected. Regionally, sales declined in the Midwest (-2.4%) and South (-11.7%), rose in the Northeast (+9.3%) and were relatively unchanged in the West (+0.2%). On a year-over-year basis, pending home sales were down 8.9%.
This report confirms that the housing market remained weak in early 2007. We’re entering the key spring selling season with elevated home inventories, a lack of speculative demand, and now, a tightening of mortgage lending standards. All of these factors tell me this spring will ultimately prove another lackluster one for home sales. Consequently, further declines in home prices are likely.
Wage inflation result of “big bonuses”… hehehehe
“The Federal Reserve is closely monitoring productivity and labor costs to make sure that inflation pressures do not begin rising on a sustained basis”….hehehehe
It was the biggest quarterly increase in labor costs since a 9.1 percent surge in the first three months of 2006. Both gains were attributed in large part to big bonuses paid to high-income workers
http://biz.yahoo.com/ap/070306/economy.html?.v=6
All of these factors tell me this spring will ultimately prove another lackluster one for home sales.
Mike, I think it’s going to be a lot worse than lackluster. The market is probably going to lock up bad with all this new uncertainty among lenders about who is a good credit risk.
January in northeast seems to have cannibalized the spring sales (unless all of the +9.3% jump is from Wall St. bonuses
)
It should be a very interesting spring (non)selling season for us bubblesitters.
sorry this was supposed to be a reply to Mike_in_FL @ 07:26:13
https://secure2.texaslending.com/seo_mortgagetest.asp
This guy has been running ads on several tv stations for a while now, the ads are awful, now he is advertising cash back, I thought that was illegal?
That’s a real scuzzy operation and has been for some time.
Try “Miracle Mortgage” lol
My Home is in Foreclosure!!
Of course, I said my Home, not my house - I rent. This F(ing) B(yatch) has been underwater for a while. The NOD was filed on 12/6/06, and the notice appeared on the door this morning 3/6/07.
Funny thing, I never got around to paying my rent yesterday. Should I bother, or hold it for the new owner? The former owner still has my deposit, but since I have no address and no phone number, I doubt I can even sue her for it.
What would you guys suggest I do?
Paul
I wouldn’t pay that rent. No way. I wouldn’t pay any more rent until I got a commitment that I could stay until I was ready to leave.
HOLD YOUR RENT…… the new owner always gets the deposit at the closing, but your LL probably spent it…..they are supposed to legally keep it in a seperate bank account collecting interest.
Witholding rent when you know the house is in foreclosure is a legal defense to non payment of rent. Then you and the LL can work out the details in court, such as you use the deposit for the last months rent…and you move out asap.
Remember you as a tenant cannot make that decision, only the landlord or a judge can.
I would hold out. Many lenders will give you “cash to vacate”. Countrywide does this. I have heard of people getting 2-3k to leave without causing any damage.
That sounds like a deal. But I really should pay them if they’ll let me leave this dump!
Really, I’m month to month, but in San Diego, I think they need to give 2 mos. notice for you to leave.
I think I’ll just sit tight and see what happens.
Paulson: U.S. housing credit risks contained
http://www.reuters.com/article/ousiv/idUSTKF00257220070306?pageNumber=2
“No one who runs a respectable bank wants to be unwittingly duped into financing illegal activity. We are going to continue to be vigilant.”
Anyone see the disconnect of this statement?
http://www.housing-boom.com/2007/03/mortgage-broker-hottie.html
Mortgage Hottie!
This morning I overlayed my chart of sales for 93552 with my chart of NODs for same zip. We are now at 3 months and counting where there have been more NODs than closed sales.
If the 1/3 estimate of NODs going to foreclosure holds, (and I think it will actually be higher) then in the next few months we could be seeing 1/2 of all sales as REO/foreclosures.
I don’t see any signs of this slowing down.
In San Diego County, I expect 50% of sales to be REOs/foreclosures by the end of the year.
So, it appears the sell off in the stock market is over.
Tons of analysts on CNBC and various websites saying that everything is fine, economy strong, subprime “contagion” won’t spread, consumer is strong, greatest story never told, Goldilocks, Fed will lower, etc. Funny that those same people never have to tell us whether they are long or short the market. Hmmm, think they have a bias ?
So I guess that housing had its 10 seconds of fame and everything we discuss here is too small and irrelevant to have have an effect on future earnings.
Move along, people. Nothing to see here. Go back to buying stocks and listening to Kudlow and Cramer.
That’s funny. We just closed out our long scalp. Not comfortable trying to ride this sucker up any higher. Good gain again, now back to penny scalping for the near term.
Oh, I forgot to mention that all the news was negative this AM as well. Certainly no reason for stocks to rally. Can you call it a rally when they rise to the level they were before the sell off the day before ?
Things like increased labor costs and decreased productivity and decreased sales used to mean something to the market. Who invented the Goldilocks theory anyway ?
This rally ain’t that impressive. The Dow was actually around the same price at the same time yesterday. Shortly thereafter, the bottom fell out of the market. The trend the last few days has been massive selling during the last hour. I wouldn’t be surprised to see the same thing today as investors try to secure their gains for the day.
I’d rather doze off in the Official Trading Chair
than try to catch the last couple of pumps. Have a short sell on the S&P at 1401 if it gets there, if not, que sera. Money in the bank works for me.
I’d rather doze off in the Official Trading Chair
than try to catch the last couple of pumps.
I heard Neil Bush wants an Official Trading Chair…From what I heard he’ll pump anything…;-)
ON MARCH 8th the European Central Bank’s governing council holds its monthly meeting to set official euro-zone interest rates. An increase of a quarter of a percentage point, to 3.75%, looks all but certain. ECB-watchers will be seeking clues on the timing of a possible further rise when Jean-Claude Trichet, the bank’s president, holds a press conference shortly after the rate decision is published. The Bank of England may also put up rates that day.
Inflation is still the world view.
Another good editorial from Financial Sense:
http://financialsense.com/editorials/au/2007/0305.html
CNBC.. Bernanke is coming on to speak about mortgages.
HELP!! Hey all, I need a little advice, and after spending a year reading this blog I know there are some very smart people here.
A family member of mine has a CD at Fremont, comes due in May I think, it is 95K…They can go down to the local branch (So. Cal) and get it out tomorrow, which is what I said I think they should do.
I guess what I am asking is, what are the chances they could fail as a bank, they are FDIC insured but….it seems that they are headed for BK…any thoughts?
THANK YOU HBB posters!
It is possible that they could go BK and then get backed by FDIC. It’s more likely that mortgage operation will be BK and banking operation will be sold off, in which case deposits transfer to the new owner bank.
Thanks for the input…kinda worried they are going to be the first bank/thrift to fail.
I know I’m not an expert like some people on this blog, but I just looked them on the NYSE, and they kind of stink. They’re another one of those guys who delayed their annual report, and they’re also being sued for misuse of some losses. They actually go out of their way in one filing to mention that they are still FDIC insured up to $100,000 (per depositor?).
My thing is that if you think they’re headed for BK, then just use another bank. Why risk the hassle of dealing with the FDIC if there are other banks around that seem more stable to you?
THE FED
Bernanke: change Fannie, Freddie housing focus
Fed chief would re-orient huge holdings of big mortgage-buyers
By Robert Schroeder, MarketWatch
Last Update: 2:53 PM ET Mar 6, 2007
WASHINGTON (MarketWatch) — Government-sponsored enterprises Fannie Mae and Freddie Mac should retain mortgages or mortgage-backed securities for their investment portfolios only in order to fulfill “a clear and well-defined public purpose” like affordable housing, Federal Reserve Chairman Ben Bernanke said Tuesday.
Speaking via satellite to an Independent Community Bankers of America convention, Bernanke said that the portfolios currently held by the companies “continue to represent a potentially significant source of systemic risk.”
“The Federal Reserve Board believes that the GSEs’ investment portfolios should be firmly anchored to a measurable public purpose, such as the promotion of affordable housing,” Bernanke said in remarks prepared for delivery to the convention.
http://www.marketwatch.com/news/story/fed-bernanke-change-fannie-freddie/story.aspx?guid=%7B03A21F17%2D29BC%2D48F6%2DB05C%2D1BB778F19E26%7D
‘Will selling season spring home-builder stocks?
Choppy trading seen as investors glean data for hoped-for housing recovery
By John Spence, MarketWatch
Last Update: 2:26 PM ET Mar 6, 2007
BOSTON (MarketWatch) — Shares of home builders could see plenty of volatility ahead as nervous investors try to get a handle on whether the key selling season shakes out as a bust or the first step to a meaningful recovery in the housing market.
“As we move into the heart of the spring selling season, investors and analysts alike are anxiously monitoring housing market conditions for any signs of boom or gloom,” wrote Citigroup analyst Stephen Kim in a report to clients this week.
“To some degree, this hunger for information is natural, since all winter long we have been subsisting on a meager gruel of statistically insignificant figures,” he added.
Against this backdrop, investors are tearing apart each new batch of data for any clues, which is contributing to the stock price swings.’
How about the subsidence of subprime lending? Dy’a think that might have any effect on demand for new homes?
http://www.marketwatch.com/news/story/home-builder-stocks-face-wild/story.aspx?guid=%7BBDE9AA97%2DD0FA%2D4B7B%2DB18E%2D08FB7C779FC7%7D&dist=TQP_Mod_mktwN
Waiting for the spring housing recovery will be talked just like the tech’s are supposed to recover 2nd half of the year. Unfortunately, nobody has been able to call the year.
With the recent fallout in the subprime mortgage market, are done deals in the housing market (new and existing) at risk of unraveling prior to settlement? If so, this could have a sudden and dramatic impact on real estate.
Serious question to the group - a place came on the market in the area that I am keeping an eye on that really meets the criteria of what I’m looking for. The description was “all offers considered” so I sent a message to the agent asking how he felt about an offer that low-balled the wishing price by about $129k ($579k -> $450k). The agent responds back and tells me it would be a tough sell but he thinks the seller would probably go for it! Now he’s asking if I’d like to see it next week. $450k is on the high end of what I could comfortably handle….but what do you guys think? Apartment living definitely has it’s drawbacks and we could definitely use the space after our little one was born recently, but am I talking crazy talk in which case, please help to knock some sense into me, or is this something I should consider?
WAIT!
If you don’t wait, you will still be buying at the top.
Paul
The realtor with whom you are communicating most likely has no intention of presenting your $450k offer to the seller. S/he wants to get you into the house so that s/he can gauge your ability to be soft-sold. IMO once you set foot in that house you are a “mark” in the eyes of the SELLER’s agent -remember, the agent is not working for you. And s/he will talk you up to $500k at least, all the time massaging your desire to accommodate your growing family.
Caveat emptor, honey.
ok.. I took an unwitting sip of my now-cold morning coffee from this morning and snapped back to my senses. Whatever intangible benefit I’d get from that house wouldn’t be worth an additional $75k drop over the next few years. Thanks all for keeping me grounded.
$75K? Try putting a 2 in front of that, and keep the coffee coming.
It seems the media is starting to see through DLs claims and they are also starting to figure out that the sub prime implosion is going to affect the availability of mortgages.
http://www.cnbc.com/id/17485638/
The next few months are going to be very interesting.
I wonder when the first piece will air about sub prime buyers not being able to get mortgages and thus affecting the housing market. As near as I can tell, eliminating sub prime and requiring doc and a 10-20% down payment is going to eliminate 25% of the buyers, especially since any equity that the current house owner have is rapidly being eroded.
“As near as I can tell, eliminating sub prime and requiring doc and a 10-20% down payment is going to eliminate 25% of the buyers, especially since any equity that the current house owner have is rapidly being eroded.”
I would think the number would be closer to 50%!
70% in San Diego.
Agree with you, SD RE Bear!!!
Eliminate 100%, low/no-doc loans and high LTVs, and this market is DEAD.
Not too late for the FB to get some public assistance:
http://cbs4denver.com/local/local_story_064143252.html
I posted a reply to a topic on http://www.loansnake.com called “The bad loan my stupid agent got me into…”, thread “1% ARM’s”. I posted as user “BetterRenter” and referenced the Housing Bubble Blog. Here’s what I said:
“”"
I don’t mean to play the role of a Casey-Serin-esque “hater” of you flippers and other RE incompetents, but …
… WHAT ON EARTH did you THINK you were DOING?
The use of a 1% ARM (using a “teaser rate”, and perhaps called a “pay option ARM”) is simply financial suicide. I just don’t understand how all you folks who got these, did so. By paying the minimum mortgage payment in accordance to the terms of the option ARM, your loan BALANCE grew each month! DUH!
Really, it doesn’t get any more basic than that: Why did you take a loan whose terms meant that you would never pay the loan off?
Now, there are many out there who will protest at my characterizations. “Of course we meant to pay the loan off … just LATER, when we had better jobs, or LATER, when we sold the home for a tidy profit, or LATER when something equally miraculous happened.” But these common protests just fulfill my point. You all bought into loans in anticipation of highly unreliable future events, and as time passed, those future events became even more unreliable … until at the core of that snake’s nest of uncertainty, a hard nut of FORECLOSURE was growing at a good clip.
Simply put, to be financially sensible, you should NOT buy anything and then hope the future will save you. THAT is why you should rely on cash as much as possible, and why when making payments you should minimize the impact such payments make on your life. THAT is the key to middle-class living.
We saw quite clearly in the dotcom fraud how those in power and authority will commit great financial crimes in order to further their positions. Darn it all if this didn’t happen AGAIN in the housing fraud. When you walked into a broker’s or loan officer’s office, all he did from 1999 to today was try to stick you into the worst loan for YOU that was possible (which is of course the best loan for HIM). Even though such a trending is technically legal, it’s highly immoral and the general public should have resisted fiercely at every turn. Upon meeting a strong and common resistance, the budding criminals (brokers and loan officers) would have backed down, to return to issuing affordable loans.
Anyway, the key point in the market today is that home affordability was NOT assisted by toxic loans. Home affordability is only assured by LOWERING THE PRICE. If homes had become cheaper to buy and own, then the industry could have rightfully taken credit for assisting more and more Americans to buy and own homes. But the exact opposite happened — the financial terms to buy and own a home became outrageously expensive, so that all those millions as homeowners are actually HOMEDEBTORS and the cause of homeownership in America has lost significant ground.
“”"
Pearls before swine.
But a nice summary of personal responsibility in an age of none.
BitterT: We saw quite clearly in the dotcom fraud how those in power and authority will commit great financial crimes in order to further their positions. Darn it all if this didn’t happen AGAIN in the housing fraud. When you walked into a broker’s or loan officer’s office, all he did from 1999 to today was try to stick you into the worst loan for YOU that was possible (which is of course the best loan for HIM). Even though such a trending is technically legal, it’s highly immoral and the general public should have resisted fiercely at every turn. Upon meeting a strong and common resistance, the budding criminals (brokers and loan officers) would have backed down, to return to issuing affordable loans.
Never having owned a home before, I’m not entirely familiar with the process. Does the realtor hook the buyer up with a lender who will fund the purchase? Or does the buyer shop around until he finds someone who will finance the deal?
A moronic buyer allows the realtor to hook him/her up with the lender, inspector, mortgage co, etc.
A smart buyer finds all these resources on his/her own — after shopping for a long while and checking the background/reputation of all involved.
Much as I hate to say it, everyone is out for the BUYER’s money. It’s up to the buyer to remain in control of every aspect of the deal the entire time, IMHO.
Hey guys…I frequently read this blog, but don’t really contribute much. I need advice though. I am 28 and I live in Newark, Delaware. I am considering buying a house as an owner-occupant and living in it for a year or so and then renting it out. I did this once before in the same neighborhood and it has turned out well. I paid $110K in September 2004 for an old beater townhouse which is near the University of Delaware…a pretty decent university that attracts groves of uppity kids from Jersey, NY, Maryland, etc. I fixed it up slowly by myself and rent it for $1200/month to two grad students. Now the houses in that neighbohood (in similar scruffy condition) are going for $150K. That’s like a 35 percent increase. BTW…these houses were like 85K in 2002-2003, so I thought 110K was too much when I bought in 2004…but I did it anyway. My calculations say it would still be cash flow positive at 150K, but I have always heard that you shouldn’t pay more than 100X the monthly rent. I really enjoy fixing up houses and I’d be getting a better interest rate since I’d be living in it at first….but I also don’t want to overpay. When I read this blog…I read about people with $400,000 houses in Florida and California that might get $1200 in rent…so $150,000 doesn’t seem so bad. However, it is a dramatic increase from what those houses were in the past and over the 100X rule. Any ideas??? BTW…I don’t hear a lot about the market here in Delaware…so I’ll share my thoughts. The lower level is staying on the market longer, but I haven’t seen any indications of prices dropping. The higher end…over 300K is not doing as well. There are houses in nice older neighborhoods that are sitting on the market, whereas they would have been gone in a few days in 2005 and early 2006.
Emjoy your current cash-flowing property and stay put for 6 months, unless you can conjure up a really good deal. You never know, you might be able to. But watch out, lots of people on this board think that rents have the potential to decline as hidden inventory comes onto the rental markets. If your deal pencils out, go for it. Just don’t tap any equity on the other property, because it’s probably about to vanish.
89117, Las Vegas. Just got a call about a half-hour ago. “If you want to sell your house for cash, you’re in trouble call blah blah… Closing can be done in as little as three days.” Automated vultures looking to buy the house I’m living in! Good thing I don’t own it.
I’m not really knocking them, I’m wanna be a vulture too!
Sorry this is late to the bit bucket. The Korean government has introduced new (higher) taxes for those who own three or more properties. They are trying to deter speculation.