Bits Bucket And Craigslist Finds For March 11, 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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New York Times says a “crisis looms.”
http://www.nytimes.com/2007/03/11/business/11mortgage.html?_r=1&hp&oref=slogin
Not that the Times is as influential as people believe, but it is read in New York where many people work deciding what to invest money in.
In the very first paragraph of that article, deception rears it’s ugly head. An analyst with Bear Stearns, who are anecdotally personal brokers to the Bush Family, writes a bogus report about New Century Financial. How many people bought NEW after that analyst touted the stock? How can we believe anything these people say? What’s gonna happen when people put 2+2 together (if they can) and see Hank Paulson’s signature on their currency? I’m going out on a limb here and predicting a credibility crisis.
“I’m going out on a limb here and predicting a credibility crisis.”
BINGO! It just dawned on me why impeachment proceedings haven’t started. With all that is going on politically, I’ve been in complete shock why impeachment is “not on the table”. Your post just gave me the clue: “It’s the economy, stupid!”. (slaps head).
All financial crises are confidence crises, one way or another. Lack of credibility shakes confidence. Impeachment proceedings would hasten a confidence crisis in a big way.
Whew! I’d love to see Bush family financials. What do you wanna bet they really made out on MBS and have been out of them for awhile?
Just your typical crime family. I still shake my head when I consider how many people supported these a-holes. On this blog too.
Amazing.
If we could just find the right somebody to hate and cut their heart out all, of our problems would be gone. We could rejuvenate the country with his blood. I am great, we are great, and so is anybody who agrees with me, but that guy there is the Devil and so are his friends, supporters and family. All of our problems were visited upon us because of that other guy. We are great and all seeing and all knowing. OUR GUY/GAL IS GREAT AND INFALLIABLE, that guy is dingle-berry and for the greater good he should be flayed alive. We are geniuses but that guy is so obviously an idiot who thus deserves our scorn and unrestrained vitriol. If fact we should share our enlightened hatred with others. We hate therefore we exist.
PS: you can see the financials for a whole bunch of the Bush’s filed a whole bunch of times but don’t let that get in the way of a good cathartic rant.
PSS: Thanks for sharing personal politics and invective here.
PSSS: I apologize for rising to the bait.
got grubs?
Huh? Congress holds the purse strings of the country. Bush is not a king with sole spending power- he has no spending power that congress does not grant.
So why not cries to impeach Pelosi and Reid?
Oh, I get it.
So why not cries to impeach Pelosi and Reid?
they be the lesser of two evils in our wunnerfull 2-party state; plus the first budget the Dems will pass starts Oct 1 2007.
“…writes a bogus report about New Century Financial.”
How can you verify that the report was disingenuous? It is not enough to say that, in retrospect, the report was a mile wide of the mark; maybe Bear Sterns analysts were simply clueless. The appearance of cluelessness is tantamount to plausible deniability.
Where was the due diligence? Bear Stearns has a responsibility to investigate before they recommend a stock for purchase.
what about investors’ responsibility to investigate a stock? took me 20 seconds to look at the income statement and the cash flow statement and see that this thing is a piece of junk.
seems like some people just want to buy and expect it to go up without doing due diligence and research.
legally BS doesn’t have any responsibility to anyone since there are people screaming buy something everywhere everyday for all kinds of products and we can tune them out. but with stocks it’s like people get a case of the stupid and dreams of wealth and forget to research it. i bet most of the morons who bought it spent more time researching which ipod to buy
This has been happening for years. Just a couple of years ago Merrill,Lynch settled with the SEC a fine of 140MM for recommending a stock that internal documents showed Merrill was unloading from their inventory. A pump and dump.
“…but with stocks it’s like people get a case of the stupid and dreams of wealth and forget to research it.”
Either that, or they are dumb enough to rely on Bear Sterns’ BS research.
When will you all believe me ?? This is “THE MORON GENERATION”
The Bear stern “anal-ist” was taught in the Very expensive college, NEVER to think outside the box or to question anything or look at alternative views , like good ole Ben’s blog.
These are the people that have been getting hired in the last 5-7 years tons and tons of them, and why i am so out of work
How can you verify that the report was disingenuous?
…because they have a longstanding financial relationship. what more do you need to call BS on that fluff piece?…maybe he was trying to bail out some friends also
“The appearance of cluelessness is tantamount to plausible deniability.”
GS, how profound. Do you think there was intent to be clueless?
“The Bear Stearns analyst who upgraded New Century, Scott R. Coren, wrote in a research note that the company’s stock price reflected the risks in its industry, and that the downside risk was about $10 in a “rescue-sale scenario.” According to New Century, Bear Stearns is among the firms with a “longstanding” relationship financing its mortgage operation. Mr. Coren, through a spokeswoman, declined to comment.”
REVULSION is building on main street. Also, ponder all the deals that fell through over the last couple weeks and the impact on New Home and Existing Home sales. Further, the panic of not being able to refinance OR sell.
It is playing out just the way this blog has been saying it would for the past year.
Last February (2006) we had a worthless troglodyte leave our company to go and work for a subprime lender. Even at that time I said to somebody, “good luck with that. He will be out of work soon enough.” I knew then that subprime would meltdown. And I will let you in on a little secret. I’m not an economic genius. I just had a little common sense.
I’m getting sick of comments in articles like, “this may get worse than anybody could have expected.” This whole blog expected what is happening.
The spring season is going to be awful now that subprime is dead. I expect panic by June.
This whole blog expected what is happening.
The big players on this blog are some of the brightest people I’ve ever encountered. You are correct that this blog has exactly predicted what’s happening and going to continue to happen. But the VAST majority of people out there just have no clue about what’s going on. I wouldn’t have had a clue had I not stumbled onto this site a couple of years ago.
I talk to my parents about the subprime meltdown and it’s actually news to them. They are both intelligent and well-read people. It may just be that this issue is so far removed from them (home’s been paid off for a while, doing extraordinarily well in retirement, etc.), they just haven’t paid attention.
I greatly appreciate the education I get on this site. And I have passed key articles/information along to those who would actually listen (which, again, is still the minority of people). I so look forward to the day when I can send a photo of my very own, affordable home to the HBBphotogallery with a huge thanks.
(And, yes, I do donate to Ben. Actually, guess I’m due for another donation.)
eastcoaster, I totally agree with you EXCEPT… I’ve noticed recently that I haven’t had to push my case so forcefully anymore re: subprime, housing bubble. It could be the simple fact that the LA Times now regularly prints articles about subprime problems. In fact, now when they make any mention of the housing market in the business section, it always references it as a down market.
While one doesn’t have to push the case as much lately… people still won’t listen beyond a certain point. e.g., when that trailer park in Florida came on TV mentioning how every trailer owner was going to get $1mill+, I snarked “no they won’t.” EVERYONE else in the room believed they would sell and sell big to the developer; it was done so forcefully, I didn’t bother to counter with timeframe, overbuilding, lack of buyers…
But yes, resistance is down, but we’re just exiting denial. We’re not even in fear yet… somewhere in between.
Got popcorn?
Neil
Lionel,
I would partially agree with you re the LA Times, exception being most articles by Annette Haddad, the resident NAR cheerleader who can be counted on to put the positive spin on housing articles. Check her articles just in the last couple of months; always the ‘glass half full’ when it comes to pricing and sales. I was surprised to see her byline on the article in yesterday’s Business section about the subprime meltdown in L.A. Maybe her editor has realized their mistakes at last.
The big players on this blog are some of the brightest people I’ve ever encountered.
Eastcoaster, I agree. I don’t know what they do in their regular lives, but I would guess about 50% of their talents would be wasted if they didn’t have an outlet in this blog. Thank you Ben, than you bloggers, thank you.
The big players on this blog are some of the brightest people I’ve ever encountered.
Not sure we have “big players” - just active posters, most of whom happen to know what they’re talking about. The blog also has a lot of occasional posters who never cease to amaze or entertain me with their insights and commentaries. I learn something useful, or at least memorable, every single time I visit this blog. Also laugh a lot at some of the jokesters in here. Ben can be justifiably proud of being that catalyst that pulled so many diverse, disparate characters together at such a crucial junction. Not since the Manhattan Project have so many brilliant minds been assembled in one place
They are all lying I expect. Some kind of pump and dump.
My favorite quote came near the end;
“Meanwhile, investors wait to see whether the spring home selling season will shore up the mortgage market. If home prices do not appreciate or if they fall, defaults will rise, and pension funds and others that embraced the mortgage securities market will have to record losses. And they will likely retreat from the market, analysts said, affecting consumers and the overall economy. ”
If home prices don’t appreciate?!! Ah, the Spring miracle again, let’s dust off that one. Idiots!
my fav quote:
“Like worms that surface after a torrential rain, revelations that emerge when an asset bubble bursts are often unattractive…”
To prove that the MSM still doesn’t have a clue, this morning on CNBC’s show “Your Business”… they listed the top five LEAST risky businesses (provided by Fair Isaac Corporation no less!):
1. Real estate
2. Legal services
3. Engineering services (all relating to construction)
4. Insurance agents
5. Health services
We still have a while before MSM catches on…
To see for yourself, http://www.yourbusiness.msnbc.com
1. repo and REO
2. BK
3. tear down
4. risk management
5. suicide watch
You can get paid to watch suicides? Sadly, there will be fortunes to be made in the next few years.
Somebody is getting it because I heard three “debt relief” commercials in a row yesterday.
Would not be surprised to find the same big guys that were backing the crazy loans to be behind these debt consolidation companies.
I tip my hat to them for a well played hand.
Did anyone see the CBS Saturday night news. They had a blurb on a couple married for 7 years with 2 children who had a commitment from New Century to fund their home purchase. The paper work showed a 10.5% APR! They and their mortgage broker were upset that NEW was not going to honor thier loan commitment. Everyone was upset.
Reality: This is the best thing to happen to this couple in 7 years. Keeping them out of this housing market will be a blessing in hindsight, 3 years from now.
It is an interesting commentary on the buyers pool: Shrinking.
Well, I can certainly believe #2 - legal services and # 5 - health services.
The lawyers are going to be very busy as the “blame” game gets rolling in the RE debacle.
Doctors are going to be very busy treating a lot of very sick RE “owners”, depressed mortgage brokers whose business suddenly disappeared, and suicidal lenders who suddenly understand the meaning of “poor credit risk”.
Dear gawd I HOPE SO, i need work badly as a Paralegal here in the big apple.
Also least risky business a Wedding DJ, Once the equipment and music is paid for (chances are you alreday bought 50-75% of it anyway) not a lot of real daily costs involved unless you really want to be a legitimate company with a storefront/storage multiple sets of equipment, , yellow pages, seperate company vehicles etc. And then you can always use the equipment and music for your personal home system.
750 watts per channel for your home theatre is mind blowing!
God, I hope you never rent an apartment anywhere near me. I would have to kill you while you are watching the director’s cut of “Star Wars”.
MSM is catching on..
First page on San Jose Mercury (San Jose, CA paper with large circulation) has this on the first page!!!!!
http://www.mercurynews.com/search/ci_5411822
#1 and #3 are two of the MOST risky businesses. Nobody wants engineers in a recession becuase nobody’s building anything. The market for civil/mechanical/chemical engineers in the early 90s was D-E-D dead.
I’m surprised cnbc wouldn’t mention financial planning/consulting/asset management, which has a countercyclical element to it. When markets are crashing there is a *greater* need for competent asset management, not less.
Can’t find good engineers fast enough in many sectors. Good reason why so many jobs going overseas. Problem is that US produces too many lawyers / business majors. Not enough people to design / build items for consumption here.
Notice that all of these are service related. No manufacturing, no (non-construction) engineering. Not good.
Crisis Looms in Market for Mortgages
very good story from the nyt
http://immobilienblasen.blogspot.com/
This could be a repost. The NY Times says a “Crisis Looms in Market for Mortgages.:
http://www.nytimes.com/2007/03/11/business/11mortgage.html?_r=1&hp&oref=slogin
Not as influential as some believe, but the Times is read in New York where people earn a living deciding what to invest money in.
Money quote: none of the mortgage risk and value models and UBS assume lower OR flat housing prices going forward.
If that is the standard, then housing value declines, or even a lack of increase, are NOT priced in. It could take 1970s-style inflation to have these loans devalued enough in real dollars that they can be paid back in nominal dollars.
The PigMen are busy buggers indeed. There is more:
Nevertheless, some investors wonder whether the rating agencies have the stomach to downgrade these securities because of the selling stampede that would follow. Many mortgage buyers cannot hold securities that are rated below investment grade — insurance companies are an example. So if the securities were downgraded, forced selling would ensue, further pressuring an already beleaguered market.
Another consideration is the profits in mortgage ratings. Some 6.5 percent of Moody’s 2006 revenue was related to the subprime market.
Brian Clarkson, Moody’s co-chief operating officer, denied that the company hesitates to cut ratings. “We made assumptions early on that we were going to have worse performance in subprime mortgages, which is the reason we haven’t seen that many downgrades,” he said. “If we have something that is investment grade that we need to take below investment grade, we will do it.”
Interestingly, accounting conventions in mortgage securities require an investor to mark his holdings to market only when they get downgraded. So investors may be assigning higher values to their positions than they would receive if they had to go into the market and find a buyer. That delays the reckoning, some analysts say.
“On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers.”
What a bunch of dimwits.
Hmmm, are they evilly stupid, or stupidly evil?
I know we shouldn’t be mocking possible victims, but after reading the previous thread about Ms Lewis I just can’t resist.
I saw it on a weekend and my heart stood still
Da doo ShaRon Ron, da do ShaRon
I knew that I could have it if I had the will
Da doo ShaRon Ron, da doo ShaRon
Yes, my heart stood still
Yes, I had the will
And, when I bought my home
Da doo ShaRon Ron, da doo ShaRon
I thought before the reset I could just refi
Da doo ShaRon Ron, da doo ShaRon
But now the party’s over it’s my oh my
Da doo ShaRon Ron, da doo ShaRon
Thought, I could just refi
Now, it’s my oh my
And, when I check the loan
Doo-doo ShaRon Ron, doo-doo ShaRon
That was good, thanks ajh for not resisting the urge.
I love these gems! http://tampa.craigslist.org/rfs/291777677.html
Bank will let it go $20k below appraisal OCTOBER 2006!!! How about March 2007? September 2007? January 2008?
In the ad it says, if you drive by, do not disturb tenants. I think it should say, “Tenants don’t know I have been paying the Hummer payments with their rent payments and now my mortgage is behind and I must sell.”
It should also say, “Please don’t tell tenants I blew their deposit clubbin’, umm, I mean networking in Miami last night.”
It was a future unemployment convention.
That’s not a bad $70,000 home. Oh my god, they are asking $205,000 for that? Holy sh-t. Good luck with that one!
I nearly fainted when I looked up my property that I sold in 2005 and saw what the country property appraiser had valued it at. I know the buyers had to appeal last year to get the taxes reduced, they bought it as an investment to rent out and maybe live in down the road (or so they said). I was rooting for them, they are nice people. But the property appraiser struck back this year with an even more ridiculous valuation.
These property appraisals are ridiculous. And I think they are happening because of re-fi’s, too. Anyone know if re-fi’s can screw up the comps?
It is a very modest property. I mean, sales are at a standstill in this area and asking prices dropping (not like a stone, but they are dropping). What does the property appraiser do? INCREASES the valuation. In this case, it was ridiculous, too.
There are a lot of genuinely nice people that are going to get run over by this thing. It has to happen. They are nice people that did really stupid things. The only way a lesson will be learned is if it is painful. We’ve all had those. Some lessons are just more costly than others.
Ths stock market will be next to fall.
As much as I think the market could crash, I don’t think it wil be sheeple liquidating stocks to pay for their mortgages etc. They never participated in this run up. Most sheeple believe housing was their ticket to riches so were 100% RE.
The stock market could fall with drying up of liquidity. If willingness or ability to use money dries up, stock speculation will be impacted.
Longer term, inability to tap equity extraction WILL impact consumer spending. That will impact non-essential businesses.
It’s all about liquidity. All “money” has to be borrowed into existence in a fiat regime. In today’s world, leveraging on repackaged debt is the bumber one game. How do you think we came to arrive at a derivatives market that has a notational value of nearly (or possibly greater than) $400 Trillion dollars? Every single scrap of that derivatives paper deep down at its base is a loan to someone and mostly backed by a collateral of equal or lesser value. The mortgage backed paper out there is supposedly $6.5 trillion dollars (this is the collateral backed base prior to the leveraging) or more than the float of all US federal govt. debt. So what happens in the mortgage paper business is very, very important to Wall Street and subsequently liquidity and therefore stock market prices.
As significant chunks of this paper go bad, you have in effect created margin calls all through the derivatives chains. The “liquidity” of this paper is going to fail its first real test very soon. Additionally the fact that a lot less paper will be coming to market, since the buyers have dried up, another source of the liquidity is waning.
Right now Wall Street is whistling pass the graveyard, having “survived” the mortgage scare. The reality is there hasn’t even been a real scare yet. I expect some serious fecal matter arriving at the fan blades very soon. I suspect some very bad news out of GMAC - worse than the analysts guess. Of course after the most recent guess on New Century, one might conclude that an analysts guess isn’t worth much to begin with.
I’m looking for a very nasty period for the equity markets that could start any day now or it might be as late as the early weeks of Q2 before it begins, but certainly we will once again find out what happens when buyers fail to make an appearance as the money begins to dry up. The sellers are always present for one reason or another - its the buyers that determine an up or down market.
Another fun aspect of this will be the almost total domination of “black box” robotic trading currently present. (See Alan Newman’s recent Cross Current) I don’t think anyone learned one damn thing from LTCM’s reliance on program trading, and the fact that it has become so pervasive is evidence in itself. When all of those little robots begin to react to a market going down they will simply shut down the markets.
I hadn’t realized how significant the reic transaction volume was to the economy until last year. Debt issues to individuals are essentially the buyers bringing future income — decades of it! — into the pockets of the sellers to spend in the current period.
An ingenious way to goose an economy, I just wonder how much the 2003-2005 bubble was intended. Greenspin’s “ARMs are GRREAT!” speech at the height indicates this asset price bubble was willingly blown.
I don’t think it’ll be too bad for the overall stock market. Unlike in 2000, P/Es are pretty much at historical norms already, especially given inflation that is still historically moderate. Don’t get me wrong; some sectors will get absolutely walloped (banking comes to mind), but I don’t see the SPX getting much below 1250 or so (for a 10% or so drop), and then not for long.
You all get Market Semiotics?
Never heard of it. That was my call at the start of the year and I’m standing by it.
“P/Es are pretty much at historical norms already”
If stocks dropped 50% they would be at historical norms! They are close to the highest they have ever traded.
Also as we go into a recession the P/E will get even worse as company earnings drop.
I don’t think it’ll be too bad for the overall stock market.
Yeah, just like 1929! Uhhhhh, wait a minute…
Palmetto - I believe the evaluations lag by 1 year. They are just quoting Dec 2005 perceptions !
Palmetto;….Kind of hard to argue the valuation if you just and may need to provide the appeal board the appraisal info….With that said, although controversial and to a degree inequitable, this is why the voters of the state of California passed prop #13….They were sick and tired of every tax assessor across the state running out and reassessing property every time they wanted to boost revenue to fund their wasteful programs and projects…
Appraisals for refinancings are included in OFHEO’s median price data. Also, since OFHEO’s index is a repeat transaction index, when flippers re-hab a home and resell at a profit, the entire price gain is in the number. There is no way for OFHEO to know how much hard money was put into the property in order for it to sell at the higher price.
job numbers- would be interested to see how many 1099 RE folks became “employed” in the last 90 days
from 80k to 25k as RE employment goes from
9.5% to the historic 6%……….
and permantly lower as consumers figure out 3 to 4 clicks of a mouse and you don’t need a mort broker and in most cases a realtor
more spillover news
boat sales scking = big surprise
http://biz.yahoo.com/ap/070311/boat_sales_marinemax.html?.v=3
I bet old muscle cars are scking too
There will be a great many toys for sale at discounts in a few years. I’ve been saying this all along. But if I’m wrong, I merely have more savings by not buying.
Yeah, there’s really no downside to playing it safe, is there?
Same thing happened in the last real estate cycle bust (1990-95). Big boat sales plummeted, many boat dealers went out of business in Los Angeles, in that area Marina Del Rey had many boat dealers. There were LA Times stories about the hardships of these business owners…it’s all coming back to me in a surreal way (major deja vu thing as I look around me and think “is it just me, or does anyone around me get what’s happening”)
Muscle cars same thing, then as in now, they had gotten bid way up. This whole mess is playing out much the same, right down to the same newspaper articles.
Related link…
http://www.uniqueperformance.com/
“is it just me, or does anyone around me get what’s happening”)
solvingadream;…..I get it….
It is apparent that you were in the business in some way to remember the 1990-94 down turn….What’s different this time however is the “leverage” that in the system particularly with people incapable of servicing debt in the event of even a moderate slow down in the economy….Any significant slow down would not only take down the fringes, it would engulf part of what’s left in the middle class…I have been through two significant down turns in my career…Four if you want to count 1974-75 & 2001-02…..If one major shoe were to drop that sent our economy into recession (7% + unemployment) the fall out in this one would dwarf the others IMO….
I think boats will do pretty well in the next few years. After all, they may be the only affordable dwelling left soon! You don’t have to pay for the land!
“I bet old muscle cars are scking too ”
Man, do I get a chuckle out of watching those Barret Jackson auctions. The audience is full of aging baby boomers. Fat, balding, longing to relive their 20s by buying the car they never could afford. AND STILL PROBABLY CAN’T.
So lately the people that cover those auctions have taken to telling everyone what a great INVESTMENT those cars are. You guessed it - ANOTHER BUBBLE ! I just have to laugh.
Do lenders have any obligation to refrain from making loans that are unlikely to be repaid? Many comments I have seen in the media suggests that a substantial number of lenders believe they have no such obligation. Case in point:
——————————————————————————–
Lenders tighten standards for borrowers with bad credit
By Holden Lewis
BANKRATE.COM
March 11, 2007
Mortgage lenders are tightening standards for loans to the 15 percent of potential borrowers who have the worst credit.
Even with the more rigorous standards, many credit-impaired borrowers can find willing lenders – albeit at higher rates than were being quoted a month ago.
“I think for the vast majority of people, they don’t need to worry about it,” says Jim Sahnger, mortgage consultant with Palm Beach Financial Network in Stuart, Fla.
…
Brokers can’t believe how lax the subprime lending requirements were just a short time ago. Investors were eager to buy mortgages, especially high-rate, risky home loans with prepayment penalties, because they were profitable. So investors pushed loan officers and mortgage brokers to find borrowers with lousy credit. Brokers and loan officers were paid handsomely – practically bribed – for delivering subprime borrowers.
“So long as these loans are legal, we’ll continue to sell them,” Cruise says. “Yeah, we do cringe. But so long as people qualify for the loans and they want them – we don’t even have an obligation to educate people on the risks of these loans, although some of us do. You still have the freedom to do things that are stupid in America. Unfortunately, many people are exercising that freedom with abandon.”
http://www.signonsandiego.com/uniontrib/20070311/news_1h11lenders.html
I wonder how many of their readers just realized “Uh oh, that sounds like my mortgage”.
GS, you bring up a good point that goes to the meat of the problem as I see it. The fine balance between regulation and free will. There are pros and cons to both sides. Do we want to increase gov’t regulation and suffer the rigidity and bloated costs associated with it? Do we accept that without regulation the lending industry will offer loan packages to borrowers who cannot afford them and do so vigorously? Who do we want to have the power? The State or the People? I realize that it is not an exclusive or problem and that there are many shades of gray, but even though I have in the past called for regulation, I am not that eager any longer because I believe it takes the power out of the hands of the individual and puts it in the hands of the few who reign. I think we are seeing the market at work in a natural correction of transactional inefficiencies in lending. Those individuals and lending concerns who have chosen to engage in transactions that are not based on the economic fundamentals and time tested heuristics for lending and borrowing are now being penalized by the market. Borrowers will lose their homes and lenders will go out of business. Employees of lenders will have to drive something other than Ferrari’s and may have to eat the ramen they so callously advised their borrowers to eat to cut costs so they could afford that loan. And this may bleed outward to impact people and institutions that were not involved in REIC because housing has been THE sector that has propped up the economy post dot.bomb and 9/11. And this is the key for me because I believe it was a conscious decision on the part of the FED and our gov’t to encourage the already heated and extended housing bubble of 2001 to go even further by loosening rates and turning a blind eye to obviously dangerous lending practices. And I will not even get into the crimes of omission regarding oversight of RE lies and deception. Only history will be able to show us if this was a wisdom or negligence.
For me it is similar to programming in a higher level language. The C programming language is very very powerful. It allows a programmer to do many things. Some of those things one should not do, but in some rare cases it is what you must do or need to do and you can do it without penalty because you have set things up so. But it is a learning experience to step outside of the boundaries and then try to understand why it did not work when it fails. We are seeing a lot of wetware that stepped outside of the lines and will now suffer the penalties. I just hope that those who chose to use sound judgment will suffer no penalty.
There was a very good discussion of the implications of the subprime meltdown for San Diego’s economy on the latest edition of KPBS Radio’s Editor’s Round Table. The only thing they missed was that the likelihood of several years of falling home prices in San Diego going forward. Like in past real estate busts, it takes years for falling comp prices to get fully priced into market values. (The discussants seemed uninformed on this point.)
“… we’ll discuss how stricter regulations on mortgage lenders could impact the regional housing market.
Guests
* David Rolland, editor of San Diego City Beat magazine
* JW August, managing editor and member of the editorial board for Channel 10 News-KGTV
* Scott Lewis, co-executive editor for voiceofsandiego.org”
http://www.kpbs.org/radio/editors_roundtable?id=7634
Hot topic du juor: SUBPRIME MELTDOWN
——————————————————————————-
Subprime mortgage troubles raise fears
Rules could tighten for other borrowers
By Mike Freeman
STAFF WRITER
March 11, 2007
In just a few short months, mortgage lenders who specialize in loans to borrowers with tarnished credit records have been in turmoil.
Default rates among borrowers have surged. Share prices of many mortgage companies have plunged. A handful are in bankruptcy. Several others are working to exit the business. One of the largest, New Century of Irvine, said last week that creditors had forced it to stop making loans. The company’s stock, which traded for about $50 a share in the middle of last year, closed Friday at $3.22.
The staggering speed of the fall has industry observers watching closely to see whether the problems in subprime lending will spread to borrowers with stronger credit.
http://www.signonsandiego.com/uniontrib/20070311/news_1b11mortgage.html
NEW closed at $3.21. Glad I could help!
Interesting first hand bubble experiences:
1. (Hell’s Gate)My Secretary and her boyfreind were to sign doc’s and buy a house on wednesday in Orange Ca.. I talk about the bubble constantly and have for years and she seemed to always agree to my facts and logic. There is a foreclosure and 2 other houses up for sale and a 4th that has been taken off and rented in the immediate neighborhood. Yet they forged ahead, foolish to say the least, but it was obviouslly an emotional buy. Worst of all she got cought up in the last Bubble and had a Bankruptcy, Foreclosure, Divorce, the whole nine yards(sigh).
2. (Salvation) They had nothing down and couple grand for closeing costs, she has been with me for 9 years and has decent wages and he is a private contractor(imagine that add on in a failing market). BUT, when they went to sign the doc’s they were told it couldn’t be done, they were going through Freemont, they have a buddy who works(d?) there. They were also told that if the deal had been done last week it would of been fine. They were doing some sort of ARM and I’m guessing the home price would of been around 600K.
In conclussion this shows that Houseing as we all know is far too much an emotional purchase and we will have GF’s all the way to the bottom. More importantly the Sub-Prime Meltdown is gonna crush the Markt, at least in the OC.
These 2 were lucky and I even showed them the Motgage Lender Implode O Meter because they were thinking they were lied to. The inter-office memo from Freemont changed their mind on that.
On another note there is a Real Estate show on 97.1FM Radio in OC & LA area on Saturday. I have cought this show quite often for a good laugh through the last year or 2. Yesterday the guy used the words “Down Market” 3 times in a 30 second span. He also went on to mention about how often people come into his office that have an adjusting ARM and the Broker they wrote it with however long ago told them not to worry just come back as it resets and they would write another. His point was to use a reputable Lender like himself (yeah right). This show is just an imfomercial style RE cheering session, the flavor and call-ins were so different from a year ago, I think the Titanic has turned.
Just thought the Blog might like a little first hand info from one of it’s own.
” Broker they wrote it with however long ago told them not to worry just come back as it resets and they would write another.”
And of course they are gone- forgot to add that.
Salvation) They had nothing down and couple grand for closeing costs, she has been with me for 9 years and has decent wages .
Buy her some Roses on Monday take her out to lunch………….and tell her that by not buying that home, she wont have to look for a much higher paying job, and you are so glad she is going to be with you another 9 years!!!!! LOL!
Bizarre…she went through the last bubble with a personal disaster and didn’t learn. She is not able to “connect the dots”, perhaps she is blinded by greed, or fears she will be priced out forever.
For many hearing bubble talk is an abstract topic, her reality in seeing increasing pricing over the last few years gives her such great “fear of loss” that she is missing the boat she just gives in into buying.
If she looked closer at the “boat” she would realize it has sprung a leak. People just can’t grasp that if an asset class has appreciated something like 20% per year for several years that it is an unsustainable situation. It absolutely 100% has to fail. The power of compounding is the most powerful force in the universe, unfortunately it can cut both ways. You cannot fight the trend, as one developer put it “the downturn can last longer than your reserves”.
These people will attempt to pay the increase monthly as their mortgage resets, taping their credit cards and savings, but eventually will capitulate and go BK. This will take years to play out, this downturn will be at least 5 years top to bottom.
So potential FBs are getting flat out cut off. Reminds me of the summer of 2000, when all of a sudden there was no venture capital money anywhere for the dotcoms. This took place a couple months AFTER the highs in the Nasdaq and after the first leg down, when everyone had suffered a couple bruises but still thought things were gonna be OK.
It is exactly the same play, but with different actors.
Also, did you see the change in the COT reported on Friday?
COT? As in the “Commitment of Traders”? Are the big boys getting positioned short, is this what you mean???
No, they reduced short positions by the largest amount in history. That gives me pause.
tx, I can guess, but what is your theory on why the did that? I spoke with a friend who is a banker yesterday and he was rah rah-ing the market big time. He pointedly mentioned that the correction 2 weeks ago was only 3% as if it were a mere flesh wound rather than a portent.
While driving around yesterday, I saw a whole bunch of signs pointing the way to “New Toll Brothers Condos!” I just googled it (I figured they’d be in Huntingdon Valley, PA) and found this: http://tinyurl.com/2v66ya. And here I thought they were just in the McMansion market!
Better hurry…only one water view unit remains!!
Nice man made water feature…probably will turn into a stagnant swamp. I am sure the home owner fees have to be paid (and increased over the years) to maintain that water hole they dug.
Mosquitoes are people, too. They deserve a Toll Brothers home.
in checking out houses that are listed and seeing when they were last sold i use Zillow… more and more i’m seeing listings like this:
Last Sale: 04/03/06
Sales Price: $10
is this like a family member selling to another or some other way of “hiding” what the house was sold for?
You look to the traditional source of your wealth - cities. That’s where business banking really takes place. And cities have long been centers of manufacturing, etc, in a low fungibility energy status (which we are not right now, but are headed towards.) Big problem, you see. Since the second world war, formerly vibrant cities have become shells: donuts, if you will. Empty centers, with the value around them. Good paradigm for making money growing into those green fields, and you’ve made bundles doing so. But hard to secure, hard to protect, and not very energy efficient. What you want in the future is an updated version of the medieval walled cities - cosy inside, with nice tough security and minimal energy needs to sustain a quality life style for your heirs. You want cities to be Danish pastries, with nice juicy, rich fillings, and a uniform layer of housing supporting it all. But you have a few too many undesirables living in those hollow centers. How to recreate your cities in the most profitable manner?
You create the conditions for maximal subprime lending. Drop the rates. Set up special subprime lending institutions - they will ultimately be the fall guys and sit thru the Congressional testimonies, but for now they are necessary. You begin by having them lend further and further down the food chain. Then come the ARMs. Then the zero down, interest only notes. On it goes. Until it ends. Then the interest rates come up - not too much; just enough. The notes come due; the chickens come home to roost. The subprime lending institutions take the hits. Your mega banks come in and secure the loans and their collateral (the housing areas you wanted all along). There is some friction - squatting, etc. You call in the authorities. Clashes. Fires. But the squatters move on. You now have untenable former housing. Bummer, it seems. Except that you now sort the portfolios. What will be inside the city walls gets bulldozed, and rebuilt - upscale. Very upscale. Unaffordable except to those you want living inside the walls when the walls go up. The properties outside the walls either become purpose built (i.e. “throwaway”) low income housing, or get bulldozed and turned back into greenbelt, with a special nod to the environmentalists. Within a decade, you have rebuilt significant portions of formerly blighted urban areas. The gentry come back. Mixed use returns. Cities blossom. Property values inside the walls skyrocket. And you and your family control it all. Things in the former suburbs get gritty. Violence rises there, while falling in the city center. A reason for management of access to your now nice urban areas? You betcha. The walls go up. Twenty years on, you are set, living the good life inside restored, safe, controlled, vibrant, urban areas, served by farmers markets as well as the remaining industrial farming. There’s a green belt around the walls of truck farms, and then, outside that, the rather dangerous exurbs and crumbling former fringe suburbs. But you have little reason to ever go there, except to fly over them on your way to another of the nice oasis lily pads you have built over the first two decades of the 21st century. Bring on the Ice Age - I think I’ll fly down to Belize for some SCUBA diving this weekend.
Pure speculation. But it might fit what is actually going on, don’t you think?”
from Urbansurvival.com
Hah! The New Paradigm of Urban Renewal.
A bit exaggerated, perhaps, but intentionally so?
Way off topic: We’re having trouble with Yahoo e-mail (server http://us.f572.mail.yahoo.com/ym/login?.rand=whatever) since three or four hours. Anyone out there having failures (or success for that matter) with Yahoo e-mail today?
Yes, big time. Okay, guys, some of you wanted this!
Rep. Ron Paul to run for president
08:09 AM CDT on Sunday, March 11, 2007
Associated Press
HOUSTON – U.S. Rep. Ron Paul, a strict constitutionalist and fierce anti-war critic, will formally declare his candidacy for the Republican presidential nomination Monday when he appears as a guest on a C-SPAN call-in program.
Paul, R-Texas, created a presidential exploratory committee in January, allowing him to begin collecting money on behalf of his bid. Kent Snyder, the chairman of that committee, said Saturday that Paul would make his candidacy official on Monday.
This will be Paul’s second try for the White House. He was the Libertarian nominee for president in 1988.
Snyder said Paul is scheduled to be a guest on “Washington Journal” Monday morning and will make his announcement then.
Paul, a nine-term congressman who represents a district just south of Houston that includes Galveston and stretches along the Gulf Coast nearly to Corpus Christi, describes himself as a lifelong Libertarian running as a Republican.
Paul has spent most of his career outside the GOPs traditional circles. He limits his view of the role of the federal government to those specifically laid out in the U.S. Constitution. As a result, he sometimes casts votes that appear at odds with his constituents and other Republicans.
Paul, for example, was the only Republican congressman to vote against Department of Defense appropriations for fiscal year 2007, which he opposed because of the war in Iraq – a war he says is “not necessary for our actual security.”
He once described President Bush as “not a constitutional president” and voted against a resolution declaring that the United States would win the war on terror.
He acknowledges that the national Republican Party has largely shunned him despite his nine terms in office under its banner. He gets little money from the GOP’s large traditional donors, but benefits from individual conservative and Libertarian donors outside Texas.
Paul bills himself as “The Taxpayers’ Best Friend,” and is routinely ranked either first or second in the House of Representatives by the National Taxpayers Union, a national group advocating low taxes and limited government.
Ron Paul’s statement that this nation had ‘free medical care via the emergency room so what’s the problem’ put me off him quite a bit.
I’m a left libertarian, not a right libertarian.
I am a registered Libertarian. But I think I may cross over to Repub so that I can vote for Ron Paul in the ‘08 primary.
yeah, my DSL sbc email goes thru yahoo apparently, and my POP email client is coming back unhappy a lot.
My e-mail is again working OK now. Thanks.
Saw this while looking at myspace jobs today; I typed in landscaping, OR, and this came up for Bend:
Assistant Manager
Guardian Management LLC (Bend, OR 97702)
…& repairs including inspection of vacant units
I guess this is a growth business in Bend now.
Hey, could someone give me the chemical structure or patent number of the wallet remover they spray on you when you walk into a Costco store? I went in to buy a bag of frozen berries and some diet Coke and came out with a $350 Vitamix (normally $500 so it was a “good” deal). I am cheap as hell but they get me ever time in that store!
Paying someone to shop is part of the problem. I would never pay someone $50 a year to go and shop.
I think it is related to the chemical that they put into cat food that somehow makes those kitties eat the same stuff for 15 years without a gripe.
Me, to–$272 this morning–with my coupon book in my hand. I use the stuff I buy there, but I hate shopping generally, and only seem to spend money at Costco. Today was food and cleaning supplies (they last us a year or more.)
Almost $600 last Friday.
$300 of that was for a new DVD player, though.