Permits Drop Represents The “True Trend”
Some housing bubble reports from Wall Street and Washington. “Housing starts rebounded from a nine-year low in February, according to the latest government reading on the battered home-building industry, but ongoing weakness led builders to pull back on plans for more housing. The February starts were 28 percent below February 2006 numbers, and were the fifth weakest reading since the beginning of 1998.”
“Permits for single-family homes fell to a nine-year low and are now down nearly a third from year-ago levels. ‘With the weather volatility, I think the permits is a better representation of the true trend,’ said David Seiders, the chief economist for the National Association of Home Builders. ‘I think we’ll see a drop off in starts in March, and certainly no take off after that.’”
“Builders reported seeing some effect from the rising problems in the subprime mortgage sector. ‘A surprising number say they’ve noticed some negative impact of the tightening of lending standards on their sales,’ said Seiders. ‘I don’t expect the builders to be cranking out the starts on a sustained basis for a while. The mortgage market problems only are likely to add to that.’”
From MarketWatch. “‘We are more interested in permits as they are much less weather-affected than starts,’ said economist Ian Shepherdson. He noted that single-family homes, fell at a 17.7% annualized rate in the three months to February from the previous three months. ‘This is a less rapid drop than in [the second half] of last year but it is still clearly a decline,’ Shepherdson said. ‘Excess inventory is still a huge problem.’”
“The trouble in the mortgage market could spread beyond the subprime sector with tighter lending standards cutting demand for new homes by as much as 15% and further squeezing home-builder profits, according to an analyst following the industry.”
“‘We expect lending standards to tighten further, based on our expectation of further [home] price declines in 2007,’ wrote Banc of America Securities analyst Daniel Oppenheim.”
“A big issue facing residential home builders is the oversupply of homes on the market after the speculative bubble. The inventory glut combined with lower demand resulting from stricter lending standards ‘will lead to lower prices and likely exacerbate mortgage delinquencies and foreclosures,’ Oppenheim said. ”
The Associated Press. “The Securities and Exchange Commission is investigating a number of companies that operate in the troubled market for subprime mortgage loans, the agency’s top enforcement official said Monday.”
“Comments by SEC Enforcement Director Linda Thomsen on Monday were the first public acknowledgment that the agency was involved in a broad examination of the subprime sector within the mortgage industry.”
“‘We’re looking at subprime,’ Thomsen told reporters following an address to an investment conference. ‘As with anything, we’re going to look at all the actors and their roles.’”
“The role of major Wall Street investment firms in the subprime market debacle is under scrutiny. In Massachusetts, the state’s top securities regulator said last week that he had issued subpoenas to two major firms, UBS Securities LLC and Bear Stearns & Co. Inc., as part of an investigation into whether their analysts’ research ignored subprime lenders’ mounting financial problems.”
From Reuters. “U.S. Senate Banking Committee Chairman Chris Dodd said on Monday he asked executives at five big subprime mortgage companies to testify at a Thursday hearing and explain their lending practices.”
“Officials with the Federal Deposit Insurance Corp., the Federal Reserve, the Office of the Comptroller, and the Conference of State Bank Supervisors also were asked to testify.”
“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.”
“Dodd has said that regulators bear some responsibility for the recent downturn in the subprime mortgage market, vowing to bring them before the Senate panel to explain how the subprime market has arrived to this point.”
From Bloomberg. “Banks are picking up the baton from the Federal Reserve, restricting access to credit months after Chairman Ben S. Bernanke stopped raising interest rates.”
“‘The market is definitely tightening standards, and to the degree the market controls the flow of capital, the Fed does not have to,’ said Carl Tannenbaum, chief economist at ABN Amro Holding. Officials have kept their tightening bias at the past five meetings, meaning any policy shift is likely to be a rate increase.”
“Fed officials may discuss the tightening in mortgage lending and its impact on the economy, already slowed by a housing recession, at their two-day meeting that starts today.”
“The Fed may alter its language to reflect the tumult in subprime mortgages. On Jan. 31, the Federal Open Market Committee said ’some tentative signs of stabilization have appeared in the housing market.’”
“‘That might be a little bit of a stretch’ this time, said Diane Swonk, chief economist at Mesirow Financial in Chicago.”
The Hartford Courant. “Mitch Heffernan is involved in starting a new mortgage business, but his old company, the now-defunct Mortgage Lenders Network, could land him in plenty of trouble with the state for not paying wages earned by his former employees.”
“The state Department of Labor confirmed Monday that it has applied for an arrest warrant in Superior Court in Middletown that would charge Heffernan’ the former president of Middletown-based Mortgage Lenders’ with 61 counts of failing to pay wages.”
“Mortgage Lenders, once touted as a model for adding financial services jobs to the state, imploded as troubles in the so-called subprime market accelerated late last year.”
The Chicago Tribune. “Corus Bankshares Inc. on Thursday warned investors that its stock holding in troubled subprime lender Fremont General Corp. is now ‘materially impaired,’ and that as a result the Chicago-based bank holding company will have to absorb a hefty first-quarter pretax charge that could be $14 million or even higher.”
“It said company officials have concluded that Fremont General’s troubles are so extensive that, under generally accepted accounting rules, Corus must treat its Fremont investment as an ‘other-than-temporary’ impairment and take a charge to mark down the value of the asset.”
The LA Times. “The shakeout in the sub-prime lending industry continued Monday, with more people losing their jobs and a prominent lender losing its name on a baseball stadium.” “Fremont General Corp. of Santa Monica said it had told ’significant numbers’ of its 2,400 home-loan employees to expect pink slips in two months.”
“The Orange-based parent of Ameriquest Mortgage Co. and Argent Mortgage Co. announced large but unspecified layoffs last week. On Monday, Ameriquest said that its name was coming off the Texas Rangers’ baseball stadium in Arlington, Texas.”
“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.”
“Williams, a Brea mortgage broker, said most of the companies that remained in business were scaling back their operations. That reflects not only the shrinking volume of loans but also the fact that the riskiest sub-prime loans were no longer being offered.”
“‘When you take the products away, you no longer need the underwriter for them or the supervisor for that line,’ he said.”
“The housing slowdown is prompting Wells Fargo to ax 191 workers at its mortgage operations in Tempe, Ariz, the Phoenix Business Journal reported this week.”
“The San Francisco bank said the layoffs, are due to the tighter lending policies reducing the level of subprime mortgages extended to those with tarnished credit records or high debts in relation to income.”
“‘As a result of changing market conditions, such as moderating house price appreciation, effective Feb. 16, we tightened our credit policy for a portion of our nonprime lending business,’ Lynn Greenwood, a senior VP in the Wells Fargo home and consumer finance group, told the Phoenix newspaper.”
“‘This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans,’ Greenwood said.”
“Wells Fargo is not alone. Bank of America, Countrywide Financial, Washington Mutual and Ameriquest Mortgage have all cut jobs in Arizona in response to the housing slowdown.”
From Builder Online. “David W. Berson, chief economist for Fannie Mae is predicting a drop of 7 percent to 8 percent in new-home sales for the remainder of 2007 but says the worst declines have passed.”
“With subprime loans dominating the news recently, Berson explains that the ease of getting the loans contributed to the recent troubles that New Century Financial Corp. and Accredited Home Lenders Holding Co. are facing. There would have been 850,000 fewer home sales in 2006 if it weren’t for subprime loans, Berson explains.”
“‘We will see what happens in the subprime market and whether regulators eliminate the subprime market,’ he says.”
“Berson says he agrees with former Fed chief Alan Greenspan’s recent assessment that there is a chance that the nation could go into a recession.”
“‘If we have a recession, it will be bad for the industry,’ Berson comments. ‘We better hope the economy keeps growing or things could get very bad.’”
‘If we have a recession, it will be bad for the industry,’ Berson comments. ‘We better hope the economy keeps growing or things could get very bad.’
Why is it that housing bloggers get called ‘doom and gloomers’ when these folks go around saying stuff like this?
Maybe because he sounds like he still has a tiny bit of optimism left, while the bloggers (or, as I like to call us, the realists) see this as a done deal.
and because he’s saying it now when the deluge of bad news has been relentless for more than a month, whereas this blog has been saying this for two years. people made fun of Warren Buffet and Julien Robertson when the dotcom euphoria was peaking. who are we, mere blogosphere gnats.
Most pundits, MSM outlets have a deep vested interest in happy talk, as their short term ad revenue depends on it. Any dispassionate analysis of the market, if it reveals flaws, cracks, impending crises, any danger signs, is going to be called “negative” or “doom and gloom”
And the hypocritical mass of this is that had the pundits and msm been focusing on the numbers instead of happy talk, they might have helped educate the public and mitigate the crisis sooner, and thus preserved their customer loyalty and their ad revenue for the long haul.
The real doom and gloomers, the real negative nellies, are the press and the mouthpieces they quote who would rather let us all hang than give us an honest view of the market and its manipulators.
How about this from Peter Morris, chairman of the PRM Realty Group:
‘ If Washington doesn’t address the rapidly building multi-trillion-dollar crisis in residential mortgage defaults, its paralysis will help trigger a national economic recession that could touch every homeowner. The crisis has been building for months - if not years.’
‘ We also need to create a Washington-based insurance program for many of those precarious mortgage holders. That way, when they do go belly up, the nation can prevent a slide in confidence that triggers a total mortgage market collapse and/or hobbles the stock market.’
‘What our economy could learn from this experience is that protection from future mortgage bloodbaths means having real equity in the dwelling being covered by a mortgage and a regulatory apparatus to review and verify that what you see is what you get.’
Talk about the sky falling!
Got Gold?
hehe… didn’t someone say men lose their minds collectively and gain them back one at a time.
Yes!
three main things in real estate: location, location, location.
whereas in the bubble: herd psychology, herd psychology, herd psychology.
it’s a done deal. too late to mend anything at this point but ride out bloodbaths.
“Help” from D.C. just makes things worse - privatize the rewards, socialize the risks.
‘ We also need to create a Washington-based insurance program for many of those precarious mortgage holders. That way, when they do go belly up, the nation can prevent a slide in confidence that triggers a total mortgage market collapse and/or hobbles the stock market.’
What do you mean “WE”, white man? (Old Indian joke)
“Washington based” means taxpayer funded. In other words, you and I will pay for the turds who created this mess and the FBs who participated in it. He can kiss my hindquarters.
“‘ We also need to create a Washington-based insurance program for many of those precarious mortgage holders. That way, when they do go belly up, the nation can prevent a slide in confidence that triggers a total mortgage market collapse and/or hobbles the stock market.’”
Isn’t this like sick people trying to get health insurance after the fact (many try)? Where is the money going to come from to prevent this “slide in confidence?” Isn’t there a reason for the slide in the first place? Do Americans ALWAYS have to be confident and chirpy with absolute faith in the markets, which must be federally guaranteed never to collapse? Peter Morris sounds like an idiot. Most of those “precarious mortgage holders” are responsible for their own situation, in collaboration with thousands of crooked mortage brokers, and tens of thousands of crooked realtors.
No, I doubt Peter Morris is an idiot. Peter Morris missed his RE meds for a couple days, sobered up, and got scared shitless. He has up his money down on the collaspe side of the table, and wants everyone to know it. CYA bigtime.
We already have housing bubble insurance. It’s called “shanty towns”. The homeless can go get some cardboard boxes and move to Santa Monica where the communist city council will provide.
Love this one:
“Before we engage in the usual finger-pointing over how we got into this mess, let’s agree on an aggressive course of action to mitigate it.”
Please bail us mortgage bankers out and don’t ask questions!!
No kidding. Sometimes a little finger pointing helps, along with “stop, thief!” or “they went thataway”
‘ We also need to create a Washington-based insurance program for many of those precarious mortgage holders. That way, when they do go belly up, the nation can prevent a slide in confidence that triggers a total mortgage market collapse and/or hobbles the stock market.’
Translation: billions for the poor, innocent mortgage banks. Run those printing presses!
Below is a posting from Bill Fleckenstein’s daily “AskFleck” segment. We have been predicting recession here for a long time and this business owner concurs wholeheartedly…
Bill,
Our business is a large hardwood sawmill (sawing oak, maple, cherry, ash, etc.,for the furniture[Read HOUSING] industry. We usually enter recession 5-6 months ahead of the rest of the economy. IT’S HERE! Prices for green and finished lumber are falling at a faster rate than at any time since 1974. We could see it coming for quite a while, but it’s not possible to do much more than clean up the balance sheet and get ready to adjust prices paid downward while still paying enough to keep the loggers alive. Timber prices are falling, but never fast enough. I’ve been predicting “THE BIG ONE” for years and I think “this time down” will be the worst we’ve ever seen. No government bailouts in the Hardwood industry, it’s sink or swim. I anticipate a few years to work through this mess.
• Thank you for sharing that data from the “front line.”
Good info. But how come copper is heading back up to infinity again???
The Chinese still tend to build with concrete. Light wood frame construction is just beginning to take off there. They have a few million more rural peasants to house in the coming years. The press and and even the Chinese gov. has been trying to talk down the Chinese economy for years now. We’ll see if they can finally pour some water on the fire. Too bad that it’s a fire in a greasy wok.
Lumber futures have fallen 1/3 since last March. That’s gotta hurt. (Chicago Mercantile Exchange). Bombs away!
I’m no “doom and gloomer’. I’m upbeat and very optimistic that I will be purchasing a house for 60% (or less) of peak bubble price. Nothing gloomy about that.
I wear my kooky doom and gloom tin-foil hat proudly these days
It’s these wackos that keep building, I fear.
I think that the hammer will really come down in a few months… as soon as some of the builders go t*ts up. Then there partially-finished properties will be bought for a fraction of their value. The buyers can finish them and sell them at fire-sale prices and still make lots of money. And these ’secondary’ builders would have every incentive to build and sell quickly.
Because he says “we better hope the economy keeps growing” and we say eeeeeeek look out below.
Optimistic that the bubble with continue to expand? Optimistic properties will become even less affordable than they already are? Optimistic that even more folks will be sold mortgages they could not possibly afford?
Personally I am optimistic property prices fall to a point where working folk can again afford to live the “American Dream” of homeownership with out having to go bankrupt to do so, and given prices are up anywhere between 100% and 400% in some bubble areas, that is a LOT of re-adjusting. A few folks will have to get used to the idea they are no longer rich of whatever poor shmuk they hoped to unload thier “rich box” onto, but that is hardly pessimism or negativity. Thats just the reality of the situation.
Ditto, GH. I hate it that so many working families have been priced out of this market. The speculators got rich and the hard working savers got skewered.
I don’t consider myself a ‘doom and gloomer’ at all. I’m a ‘gloom and doomer’ ! Just like the ‘People’s Front of Judea’ versus ‘Judean People’s Front’, there is a distinction you know.
Berson is a ‘boom and gloomer’. He recognizes the pick up in speed but can’t see as far down the railtrack as us doomers watching it from the hills.
I always thought “Life of Brian” and “The Passion of the Christ” would make a most excellent double feature…
Splitter!
“If we have a recession it will be bad for the industry.”
Ha ha, just which industry caused the recession in the first place?!?!
Which industry will a recession be good for? The Valium industry?
Maybe:
1. Smith & Wesson
2. Gold “producers” (miners)
3. Coors, Anheiser Busch, et al.
4. Those brilliant Colombians with cocai. . . ahem - coffee.
It’s gloom and doomers. Gloom always comes before doom. God.
“The housing slowdown is prompting Wells Fargo to ax 191 workers at its mortgage operations in Tempe, Ariz, the Phoenix Business Journal reported this week.”
Can I axe you a question?
How much longer will Wells Fargo last?
A big bank may fail, but I’d think that it would be WaMu over Wells.
Wells has a lot of exposure, but they’re also very large and diversified. Not so much for WaMu.
If Wells starts failing, you can bet they will pull out of San Francisco and go back to their midwest corporate headquarters here in Mpls to save on costs. (Norwest, which bought Wells, was always the bigger and stronger company, plus since it’s a Mpls company costs are lower)
I agree Wells is possibly the only major bank that actually verified its subprime. Its default rate is running the same as in 2002. In point of fact the stock got hit harder than should be expected and is probably a solid purchase (if you think P/Es are OK and you like financial stocks. It is the best dog of the lot).
My understanding is Wells does not hold loans in a portfolio, they just sell and service.
WaMu has been cleaning up their mess for awhile now; laying off and closing offices of that mortgage company they bought. Also selling off loans portfolios at a discount.
Yes, I’ve been looking for Wells Fargo info if anyone has any.
A good banking concern, long ago, founded during the California Gold Rush in 1852.
RIP 1852-2007
Good lord I wonder if FDIC $100K insurance is going to become an issue with WF. Can/will fractional banking practices hit the major banks? At what point do we cash out and bury the money/gold?
Just head off to http://www.treasurydirect.gov No digging required.
Warning: Dollars may lose value.
I’ve got to think that Wells is prepared. They’ll take a hit, sure, but I would think they are prepared.
Wells has been in CA since the 1800’s. They’ve seen every real estate boom and scam imaginable for over 100 years. If any bank has developed a way to profit handsomely from the hysteria without being burned too badly by the inevitable fallout, it’s Wells.
Being a legendary bank and any business lasting 155 years gets my kudos, certainly…
But sadly, they staked their future on the subprimes~
AMF
Arthur Andersen was among the most highly regarded firms in its industry for nearly 90 years. We all know how much that fabled history counted for when the rubber hit the road in 2002.
I may sound gloom and doomish to many, but…
This is the time i’ve waited for, for many years now~
I prepared myself for the inevitable, the collapse of an empire, though I doubted it would come so soon, and that it would involve the entire industrial world all @ the same time, like a bonus!
You see, i’m a later day Goldfinger and I need not set off a nuke @ Fort Knox, as my namesake had to resort to, I merely let the Financial Bomb do it for me…
Every currency will go the way fo the dodo, once we fail, they all fail.
A scramble for quality will ensue. What will the world turn to?
Hop on board.
aladinsane, were you equally giddy about the feared collapse of the industrialized world during Y2K? You seem to be looking forward to this a bit too much.
“Housing starts rebounded from a nine-year low in February…”
Together with inflation reports it gives the fed more cover if needed.
the “rebound” is within the margin of error. So, strictly speaking, we can’t tell if they really increased or decreased or remain unchanged. But, even the bad news is good news for this market.
Those who are living in denial will tend to grasp at straws.
It’s actually down 28% from 2/06. And wait till it gets revised lower.
Now, with the layoffs from mortgage companies, banks, construction, home builder, home material suppliers …, another wave of foreclosure is
coming, yes?
True, nobody cares about month old numbers. The February statement said down from the revised January number. Aha! I tried to look the old number up, but all I could find for January was 1.4Million. The revised number for January is 1.399Million. That’s bordering on silly.
(“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.
“Dodd has said that regulators bear some responsibility for the recent downturn in the subprime mortgage market, vowing to bring them before the Senate panel to explain how the subprime market has arrived to this point.”)
I like this, as long as it doesn’t lead to a bailout.
“I like this, as long as it doesn’t lead to a bailout.”
Me, too. As long as Congress just talks and questions and blowhards, it’s ok with me. It’s when they start legislating that I get nervous.
“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.”
I strongly agree. Why doesn’t the Senator start by explaining how all those investment banks that contributed to his campaign coffers were the kingpins who managed the flow of money from investors to subprime lenders and securitized the subprime debt into MBS?
“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.”
Agreed. First backpedaling by a Politician I liked.
Easy fix. Send them a mirror together with a postage stamp. Hopefully, they will independently be able to find the keys’ mailing address.
the mirror! my thought exactly
Yep, reading between the lines, this is a big change in language from Dodd. I know I wrote both of my lousy Senators immediately after that bail out story first hit the wires. Told them absolutely no way should this gain traction. I wonder if Dodd has been getting peer pressure to back down, or if he was just blowing smoke all along?
In other news, this thread has some good articles that point out the folly of the Goldilocks investors. Housing starts mean jack, and permits tell the future. Builders know they are looking at dark days ahead. This past weekend I almost got into it with a sort-of relative (through marriage) about how housing is going to pull the economy into recession. He’s a textbook Goldilocks and said that while people may get foreclosed on, there won’t be any spillover. I had to restrain myself and wound up just walking away. So when mass foreclosures start happening, who is going to step in and absorb those units on top of new units still under construction? Credit is tightening and the industry borrowed heavily from future demand over the past 5 years, so I see a pretty small pool of potential buyers. And a lot of those waiting to buy aren’t so stupid that they would pay these prices. Connect the dots people! This thing is going down in a ball of flames.
‘Housing starts mean jack, and permits tell the future.’
I would rephrase that slightly: The one-month change in housing starts mean jack, but the YOY picks up the trend–
“The February starts were 28 percent below February 2006 numbers, and were the fifth weakest reading since the beginning of 1998.”
Why doesnt Dodd ask for a independent investigation ? It seems to me like he’s asking the wrong people what went wrong .
will rainse and mudd (gov clerks) still get millions ?
Remember that in addition to being Senate Banking Committee Chair, Dodd is running for President. He’s out to make headlines and will do a lot of empty posturing in the next year.
“At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits,”
Dodd can’t be this stupid. Too much debt. How hard is that to understand? It’s like the obesity “epidemic”. My doctor asked me about my weight a while back my answer was very simple - “I eat too much”. It’s not a hard problem to understand.
Americans are having a horrible time with self discipline of any sort, that’s the problem.
What Dodd really wants to know is “How can we expolit hedonistic, childish fools while appearing to be ther friends?”
“I eat too much” is a bit too simple of an explanation, as it only considers calorie intake.
More to the point, “I eat too much for the amount I exercise” is analogous to “I borrow too much for the amount I earn.”
climber, you are living in the reality-based world. mainstream economists created their own reality and suddenly debt, deficits and etc. were no problem. in fact, I’ve read numerous times about how our trade deficit was a sign of strength.
you’d be suprised how many people don’t know how we got here.
debt is wealth in the new new housing economy. remember lereah? he said if your house was paid off you weren’t managing your finances well.
Old School: High Net Worth Individual
New School: High Debt Worth Individual
Too bad society’s collective memory lasts less than sixty years. Hence the lessons of the 1930s about the folly letting easy money run amok will have to be collectively relearned.
“I don’t expect the builders to be cranking out the starts on a sustained basis for a while. The mortgage market problems only are likely to add to that” said Seiders.
Someone finally screwed the cap back onto the tube of glue at the NAHB.
Nah, they switched from sniffing the black markers to sniffing the red markers. The black markers dried out, you know.
“A big issue facing residential home builders is the oversupply of homes on the market after the speculative bubble. The inventory glut combined with lower demand resulting from stricter lending standards ‘will lead to lower prices and likely exacerbate mortgage delinquencies and foreclosures,’ Oppenheim said.”
What is it about “inventory glut” that Washington and Wall Street types don’t understand? Bailout the subprime borrowers and worsen the inventory glut, including its huge drag on the future U.S. macroeconomy, as everyone eventually wakes up to the fact that all those empty McMansions have to be maintained, at high cost, to keep them from crumbling to the ground.
David W. Berson, chief economist for Fannie Mae is predicting a drop of 7 percent to 8 percent in new-home sales for the remainder of 2007 but says the worst declines have passed.”
More Joseph Gobbels inspired propoganda
Goebbels indeed. These REIC talking heads are quite remniscent of the last days of the third reich. Deny, deny, deny. Won’t admit defeat until it all burns down around them. Then they’ll all start chirping about how surprising the implosion was. Who could have seen this coming? Gee, only anyone with half a brain.
Lack of resources was not an issue. Rather, he continues, it was “the failure of … to ‘cut their coat to suit their cloth’–i.e. to cut their spending commensurately with their income loss, that weakened the currency, coupled with the–varying–reluctance of foreigners to lend the foreign exchange needed to finance the resultant deficit”
The U.S.? No, actually the Weimar Republic
http://www.h-net.org/reviews/showrev.cgi?path=271851066455618
More like Edward Bernays, who taught Goebbels everything he needed to know:
http://en.wikipedia.org/wiki/Edward_Bernays
’some tentative signs of stabilization have appeared in the housing market.’”
Where have we (or where haven’t we) heard this one before?
There wasn’t supposed to be a housing bubble at all, remember ? Bubble, what bubble ?
Said in my best Maxwell Smart voice,” Would you believe housing souffle’?”
Mitch Heffernan is involved in starting a new mortgage business, but his old company, the now-defunct Mortgage Lenders Network, could land him in plenty of trouble with the state for not paying wages earned by his former employees.”
This is what pisses me off so much. SO many of these slimeballs will just close up shop and open as a new entity. The workers all get screwed, the bigwigs walk away with all their “earnings” and “options” and golden parachutes. It’s baloney.
These days, corporations have way more rights/benefits than their truly corporeal employees.
BS
Can’t believe someone hasn’t taken that guy out.
Yeah, my BIL worked for MLN and wasn’t paid for the last 6 months of 2006, right until he got laid off at Xmas.
Anyone who works for 6 six months without getting paid deserves to be laid off.
I agree that incorporation laws have been seriously abused. Personal responsibility is a cornerstone of the capitalist system. Limited liability corporations actively encourage a lack of ownership responsibility and abuse by non-owner management.
You aren’t the only one pisssssed off. From this article is seems that corporate BK is easier than private. Gee whiz, no wonder they were willing to lend to any and all who could fog a mirror or mark an X. Mr. Heffenan should have to pay off his debts and not be allowed back in the business for another 10yrs.
“Officials with the Federal Deposit Insurance Corp., the Federal Reserve, the Office of the Comptroller, and the Conference of State Bank Supervisors also were asked to testify.”
Hope they enjoyed the nap.
What I love is how quiet the regulators have been, save a token butt covering now and then.
But just let the bribes (scratch that) campaign contributions stop flowing, and suddenly everyone can see the sunrise.
“On Jan. 31, the Federal Open Market Committee said ’some tentative signs of stabilization have appeared in the housing market.’”
ROTFLMAO.
“There would have been 850,000 fewer home sales in 2006 if it weren’t for subprime loans, Berson explains.”
Imagine — 850,000 fewer new home sales w/out subprime.
Correction — he probably meant all home sales, new and existing.
Agreed, but it is still a huge share of all sales (and does not include Alt-A suicide loans!).
Alt_A is next!
I am dying of curiosity to see how few home sales occur in April, 2007.
“Housing starts rebounded from a nine-year low in February, according to the latest government reading on the battered home-building industry, but ongoing weakness led builders to pull back on plans for more housing.
The February starts were 28 percent below February 2006 numbers, and were the fifth weakest reading since the beginning of 1998.”
And the guy goes on to say to not expect a turnaround any time soon.
Yet contrast this with the current headline in MSN Money:
HOUSING STARTS REBOUND
“There was finally some good news today for the housing industry.
The Commerce Department reported that housing starts rebounded by 9% in February, rising to a seasonally adjusted annual rate of 1.525 million from a revised decade-low rate of 1.399 million in January. ”
To a casual observer it LOOKS like things are turning around. Even the headline is amazing in that it can be read two ways. It can be read that Housing starts are up, or could be interpreted to mean that Housing is now starting a rebound.
Everything we read has a growth or long bias? Any excuse for cheerleading.
No wonder people are clued out. The media goes out of its way, in many many areas, to shade the truth.
“Everything we read has a growth or long bias?”
Hell yes! This whole scam relies upon people continuing to ignore the man behind the curtain. Eventually the truth comes out, and this time the sheep are going to get a rough shearing.
“The media goes out of its way, in many many areas, to shade the truth.”
Their advertisers can’t handle the truth, or at least can’t handle the idea of the readers learning the truth.
There is a built in conflict-of-interest between the publishing of the truth by the media and appeasing the hands that feed the media.
you look at today’s headlines, it is obvious that the PPT is holding the price of gold down
I ordered a new hat with a nifty propeller today on kitco
That’s why it went up today?
I wish you guys would knock it off.
I wish the Brads of the world would stop baiting me…
If you kids don’t KNOCK IT OFF we are NOT going to Dairy Queen!! Awright, thats it! Lean forward so that I can smack you- Don’t make me pull this car over!
Remember when you were a little kid and an hour long ride in the car seemed like an eternity?
I’d be ok with that now. Things are moving entirely too quick…
Doddiot is an pontificating idiot.
“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits, and what steps are needed to fix this pressing problem,’ Dodd said.”
Well, how about:
1. Greed by the FB borrower (wanting to “get in the game”)
2. FB not doing financial homework to see what they could really afford (heck, I knew at a glance that the “teaser” rates were too good to be true)
3. FB ignorant of market cycles/thinking real estate always goes up
4. FB trusting real estate agents and mortgage brokers
5. And, of course, mortgage companies handing out stupid loans (thinking they had transferred all risk), deceptive LO’s, etc
The Doddiot also seems to think real estate always goes up:
“Dodd has said that regulators bear some responsibility for the recent downturn in the subprime mortgage market, vowing to bring them before the Senate panel to explain how the subprime market has arrived to this point.”
Dude, haven’t you heard about real estate cycles? The regulator’s fault isn’t causing the downtown (which is a good thing - the longer a bubble lasts, the worse the burst), it’s not being pro-active in stopping the speculative excesses (e.g. Option ARMs for the average Joe), which would have caused a downtown much earlier - and the regulators would’ve taken a lot of heat for causing a RE downtown.
To put it mildly, I’m not a big fan of the Chinese government, but at least they try to move prompty to limit speculation (e.g. raising downpayment requirements from 20% to 30%).
Fed testimony you are not likely to hear on Capitoline Hill:
“Well, Senator, that is not exactly what we do. We supply the basis for credit generation to our member banks based monetized debt, as in money created from US treasury bonds that we purchased. This transaction as you know involves no exchange of assets just electrons, so in the truest sense this money has zero value and, if I could be so bold, it has negative value as it is debt. It is in fact a cancer meant to destroy society. But let’s getting back to the reserves. We supply these reserves to our member banks, and they extend those reserves to the public who wishes credit. Up until 1995 it was important to have a significant amount of reserves, as the reserve percentage was 5% or so, but after 1995 it has been essentially zero.”
“Yes, Senator, that is an excellent question, the Fed did in fact control the total amount of credit; debt, money, it’s all the same, prior to 1995 by having a finite reserve percentage. Now, with the percentage at zero, the Fed no longer maintains control over much of anything and we are a figurehead organization used to bark at inflation and other issues.”
“Yes, Senator, you do note correctly that post-1995 there was when a psuedo-hyper inflationary trend began first in the high tech area, in stocks, M&A, and IPOs, that boom remained sound for a few years and then it went bust when new flavors could no longer be invented fast enough to satisfy or more aptly, “bamboozle” the speculator.”
“At that time the Fed did lower the prime rate to 1% and along with our partners in government made a big push to keep the party rolling by transfering the hyper-inflationary trend from high tech to real estate. We all know what the end game is but we need to keep the ball rolling so that other simultaneous event strings (wars, geopolitical, etc) could line up for the big event.”
“I’m sorry Senator, you and I both know it is not in the best interest of our longevity to mention the masters names in these public halls. The public is meant to think that we are the glorious leaders and that no one pulls our strings.”
“I would like to thank the Senator and the Commitee at large for this opportunity to speak, although as we both know this is more drama than substance, since real policy is never discussed here. Good day.”
Oats,
You’re cracking me up…could you do one like that involving the FED beige book meeting?
Just saw a story on CNN that NEW can no longer sell their crap to FNM.
“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.”
Whoops, there it is! Deja Vu all over again…
MIC military spending will have to come down- 09 or sooner
It’s already winding down…
And of what use is a F18 fighter jet, or an Abrahms Tank or a Blackhawk Helicopter, against a freedom fighter, armed with a seemingly endless supply of i.e.d.’s?
They are “freedom fighters” because they have to HIDE from the F-18s, M-1 Abrams, and the UH-60s.
They’ve done a good job of hiding, so far.
Imploder, I saw you post about WLA. Do you live there? I live there, too 90064. sm_landlord, you, and I should grab a beer sometime.
I’m on the west side, so can I join?
What’s funny about this is that everyone was saying that the RE downturn of the ’90’s would not be repeated because we wouldn’t experience any of the job losses like we did after the cold war. And they were saying that just a few months ago.
OOPS!
Its bad in FL.
New Century just hired Cops to export all home123.com employees out of their offices. Loan Officers are running around like rats to find new homes. All lenders in commercial A space are trying to break their leases and move in real cheap space.
The scary thing is banks are bashing appraisals. If a home is appraised for $500,000 the bank is saying it is worth 400K or less. This is much worse then what the news is reporting in terms of homes fair market pricing. Banks call the shots and if they are wacking 20% or more now, it will only get worse.
The mortgage industry is done. The FEDS will move in and make it an extremenly regulated environment. The days of bashing borrowers with large fees are over. Right now, every deal that a bank approves - they have to decline 4 or 5 loans.
This will be worse than any dot com bubble. It is going to effect the whole economy for a long time. You can still expect a lot of fraud in the market place as restrictions increase.
can you actually corroborate any of this?
That is awesome that banks are whacking appraisals. It’s about time, wouldn’t you say?
I have a question. There seems to be much concern here about a bailout of FBs by Dodd and others in Washington. How exactly could a bailout work? For instance if someone’s LTV is > 100% what can be done for them? Even if they could refinance wouldn’t they be better off just walking away?
“‘At the very least, homeowners facing foreclosure deserve to know what factors contributed to their dire financial straits…”
Dodd is going to hire 10 million clerks to read their loan papers to each individual foreclosed subprime borrower…”
I was just last evening reading someone’s mortgage note aloud, and the person who signed it was amazed to learn that the payment will increase by about 60% in 2011.
He talked about using taxpayer money to make payments for them “until they could work out better terms” or some such nonsense.
The man has no plan except to throw taxpayer money at the problem - like throwing money at real estate didn’t make the probelm in the first place. He has no exit plan - just like the current neo-cons in Iraq. He’s going to make unaffordable housing and bad debt a chronic problem rather than a temporary one.
The only bailout will be the banks, GS, JPM, etc. After all, that’s the Fed’s job, always has been.
FB, pension funds, holders of MBS are the losers.
Fast answer: it won’t work. It is like the ol’ shark- has to keep moving to keep alive. The ridiculous house prices require appreciation. No appreciation, prices will fall. Any attempt to let foreclosures turn into shorted long-term loans will just sentence the owner to life underwater.
“Wouldn’t they be better off just walking away?”
They’d be a LOT better off walking away. Live mortgage free for several months til they’re foreclosed, save the $$ that would have gone towards the mortgage payment to provide a cushion, get a cheaper rental, etc.
But nobody is going to tell the FB’s that. Because the bailout is not for the FB’s, it’s for the Lenders. All they want to do is strangle a few more monthly payments out of them to put in the lenders pocket.
People are going to figure out real soon that they’ve been HAD, legally and with their full consent.
On another note, Montgomery County, MD the houses are selling much quicker - I hope this is a temporary thing because I’ve been patient and right now I’m being proven wrong on the bubble.
“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.”
———————————-
I’ve been thinking the above for a while. That is when the last housing bust started too (1990-1991). I survived 7 layoffs as young
dynamic simulation engineer… I then decided that software engineering would be better.
A lot of parallels between this bust and the last one:
1) A Bush in office
2) An Iraqi war
3) A housing bubble going bust
4) A short recession (yet to be seen)
5) high oil prices (that eventually bust to below $20/barrel and start a stock market run in 1993-1994 until 1999)
#5 is why I look for a stock market take-off within a year or so. Oil is so highly manipulated (when Enron cornered the energy market people actually thought we had an energy shortage … which was later proven to be a lie). I see $40-45 oil within the next year. No matter how bad the housing bust gets another bubble will be started (my best guess in biotech … I can see it being sold as “the baby boomers will need all kinds of drugs”).
The Chinese are creating a $400BN dollar investment fund to diversify their dollar holdings. A very good way to rid yourself of American dollars is to buy stock in US companies. The Chinese
are also big on biotech … I wouldn’t be surprised to see them buy
US companies for tech transfers.
http://biz.yahoo.com/ap/070309/china_foreign_reserves.html?.v=10
“A very good way to rid yourself of American dollars is to buy stock in US companies.”
Especially if a giant printing press is wired up to a giant liquidity fan blowing $$$ into ever-inflating U.S. share prices.
inflation does not help stocks. only at very specific times during hyperinflation do stocks do well- only when money has been so thoroughly debased that people will buy anything as long as they don’t have to hold currency. if you want to invest, try commodities.
“…inflation does not help stocks.”
I guess that depends. If inflation were running at 6% but officially stated at 3%, and stock prices were moving up in lockstep, would you rather be holding cash or stocks?
Hey GetStucco,
I always enjoy reading your comments even though I very rarely
post here. Getting kind of burnt out on the housing bubble. I’ve been watching it unfold since 2002 when a RE agent friend tried to get me to use an IO loan to buy a place. When I first heard of these exotic loans I could very clearly see the things to come.
I remember that it was in 2000 (I’m pretty sure) that Warren Buffet said that the stock market would be good again in 7 years (which puts his timing at 2007). With
the international bankers meeting all the time I tend to believe that the economies are more finely managed than most people believe… using new bubbles to actively cancel out the previous ones (like active wave cancellation techniques).
That being said, we saw a stock market run after the last housing crash (look at my parallels above) after a very short recession. If history is any guide I would not be surprised to see this again. A very weak dollar might spur more foreign stock market investing too. When there is fear in the stock market, it will be time to get both feet in.
There’s nothing new under the sun.
It would be very convenient for stock prices to blow off about 25-30% of value this summer, what with the Chinese sitting on a large and growing pool of funds to spend. We may just witness a special sight - a US recession with certain sectors inflating.
“David W. Berson, chief economist for Fannie Mae is predicting a drop of 7 percent to 8 percent in new-home sales for the remainder of 2007 but says the worst declines have passed. With subprime loans dominating the news recently, Berson explains that the ease of getting the loans contributed to the recent troubles that New Century Financial Corp. and Accredited Home Lenders Holding Co. are facing. There would have been 850,000 fewer home sales in 2006 if it weren’t for subprime loans, Berson explains.”
Let’s put two and two together here. I am not sure how many homes sold in 2006, but I am guessing 850,000 was a large percentage (maybe 40% or so)? But after the subprime implosion of the last two weeks, we will only see a 7-8 percent drop in new home sales for the remainder of they year? Berson must believe a subprime bailout is “in the bag.”
I think the bailout buzz is just CYA bs because things are going to get worse than most think, soon. It’s too big and too late to bail out this ship. Sounds good to the FBs who are waking up shirtless.
Govt will always spend and waste at every and any opportunity. That’s another problem.
” …6480000 existing-home sales in all of 2006.” NAR
27% were subprime nationwide (36% in Houston - still trying to verify)
Aegis Lending (operates mainly Houston) just laid off a bunch of people today. Friend of mine there who works in mortgage origination has been telling me over and over that they do good business, and no need to worry, no worry, really no worry, the mortgage apps keep rolling in, no downturn in sight…
He hits the sidewalk today, unemployed and very surprised.
He never saw it coming. Maybe the mortgage industry should read blogs like this one.
“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.”
Wait a minute, Economist Alan Gin (AKA: con man lies to gain) has said repeatedly that significant job losses wont happen a la the aerospace industry of the 90’s and thus we are saved! I sure sleep better at night knowing that I can rely on Alan’s spot on predictions!
AAAHKWOOORD!
Ameriquest/New Century is to 2007 as Lockheed Martin/General Dynamics is to 1991.
except, the folks from the aerospace industry had ‘real skill’s i.e engineering, machine shop workers, etc.,
the folks that got jettisioned from the mortgage industry may have a hard time applying their skills to anything else, (i feel cold saying this, but it’s reality)
got cash?
perhaps, but in the context of keeping or having to sell your house due to unemployment, a yob is a yob.
Speaking as a former bureaucrat, I wonder if any of those regulators will have the guts to say:
“If we had tried to stop this three years ago, the mortgage bankers would have come running to Congress and we would have been hauled before the committee and blasted by Republicans for being anti-innovative free enterprise and by Democrats for being racists against affordable housing. Just like regulators were harrassed by Congress before the S&L disaster.”
Answering my own question, if they had that kind of “damn the torpedos” attitude they never would have risen to a high enough post to be called before Congress in the first place. It’s amazing the regulators got up the nerve to start to suggest that this stuff stop in 2005.
At some point, accountability must enter the fray, surely?
Yes, they always flog the pig after the horse has left the barn.
“The role of major Wall Street investment firms in the subprime market debacle is under scrutiny. In Massachusetts, the state’s top securities regulator said last week that he had issued subpoenas to two major firms, UBS Securities LLC and Bear Stearns & Co. Inc., as part of an investigation into whether their analysts’ research ignored subprime lenders’ mounting financial problems.”
Wall Street plays a major role in this, earning huge fees securitizing mortgages, encouraging and pushing the subprime lenders to generate more and more substandard mortgages. Remember the huge 2006 bonus checks these guys got?
If CA’s AG Jerry Brown goes after these GS, Bear-Stearns guys, he’ll be in 2012 race.
On street signs:
“There is a silver lining, LA home prices are up 7% -8%. An RE agent said that you’d now need an income of $100K to buy a $500K house with a 20% down payment.”
These people just read the pap someone prints for them and then jubilantly run with it.
Street Signs: what an embarrassment. She introduced the Jim Cramer (sponsored by Fidelity) segment by citing “double-digit” gains in housing prices across Texas. Talk about cherry-picking your data.
I suppose they go home from the TV studio feeling that they’ve protected the U.S. economy by spouting this “silver-lining” nonsense and helping suppress panic.
“I suppose they go home from the TV studio feeling that they’ve protected the U.S. economy by spouting this “silver-lining” nonsense and helping suppress panic.”
Nope… watching these folks daily leaves me with the impression that they are either a. kool-aid connoisseurs or b. room temp IQ talking heads.
Maybe it was “Stated” double-digit gains
95% of the US: Hmmmm..Let’s see, I need 100K job and 100K cash in the bank.
Nope and nope.
Any other bright ideas?
At first, the sea recedes. This is the deflation which is coming soon as asset prices decline. People amazed, go out into the bare sea floor and pick up fish and items of interest. Bottom feeders. Then a rumbling is heard and a tsunami of inflation wipes out dollar based equity.
Hasta la vista baby. It’s all going down.
Loan City - DONE!!!
http://bakersfieldbubble.blogspot.com
Good. Nothing had blown up in a while, and I was getting bored.
lmao!!
Look out! Another one bites the dust:
http://www.youtube.com/watch?v=hMenB9Ywh2Q
they were alt a and prime lender
Yeah, so much for this not spreading beyond subprime!
Who was Alt-A and Prime?
loan city (see post above)
Alt-A and Prime, we hardly knew thee.
While we’re all watching the subprime implosion the HB implosion is beginning in earnest….TOA down 21% today after horrible earnings and loss of money on a shady takeover deal. The other legs of the of the card table are beginning to fold.
Don’t know if this has been posted, but a little piece on today’s housing starts numbers from the Fool:
http://www.fool.com/investing/general/2007/03/20/quick-take-housing-rebounds-sky-green.aspx?source=eptyholnk303100&logvisit=y&npu=y&bounce=y&bounce2=y
Boy does this sound familiar. I said it right here about two hours ago.
‘The “improvement,” as usual, is made by comparisons to the prior month — in this case, February to January. That’s a bad way to do comparisons, as it doesn’t account for seasonality. Worse yet, the reported 9% “increase” over January is subject to an error of plus or minus 10.2%, which means there’s no way to judge whether it’s an increase or a decrease.
What’s completely unambiguous is the giant drop from last year’s February numbers. Housing starts in February 2007 were 28.5% worse than in February 2006, with a margin of error of 6.2% in either direction. Worst-case scenario, housing was down 34.7% — at best, it was down only 22.3%. (Full details here.)’
To be fair to the CNBC Kool-Aid Konnoisseurs, they did show and comment on the big drop YOY. But I don’t think they noted the positive aspect of the decline; i.e., it will alleviate inventory buildup.
Have any of you been to http://www.iamfacingforeclosure.com? This guy is pretty much of an idiot but the comments posted by readers are a hoot. I like the one that starts out with “Boo freakin hoo…” the best.
never heard of it. can you fill us in on more details?
Sign of the times. I was asked to appraise a new house in a subdivison of about 300 plus lots. The sub has been complete for perhaps 6 months and there are three sales. One next to the subject and two behind it.
The contract for the subject was drawn in january and since then the builder has reduced prices. The same unit as the subject next door just sold for $288,000 and the one’s around the corner had sold for roughly $310,000. Basically all the same house as the subject.
My client was under contract at $345,000. I came in under the contract price. DUH!
Obviously if one is bound and determined to close on the POS you would go back to the developer and say, “hey dude, you are killing the market and I am not paying the price previously negotiated. Reduce it. Once again DUH!
The client calls and is furious he cannot close at the higher number.
I said, are you thinking straight? We just saved you from a $40,000 kick in the ass.” He said, “but man my loan is a lock on a nothing down deal through countrywide and I am gonna lose my loan.”
I said, ” sorry fella, there is nothing I can do for you. Ask your builder why he kicked your legs out from under ya and then take a good look at your 275 vacant lot neighbors and call me in a few days.”
Guess what this guy does for a living?
Mortgage broker! Friggin stupid does as stupid is.
You know - even if you’re desparate enough to buy a house in this market, at least be smart enough to know when to cut your losses - i.e. lose your deposit, and move on to something a lot cheaper.
Thanks for that dimedropped.
I love these stories of Appraisers playing hardball and hope to see many more in the future. It follows my timeline perfectly:
- raising inventory- check
-increased DOMs -check
-softening prices- check
- lending tightens- check
-appraisers get serious- starting?
“‘You almost can relate this to the aerospace industry, when they had those massive layoffs’ after the end of the Cold War, said Jack Williams, president of the California Mortgage Brokers Assn.’”
Yes, you almost can. Can anyone find a way to measure the number of mortgage-finance jobs that have been lost in southern California since the tipping point last year? Everyone in the REIC blames the last housing collapse on the cutbacks in the aerospace industry, which evidently lost a total of about 70,000 jobs between 1990 and 1997. (Link at http://www.huduser.org/periodicals/ushmc/spring98/pacific.html.)
I suspect we’re not quite there yet. But if New Century implodes, that’s 2,000 Orange County jobs right there. Add all the nickel-and-dime operators that are collapsing every day (including the one on the ground floor of my building across from Segerstrom Hall), and the number has to be large already.
Ameriquest will net you another few thousand. I would estimate that we are already nearing 10K if you count all of SoCal.
Many apologies to readers who read this article on another thread, but I cannot resist taking another swipe at it, as there is a critically important suggestion missing from Newsweek’s list of “smart money tips”:
DON’T BUY STUFF (INCLUDING HOMES) YOU CANNOT AFFORD!!!
http://www.pistolwimp.com/media/41738/
——————————————————————————–
Buying With Bad Credit
TIP SHEET
• How to Buy a House With Bad Credit
By Jennifer Ordoñez
Newsweek
March 26, 2007 issue - Regina Miller says she is tired of “throwing away $1,520 each month” to rent the two-bedroom apartment in Long Beach, Calif., that she shares with her 12-year-old son. So two years ago she set some goals, including making more money and buying a condo.
…
For those already in danger of sinking in subprime debt, try your best to stay afloat; a lifeboat may be on its way. Sen. Christopher Dodd says he plans to introduce a law that would essentially allow you more time to solve loan problems before foreclosure. In the meantime, lenders urge troubled borrowers to keep in touch. It’s in everyone’s interest, they say, to keep you in your house. Try to work out a deal—your home may depend on it.
http://www.msnbc.msn.com/id/17662293/site/newsweek/