The Housing Bubble

jmf,

More Sangria………”Spanish Kool-aid”

jmf,

The article talks about also Germans buying the last years. Are they mostly investors, secondary homeowners or people really retiring in Spain?

The dominos are falling.

The latest installment in the xx-up documentary series had one of the subjects retiring to Spain, to a community full of other expats.

Stucco is a lot brighter than this guy.

From the article:
“So you have the Federal government’s legislative AND executive branches (if you know which branch the Federal Reserve comes under please email me) wanting to help these folks. But, still, liquidity wanes.

Everyone here knows the Federal Reserve is a private bank, wow. How much do you think this guy makes? I’m guessing he is a little overpaid.

Oh no you didn’t………..hahaha

methinks immobilielblasen has a computer program that monitors the site and automatically posts in the morning.

Guys, this “first post” is juvenile. Please stop it.

Posted that on here two days ago when it was on Minyanville. When Reamer makes Marketwatch, that’s probably a short term buy signal.

NYCityBoy,

This Dodd and Clinton bail out proposal could very well turn around and bite them in the *ss. I don’t think they have truly thought it through.

“Let’s not lose the war.”

Testify, Brothah! And the war is on, with cries from various quarters being heard about “Washington Based” solutions. I read a great article on Alan Greenspan’s role in this whole debacle. The author really savaged him. (wish I could link it, but I’m not up for comments about tin foil hats). The guy was vicious and unsparing in his analysis of Greenspan’s easy money policies. It would be nice to see Easy Al go into the night a reviled and discredited man.

If one can strike just the right balance between cocaine and whiskey it will have that effect.
Sounds like a lot of FBs, no?

I got the 4 Flicks DVD. The foursome keep their “girlish” figures by smoking a lot and eating very little. Actually Mick takes dance lessons (in a short scene on 4 Flicks) and probably also does yoga, which, besides being skinny as a rail, helps to make him move as fast as a 23 year old.

Alan Greenskam and Mick Jagger both knighted by the Queen. I wonder if that has any significant meaning?

Got Amero’s?

Are you kidding?…I saw him at the half time of the football game. He looked like my grandmother dancing drunk at my sisters
wedding!…I was embarrased for all of his families.

Good drugs.

thanks mike, the supply is up in the areas I watch down here also.

I love it, Tom. Now I just wish someone up in Hedge Fund Heaven (Greenwich,Connecticut) would do the same thing so that the fundies can get to know a wider swath of society. And also so they can learn what middle income earners have to cope with in everyday life. I took a tour of my old neighborhood the other day, the one where I had a house not quite two years ago. My street was OK. Two streets over it might as well be the barrio, with half dressed little kids wandering up and down unsupervised. Almost completely trashed. This has happened in less than two years.

Sometimes characters like him will do stuff like this to jerk their neighbors’ chains, and also just because he can.

$150 a month??

Now how the hell can the folks at the Super 8 motel compete with that?

Mike:

My GF and I have found a nice little rental in your neighborhood. When we did a walkthrough yesterday, my GF said, “I wonder what our neighbors will be like.”

We looked around us - the two houses next store were vacant and for sale; the two houses across the street were also vacant and for sale.

I said, “Honey, I don’t think we have any neighbors.”

Where on earth do you go trick-or-treating?

Unfortunately, if the IRS finds out about this, it will “impute” a market rent that is vastly greater than $150/month and treat the difference as a gift and taxable income to the poor renters.

the house of cards that is the bush administration, is disintigrating before our very eyes and doesn’t our ersatz leader look oh so old and tired?

clinton fired all of them
did you clap for that ?
the media certainly didn’t care then

It’s not so much the political aspects of the situation that warm my heart, but the fact that Gonzales is a graduate of Harvard Law School. Harvard Law. What a joke. They managed to turn out a complete idiot who wouldn’t know the Constitution if it came up and hit him in the hindquarters. Haaahvaahd Law. They trained their graduate to act like a consigliere for the Corleones. You’ll find better lawyers from a diploma mill than you will Haahvaahd Law.

Fire 8 US attorneys and its a “major boner”.

Fire ALL US attorneys (when YOU are being investigated by one along with your party’s MAJORITY LEADER)…….ho hum.

For the uninformed, US attorney positions are plum political appointments. They can be fired without cause (as Clinton did the first day he took office). Yes, ongoing trials and investigations can be affected when a US attorney is abruptly fired. So, since this reality certainly applied to ALL the US attorneys fired by Clinton, the question is what is special about the firing of 8 US attorneys by Bush?

Its politics and not particularly brilliant politics at that. If all you can conjure up is 8 disaffected political appointees to wag in your political opposition’s face you either don’t have much material to work with or you are pretty lame, no?

Send it to Dodd and Clinton and ask for a bail out.

Just listen to the KQ morning show. It’s less stressful than all of the housing lies.

Please tell me his name isn’t Cheney?

1700AM out of san diego has some bubblicious types. Also KLSX in LA 97.1FM on Saturday mornings.
The guys Saturday morning are actually starting to admit that if you bought in the last 2 years you are toast. They shill for out of state investments boasting cash on cash return.

http://www.npr.org/search.php?text=real+estate+investors

I’m not the guy who posted originally, but there’s a bunch of great stories here.

If one is so close to the line that those small changes in monthly disposable income push him over, then they’re screwed before the interest rate changes, either way.

Maybe we’ll get lucky and they will shut off the high-speed internet connection to their spyware-infested zombie spam-mailing home computers.

“The length of a bar of soap”.

I like that. This revives the term “soap box”. It’s really cool.

Yep, I remember when a supercharged topic in here (usually featuring DL) would draw maybe sixty comments, usually from a core group of about 15 posters. I’ve often wondered about the site stats - how many hits it gets a month.

It was kind of fun “back in the day” (circa early 2005) when there were still a few Kool-Aid Imbibers like LVLandlord to kick around. They fought a doomed rear-guard action for awhile, then just vanished, probably into their parents’ basements.

Fedex overnight? Isn’t that how refi docs were sent for signature?

What a post from you and no fed worker bashing?

In college I worked for UPS.

They always bragged that their shipping volumes would inform them of an uptick in the economy long before any economist could.

I suppose the converse is true as well.

San Diego subprime specialist gets loan
$200 million deal helps Accredited
By Mike Freeman
STAFF WRITER
March 21, 2007

Troubled subprime mortgage firm Accredited Home Lenders has agreed to a $200 million loan from a San Francisco hedge fund that’s already one of the San Diego company’s largest shareholders.

The five-year loan from Farallon Funds could provide a lifeboat for Accredited to either survive the current liquidity crisis roiling the subprime business or be acquired.

But the financing didn’t come cheap. Farallon will receive a 13 percent interest rate on the loan, making it the corporate equivalent of a subprime residential mortgage.

http://www.signonsandiego.com/uniontrib/20070321/news_1b21lend.html

how do you come down from 160 K ?
auction in bloomington hills MI for 135K
wow cash out of the coasts and head inland

I live in the Cincy area as well and I would agree. The builders are in big trouble. I work with the building community and I can tell you they are really being push to the limit. I can’t believe how much inventory they are sitting on right now and how little construction is going on. I have even seen several homes in upscale neighborhoods that had tyvek exposed last summer and fall, that still have not been covered. If this house of cards doesn’t improve by this fall I think we will start seeing the BKs. You have got to wonder how in a market like Cincy, that has almost no population growth, could get such a glut of new unsold homes on the market. What a mess!!!

“Prices don’t seem to be coming down yet …”

Admittedly, this is picky, but the accurate term is “asking prices,” not just “prices.” There likely will be a large and growing difference between “asking” and “selling” prices.

1. They both add lost “tax savings” to rent and subtract “tax savings” from cost of ownership. Double counting on this count.
2. Mortgage payment does not include taxes, insurance, repairs. Not apples to apples.
3. In what market is an amortizing mortgage payment only 5% higher than equivalent rent?

Try this link:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/18/BUG9AOMAJH66.DTL

The Article:

Why subprime mortgage crisis may have impact on stocks, lending and spending
Carolyn Said, Chronicle Staff Writer

Sunday, March 18, 2007

“No Credit, no savings — no problem!”

That could be the motto for the subprime lending industry. And that simple slogan might just end up knocking the props out from under the U.S. economy.

Until a few months ago, someone with tarnished credit and meager assets could find dozens of lenders offering a no-money-down, interest-only mortgage for several hundred thousand dollars. To sweeten the pot, many such loans were “no doc” — meaning potential borrowers could simply state their income instead of producing documents such as pay stubs to verify it. In the trade, they call these “liar loans.”

Subprime loans to people with poor credit have ballooned to $1.3 trillion, accounting for a fifth of all new mortgages last year.

And that’s turning into a major threat to the economy.

The subprime industry has begun to implode as many credit-challenged borrowers fall behind. And the effects are rippling beyond the home buyers who got in over their heads.

Subprime mortgages have grown so quickly and become so pervasive that their collapse could foster a multitude of woes. Subprime defaults could wallop Wall Street institutions with huge losses, further undermine the already-soft housing market and drag down consumer spending.

In a worst-case scenario, the turmoil could trigger a recession the way the savings-and-loan scandal did nearly two decades ago.

Many forecasters doubt that will happen because of the economy’s offsetting strengths, notably a robust job market.

Still, anxiety over subprime loans is mounting among economists, Wall Street traders, banking regulators and government officials.

Congress is looking at ways to shore up the industry. Fear about subprime loans was a major catalyst for the stock market swoon this month.

Here is a rundown on who could get hurt if subprime problems spread:

– Subprime borrowers. First up are the folks who took out mortgages they couldn’t afford, seduced by a hot housing market. While prices were rising, many borrowers saw their homes increase in value. That masked the problem because they could refinance based on that increased equity. Or they could sell their homes for a profit or at least enough to pay off the mortgage.

But now that housing prices are stagnating, the options of refinancing or selling have slammed shut. People who bought homes they couldn’t afford face the prospect of losing them through foreclosure, forfeiting their down payments and having their credit ruined. The Center for Responsible Lending, a consumer advocacy group, predicts that 2.2 million subprime borrowers will wind up in foreclosure in the next few years.

– Speculators. Real-estate buyers who rushed into markets such as Las Vegas and Phoenix to snap up homes, hoping to “flip” them for quick profits, could lose big.

– Subprime lenders. Companies that make subprime loans are already disintegrating because of delinquent and defaulting borrowers. In the past three months, 35 subprime mortgage companies have gone out of business. Of the 25 biggest, about half are out of business or so severely impaired that they are not making any new loans, according to Chris Low, chief economist at FTN Financial in New York, a capital markets arm of prime mortgage lender First Horizon National Bank.

Subprime lenders are in the business of originating loans, not holding them for the long term.

Typically, they “securitize” the mortgages, that is, bundle them up and sell them to investors. That brings in new cash so they can make more loans.

But most securitization deals include a clause saying if the loan goes bad in the first three months, the originating mortgage company has to buy it back, Low noted. So many loans have gone bad that subprime lenders have been unable to keep up.

The lenders rely on lines of credit from investors who buy mortgages to finance their operations. But those buyers have stopped buying and subprime lenders are seeing their credit dry up.

– Wall Street firms and other big institutions that bought the loans. Subprime mortgages get packaged, sliced and diced to create a range of products with different levels of risk. Such mortgage-backed securities have become popular investment vehicles in recent years. Subprime loans carry interest rates two to five percentage points higher than those to borrowers with good credit, so theoretically they offer a high enough return to offset the risks.

“They are bought broadly,” said Steve Cochrane, senior economist at Moody’s Economy.com, a forecasting service in Pennsylvania. “Many are held by investment banks, hedge funds, international investors of many sorts.”

The big question is exactly who holds them.

“Part of the panic the other day when the stock market was tumbling was trying to figure out who’s on the hook for these bonds,” Low said.

In the coming weeks, some victims of spending sprees in subprime mortgage securities will be revealed as Wall Street firms report financial results.

If major Wall Street firms have to write off billions of dollars in investments, that could further chill the stock market and have repercussions throughout the financial sector.

– Other borrowers. Financial institutions might react to the subprime implosion by clamping down on other kinds of borrowing. If money is harder to get, the economy suffers because it’s harder for businesses to expand and consumers to spend.

“It could create a fair amount of uncertainty in investment markets, so that all investors would become overly cautious and freeze up, stop trading,” Cochrane said. “That could limit the flow of capital in the U.S. economy and the global economy, and create a credit crunch.”

Cochrane says he thinks there is about a 25 percent chance that could happen. The results would be far-reaching.

“Right now you might say there’s a bit of a credit squeeze, largely focused on subprime holders. If the lending industry stopped lending or became increasingly tight on prime mortgages, commercial loans, industrial loans, revolving credit, it could very quickly work to slow the economy down and push it into recession,” he said.

– The housing market. The subprime collapse threatens to turn the real estate slowdown into a meltdown. Lenders have started to tighten their standards, meaning that fewer buyers — both prime and subprime — qualify for loans. That lessens demand and increases inventory.

With subprime buyers no longer in the picture, “There are a lot fewer people out there competing to buy homes, on top of which, because foreclosures are so high, there is a steady stream of houses hitting the market,” Low said.

“It means the supply-demand imbalance remains for another couple of years, putting downward pressure on prices.”

– Consumer spending. The stimulus from rising real estate prices has been one of the main engines of the economy in the past few years, as people bought and furnished new homes, and borrowed against existing homes for big-ticket purchases such as remodels and cars.

If homes are worth less, people find it harder to sell them and harder to borrow against them. That means consumers will tighten their belts and the whole economy will take a hit.

E-mail Carolyn Said at csaid@sfchronicle.com.

I’m out past Prince William County, and it appears as though most of the new listings are marked with “Wishing Prices” based on . . . I don’t know . . . hoopla over the last few months that things were “bottoming”?

Still, even in Fairfax County, there are properties selling for up to 20% below the last sales price. Usually these are in the less-desirable areas such as Herndon, Woodbridge, and Centreville.

I should do a post at http://novabubblefallout.blogspot.com on nearly identical houses (in No. VA) priced 100K apart. If you check out http://www.bubbleinfo.com, there is a quote from Robert Cote about this:

“It’s the same word I used 4 months ago for ther same reason(s). Froth. Caution math stuff ahead. The nature of discrete particles (individual houses) in a non-homogeneous environment (location, location) being acted upon by random forces (buyers market) will exhibit non-linear (prices all over the place) behavior in the short term (monthly sales). Clear as mud?”

NOVA - out of curiosity, where do you get your numbers?

I’ve been tracking Loudoun on foreclosure.com since October - it’s been a relatively steady increase as you say though actually somewhat bigger numbers - I’ve seen it go from 149 on 10/21 to 271 today - an increase of about 25 per month. It took a big jump not so much last week (5 new), but has in the last 4 days (13 new!).

I guess she is lucky then, because the Europeans are still buying everywhere; most of them are totally unaware of what is going on with US RE and they will snap up the first bargain they get offered …

Speedingpullet, too.
Technically, in SFV, but a girl can dream….

I moved from a condo renting for $1,250 to an apartment renting for $900. Prices are expected to go up despite the increased vacancy rate?? I’m not paying higher rent simply because some wealthy property owner has a higher mortgage payment. I’m saving 40% of my paycheck aftertax ao I could afford to pay more but I simply wont.

I’m looking for a place to rent in North County Coastal right now. I’ve pretty much determined that most of the “Rent to Cover My Payment” types post on Craigslist while the long time owners with actual affordable rents are on the UT’s and SDReader’s websites.

Looks like a recession to me. Pitiful. All of the data looks pretty bad however the pitiful job creation over the last five years and new construction sales at levels not seen since 90/91 stand out to me.

That’s funny, I sold that bridge numerous times…

Law geek humor. I like it.

What happened to the spring rally? Who closes their offices right before the busiest time of the year for realtors?

“We were approaching break even.”

Nah. Bet they were way below break-even. Nobody in the happy-talk industry closes down when net income is still positive. Such farsightedness exists in other industries, perhaps, and certainly in Ben’s blog, but not in Happyland.

A sign spinner shot? That’s horrible.

Of all the things this bubble produced, I happen to like the sign spinners. Good ones are truly artists. I hope the fiends are caught.

Neil

Here’s the link:

“Signboard holder shot to death in apparent drive-by: LANCASTER - A man advertising new homes while standing by the side of a street was shot and killed Sunday afternoon, according to detectives.“

I noticed that too. What a world of difference from when I was looking for a SFH to rent last summer.

Yes, BM, I caught that. I liked that she did not make excuses for herself. That allowed me to actually feel pity for her.
I’m sure Ben has already taken note and will post, but for those of you who get the paper version of the WSJ, there is a big article in Opinion called Mortgage Meltdown by one Andy Laperriere, who I think has been doing secret interviews with Ben, Get Stucco, Neil, etc. etc. It was strange to be sitting in the gym and reading that kind of article in a big newspaper. Meanwhile, today’s LA Times business article on how subprimers can get ahead and “save” the economy was nauseating. Read it, but make sure there’s a bathroom nearby.

http://www.latimes.com/business/la-fi-economy21mar21,1,2144311.story?coll=la-headlines-business

Yeah.

Apparently there’s another one on Marketplace Weekend coming up.

Thanks for that link. We are so screwed.

Did anybody see the article (in the UK Daily Mail?) yesterday wherein a Bank of England chief (equivalent of our Fed?) admitted that they pushed a policy of personal indebtedness the past several years (to hold up consumer spending) in order to keep recession at bay.

Obviously, that’s been our plan in the US for economic “stability” also.

The Heloc thing has been being promoted like crazy for about a year up here. People have taken out HELOC’s on fully paid off properties, indebting themselves where they were debt-free a few years ago.

The lenders and policy makers have trully gone berserk. The US and Britain, the old world economies, have apparently fizzled completely and now must rely on debt expenditures, no real production at all.

This is where JL gets the RE Shill Label again.

He notes:

O.C. single family homes were 33.5% overvalued in the fourth quarter

and,

It’s worth noting that in the last boom, O.C. housing’s overvaluation once led the nation: In the fourth quarter of 1989, when prices were 27.2% too high, by this math.

Yet when you read the couple paragraphs it reads like affordability is back baby.

For shame, for shame, for shame.

My understanding is that app declines are way up! I also understand that 21% of new apps are for ARMs, yet the spread between ARMs and Fixed is only 17 bp. Why any lender would push an ARM right now is beyond me. Unless, of course, his/her commish is better . . . sorry, answered my own question.

That bothers me a lot — applications. Like the corny old joke, “We have a partial score: Philadelphia 6.”

The only thing that matters to me at this point in the crunch is “mortgage loan approvals.” Haven’t seen any measure of that, yet.

That bothers me a lot — applications. Like the corny old joke, “We have a partial score: Philadelphia 6.”

The only thing that matters to me at this point in the crunch is “mortgage loan approvals.” Haven’t seen any measure of that, yet.

As for deflation, I may be wrong, but I think that we quite likely are in for a period of asset (think housing) deflation riding right alongside consumables inflation. JSP will never know what hit him. As intended.

“If inflation is all about expectations (I’m not sure that is completely true),”

Not true. A huge inventory overhang of durable assets at overvalued price levels (such as California houses) creates deflationary pressure. Witness what happened in Japan’s housing market from 1990-2006 — the BOJ could only push on a string while watching prices deflate.

Nice to see that *somebody’s* learning from our mistakes, even if we can’t seem to ourselves.

These big banks may be screwed long term. They’ve tapped Americans out and, I think , made the assumption that once they were through with us they could throw us to the dogs and move on to Asia.

There’s been a huge push the past couple years by them to turn the Chinese into permanent debtors, I guess to replace the Americans once we’ve been wrung dry. Hopefully the Asians will surprise them by “just saying NO”.

About 10 years ago, there was a best-seller in China called “Just Say No to America”.

Th nation’s largest RE Investment Trust, Plum Creek is trying to take over the north woods of Maine. If they succeed, the entire place will be developed.

Because these idiots are bullish on the so-called dovish tone. They think that a rate cut is coming. I think the shoe will really drop on the stock market when corporate earnings fall like stones. Idiotic morons everywhere.

Seeing the market reaction to that statement clarified for me that we are at a breaking point psychologically/emotionally.

That was the most hawkish statement Bernanke has given since he’s been Fed chief and yet the market interprets it as dovish?

They are clearly grabbing at straws and choosing the “Don’t confuse me with the facts” manic line of thinking.

Kind of like desperate homesellers refusing to believe that prices go down, in the face of everything.

Frankly, I find that deliberate misinterpretation of Bernankes statement very scary.

So they are claiming that the “flip” part of “Condo Flip” did not pertain to overly-ambitious speculators?” I thought that these people were at least in their twenties.