The Housing Bubble

CNBC reports a possible bailout in Ohio for buyers in over their head with housing.

Oh please no. This will extend the correction for 2X as long as it normally would have played out, or will artificilly inflate home prices indefinately (until inflation eats the gains in 10 years).

I hope this does not start a trend.

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070326

Federal Bailout in the works.

House Financial Services Committee Chairman Barney Frank, D-Mass., has proposed a bipartisan bill to create a tough new overseer. But he wants something in return.

A key part of Frank’s bill is “an affordable housing fund” to be financed by the GSEs. The estimated $500 million fund would make block grants to states for low-income housing.

Check out the honesty from the hedge fund and private equity crowd. They know the debt bubble is a house of cards but they can’t pry themselves away from the party until it’s clear everyone else is about to leave. I doubt they’ll all get out the door at the same time, but then it’s the fools who have entrusted their capital to them that will pay the price with no clawbacks of the obscene bonuses they have received. Is this a great country or what? I’m generally to the right of center on economic issues, but this is a situation that is just begging for regulation to keep the dealers from skimming the take at the casino. It’s the closest thing to legalized theft going. And there is no grownup watching the till and keeping things from getting out of hand. This has to end badly.

Sketchy Loans Abound
http://online.wsj.com/article/SB117495177692049687.html?mod=home_whats_news_us

Very few people want to take responsibility for their actions. Let thy neighbor pay for my mistakes.

Someone yesterday was looking for the link to Ben’s interview in the OC Register… don’t think anyone replied with it:

http://blogs.ocregister.com/lansner/archives/2007/03/insider_qa_gets_o_1.html

March 27 (Bloomberg) — Lennar Corp., the largest U.S. homebuilder by revenue, said earnings plummeted 73 percent in the fiscal first-quarter as demand waned in the worst housing slump in more than a decade.

Revenue for the quarter plunged 14 percent to $2.79 billion from $3.24 billion as the number of homes delivered fell by 3.9 percent to 8,566. The average selling price dropped 7 percent to $303,000 as sales incentives more than tripled to $45,500 per home.

http://www.bloomberg.com/apps/news?pid=20601087&sid=adsLkS5Kr3mw&refer=home

Is a rate cut already baked? Will housing demand lift and shares rally? Some are betting on a rate cut. From the WSJ:

By EMILY BARRETT
March 27, 2007; Page C6

A poor report on new-home sales in February sharpened bids for government bonds as investors put more money on the prospect of a rate cut in coming months.

The disappointing housing-market report was a boon for Treasury bulls, who have thrived recently on the view that the Federal Reserve will have to hasten toward a rate cut as the housing sector’s troubles deepen, threatening to infect the rest of the U.S. economy.

Futures markets illustrate the heightened expectations. Approaching the close, the June Eurodollars contract was pricing in a roughly 60% chance for the Fed to cut its target rate a quarter percentage point, to 5%, in the second quarter. This is up from about a 56% chance at Friday’s close.

In its last monetary-policy statement March 21, the central bank abandoned its previous explicit reference to the possible need for higher interest rates.

Here is a thought for this morning……

OK lets bail out the FB, but in exchange, RE agents will have to refund thier commissions to the Bank, if the buyer forecloses in say 2 years.

That would thin out the ranks pretty quickly and should eliminate fraud.

Connecticut goes after MLN exec for back pay:
http://tinyurl.com/3ap3n4

I’m thinking about relocating to the area around Nashville, within about 60 miles of the city.
Most of the smaller towns show low crime rates, and the cost of living index is low. My plan is to buy acreage and become a gentleman farmer.
I’m not worried about the lack of things to do and see, I can travel for that. Plus, I’m from Idahole, how much worse could it be?
Comments?

Can anyone pinpoint when the “housing slowdown” morphed into the “housing bust?”
——————————————————————————–
New home sales slide 3.9% in February
Shaky housing market pressures U.S. economy
By Martin Crutsinger
ASSOCIATED PRESS
March 27, 2007

WASHINGTON – Sales of new homes fell for a second consecutive month in February, dimming hopes for a rebound soon in the troubled housing market and raising fears about the health of the overall economy.

The Commerce Department reported yesterday that sales of single-family homes dropped 3.9 percent last month to a seasonally adjusted annual rate of 848,000 units, the slowest pace in nearly seven years.
…
The housing bust is coming after a boom in which sales of both new and existing homes set records for five straight years.

Some analysts see the current slowdown as a correction from a period of speculative frenzy in which investors were buying second homes in hopes of reselling them quickly to make profits.

The slowdown in housing is occurring after a two-year effort by the Federal Reserve to raise interest rates as a way of slowing the economy and keeping inflation pressures from getting out of control.

Last week, the Fed bolstered spirits on Wall Street with a signal that it might consider cutting interest rates if the economic slowdown threatens to worsen.

http://www.signonsandiego.com/uniontrib/20070327/news_1b27economy.html

This is from my local real estate mortgage brokers blog. He’s ranting about the tightening lending standard and blaming them on a knee jerk reaction from Fannie Mae. It would be funny if it wasn’t so sad.

http://slcrealestate.blogspot.com/

::Start rant::

::End rant::

LIErah someone on bloomberg pronounced his name LOO-ray
has he changed his name ? might be a good idea

A little update from the trenches:

It’s been a while since I posted about my company’s progress in the housing bubble-bust. As a refresher, I work for a suppier to the homebuilders. My company is a manufacturer that operates nationwide. I work in our Florida plant and our primary market is Florida, but includes the Carolinas.
Sales have been declining since about Sept of last year.
Until the beginning of the year, we were about 60-70% of the previous years sales. It began edging down this year, so that the beginning of 2007 has us operating in the red.
Sales overall are now at best 50% of the previous year and are not improving. Last week we has some up days, and there was some optomism. A couple of 70% days, but followed by some 20-30% days.
Some markets are much worse than others. While I estimate an average 50% volume overall, our ORLANDO market was down 70% in January, based on YOY sales.
I know this by talking to the commission salesman who handles that market. He had seen no improvement as of last month.
To our benefit, attrition has taken it’s toll on about 20-30% of our staff. When people left over the past year for other jobs, or were fired for cause, we simply adjusted our workload to the current employees, so we have not incurred additional unemployment costs.
Thus far we are hanging on, but senior management is now issuing cost savings directives, like cutting back on trips that are not essential, forget the Hilton, say at Best Western. That kind of thing. Are we in real trouble? I don’t know. Our staff reductions have been substantial compared to a year ago, so we may hold out without additional changes, because we are still moving materials everyday. Builders are still building.
Will we loose more sales volume?? I think before the end of summer, yes. But then, who can say?

I wonder if that troll who argued with Ben a couple of days ago that “U.S. real estate prices have never gone down nationally” is lurking around here today?
———————————————————————————–
ECONOMIC REPORT
Home prices go negative for first time in 11 years
Case-Shiller price index shows prices falling in 17 of 20 cities in January
By Rex Nutting, MarketWatch
Last Update: 9:27 AM ET Mar 27, 2007

WASHINGTON (MarketWatch) - U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor’s and MacroMarkets LLC, which released the January Case-Shiller price indexes on Tuesday.

The 10-city index is down 0.7% in the past year, the first year-over-year negative reading since 1996. The 20-city index is down 0.2% year-over-year. A year ago, prices were rising 15%.

Prices fell from December to January in 17 of the 20 cities; only Miami showed any price gains. Prices were flat in Charlotte and Seattle. Prices were falling fastest in January in San Diego, down 1.7% or a 22.4% annual rate. Prices dropped 1.1% in Los Angeles, or a 14% annual rate.

The 10-city index was down 0.8% in January, or an annual rate of 10%. The 20-city index was down 0.7% in January, or an 8.7% annual rate.
“The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market,” says Robert J. Shiller, chief economist at MacroMarkets.

http://www.marketwatch.com/news/story/home-prices-go-negative-first/story.aspx?guid=%7B30B54985%2D2189%2D4AE9%2DB8E5%2DECF89F6095F3%7D

Headline indexes are plunging again on the opening bell today. I’m guessing
they will return to within a hair of their opening levels by day’s end…

http://www.marketwatch.com/tools/marketsummary/

Today on the CBS morning show, some jeroff from Bankrate.com was explaining the New Home Sales decline to Harry. At the end he said how this is a great Buyers Market because of all the choices. “You can really find the house you want.” Sure if you want to overpay foir it.
Houses are still priced around 10x average income, IT IS NOT A BUYERS MARKET!!!
When buyers can afford to buy (I am a buyer and I can’t) then it will be a buyers market.
I am tired of hearing this B.S.

http://biz.yahoo.com/ap/070327/wall_street.html?.v=12

More bad news…….

A 37% price drop already? This 383 sq. ft. bank foreclosure studio in hillcrest has been reduced to $189,000. Sold for $300,000 in June 2005.

About a quarter of the 60 units in the building are for sale by lemmings that rushed in after the apt. building was converted to condos in 2003 or 2004. I expect them to cut and run once this measly studio leads the prices over the cliff. (by the way the building is called Cliffbridge; ).

http://www.varealty.com/va-real-estate/homes-for-sale/ca-california/san-diego/mission-hills.html
http://www.sdlookup.com/ListingDetails/tabid/73/plid/669984/Default.aspx

My post didn’t stick in the NM thread under the “Riding the Real Estate Cycle in CA” article. I reposted it there, but OT now so I’ll toss it in here as well.

I think Misstrial lives in the southern part of the state in Las Cruces so she can speak to that area. I know a few others in NM have posted in the past as well. She has it about right, imo, other than I believe the fiscal effect of Sandia and Los Alamos National Labs is nontrivial, but localized. That has changed a bit this past year since LANL’s tax status changed and they now have to pay tax to the state. LANL was considered a non-profit educational institution since they were run by the University of California and therefore exempt from the tax. LANL employees were employees of the University of California until last year.

SNL is in Albuquerque on Kirtland Air Force Base, and LANL is in Los Alamos County. Los Alamos is about 105 miles from Abq., and about 35 miles from Santa Fe. SNL is run by Lockheed-Martin, and LANL is now run by Los Alamos National Security (LANS) for the Department of Energy.

LANL and Sandia have highly paid workers. Los Alamos county is one of the highest (maybe even the highest) per capita income counties in the US. The rest of the state has some of the poorest counties in the US – “Stepping Stone to the Third World” as some say. Remember the poster telling you a week or two ago about his trip to Farmington?

On top of the lame prices in Abq, there are really ridiculous prices in Santa Fe and Taos in Northern NM. There is a large number of state government employees in SF. SF has about the same median income as the US as a whole, while the median house prices are much higher.

IMO, much of the recent housing price run up in Abq is due to out-of-state buyers. They vanish, and there is really no support for high house prices in Abq. Several of my properties in Abq. I sold were to CA buyers. Intel has a fab plant on the west side of the Rio Grande next to Abq, and the city of Rio Rancho has grown around it. A lot of building continues in that area.

I’ve never figured out the high prices in SF. I have been of the opinion that at one time SF was considered “in”, but I do not hear that kind of talk much anymore. Again, out of state buyers likely a factor in the prices. A reasonable percentage of LANL employees live in SF. SF Mayor was on TV a couple of weeks ago bemoaning how immigration came and did a sweep in SF w/o informing city officials.

nycboy, a partial answer to a question you raised is that a lot of land in NM is Indian land and US Gov’t land. Prices in Los Alamos, for example, are very high in part because it is surrounded by DOE, Forest Service and Indian land. SF and Abq have a similar situation on a couple of their boundaries. However, the prices in Los Alamos are also dependent on the fate of LANL, since most people that live in Los Alamos work for LANL (or are retired from LANL).

NM has apparently added another #1 to their long list of accomplishments - the paper the other day said NM is the most dangerous state in which to live in the US. I think NV was #2? Immediate response was to attack the methodology, etc. NM held the title of “Dumbest State” for several years. I think the baton got passed to AZ recently. NM has a lot of high per capita rankings for unwed parents, teen pregnancy, DUI related accidents, uninsured drivers. Not surprisingly, NM also has the highest return of federal $ per tax dollar sent to DC. I’ve provided SF and Abq crime stats before, not exactly a selling point.

So you guys don’t think I’m too negative, NM does have some of the best SW food you could ever hope to eat, a long and interesting history, and some really beautiful areas.

Got my “special invitation” from Mister The Donald Trump himself to attend a very special wealth building seminar in a couple weeks, featuring his genius offspring Ivanka.

What better way to spend a Saturday in mid-April (which is one of the most pleasant weather months in the Washington area, by the way) than getting dubious/obvious financial advice while being up-sold on expensive additional wealth-building training and materials?

Honestly, the urge to see how pathetic and craven this event would be ALMOST makes me want to skip a lovely spring Saturday for it. Fortunately, the operative word here is ALMOST.

Anyone ever go to one of these things, just for the hell of it?

About being smart and this bubble?

My sister is scary smart.

When we were kids, both of us caught a glimpse of our iq tests and from my recollections, she clocked in @ 4 iq points higher than me.

Why does she own 3 houses now?

Here’s an interesting counter to the “wages are increasing” argument. Public Works magazine, a trade publication for people in the government publics works sector just completed a wage and benefit survey in the March 2007 edition. According to the survey, salaries have, in many cases, gone down in the last year. Median salaries have gone from $72,500 in 2005 to $65,000 in 2006. That’s a 10% decrease. While the cost of living continues to increase, most respondents said that their salaries are not keeping up. Public works managers feel their standard of living is falling. On the other hand, six out of ten respondents said their benefits are better than those in the private sector, including liberal vacation, holiday and solid health insurance.

While the vacation is nice to have, it does not put food on the table or make the mortgage payment. I think public pay is generally on the downtrend.

What would drive somebody like Tony Snow to parachute onto the deck of a fully engulfed aircraft carrier and then claim the flames are beneficial?

30 pieces of Silver

15 minutes of “fame”

“His goal (Senator Dodd), he said, is not to deny low-income people access to capital or scare investors away from the subprime market altogether, but rather to find some way to help consumers meet their mortgage obligations.”
http://money.cnn.com/2007/03/26/real_estate/Dodd/index.htm?postversion=2007032709

His goal is to magically make subprime loans not act ’subprimely’.

Something is amiss in denying that this yield curve is inverted — just look at the roller-coaster slope from 6 mos out to 2 yrs, which suggests a market looking forward to a recession within the six month to two-year time horizon, followed by massive respiking of the punch bowl (rather than fixating on the 2-year to 10-year spread, as Hulbert suggests…).

http://www.bloomberg.com/markets/rates/index.html

“MARK HULBERT
The not-inverted yield curve
Commentary: Something’s amiss in how advisers are handling fluctuation
By Mark Hulbert, MarketWatch
Last Update: 12:04 AM ET Mar 27, 2007

ANNANDALE, Va. (MarketWatch) — I would be a rich man if I had a dollar for every adviser who, over the past 15 months or so, argued that a recession was imminent because the yield curve had become inverted.
I’d be a very poor man if my wealth were dependent on getting a dollar for every one of those advisers who, since late last week, has even acknowledged that the yield curve has become positive again - much less conceded that, by the logic of their previous argument, a recession has become less likely.

It just goes to show how difficult it is to be truly objective in this business.
…
There is no consensus among economists concerning which particular maturities should be focused on when determining whether the yield curve is inverted. One pairing that is widely used, however, is the difference between the yields on two-year and 10-year Treasuries.”

http://www.marketwatch.com/news/story/now-not-inverted-yield-curve/story.aspx?guid=%7B308184EA%2DA2A2%2D4B4E%2DA55A%2DDA251E680AA8%7D

“Rapid rise left room for decline”

http://www.bakersfield.com/619/story/107405.html

With regards to future inflation:
FOOD
“…Dick Bond, chief executive of Tyson Foods, the world’s largest protein producer, has called on Washington to recognise the competing claims of the food and energy sectors when drawing up a proposed farm bill. “If left unaddressed, the bigger long-term issue will be the availability of US and global grain for protein and other foods,” he warns.

The USDA predicts that farm cash receipts will this year be 22 per cent above their average over the past decade. Yet Mr Bartz and others should not expect too much of a bonanza. After taking into account higher costs for fertiliser, feed and seeds, the department forecasts that farm expenses will be an even sharper 24 per cent above the 10-year average. That leaves American farmers sharing an aggregate income of $67bn (£34bn, €50bn), barely changed from 2006….
The USDA’s March annual conference normally brings together farmers, government officials, agricultural lobbyists, seed, fertiliser and farm machinery suppliers, and the merchants from groups such as Cargill. But this year in Arlington another group was also in evidence: potential investors.

“I have been coming to this event for more than 10 years and I have hardly seen a hedge fund here before. Now they are all looking to become grains experts,” says one farm machinery analyst. A hedge fund manager, explaining his presence, says: “If there is any risk to biofuels on agriculture, it is on the upside [for grain prices], because the US government wants more biofuels, not less.”

But John Johnson, chief executive of CHS, a large US farming co-operative, says the industry should be cautious about the ethanol-driven surge. CHS owns 22 per cent of BioEnergy, one of America’s biggest ethanol producers.

“We could have unintended consequences from this,” he warns. “If grain prices go too high too quickly, it could push up food prices and we could see a consumer backlash against biofuels. Consumers will be upset that theirfood bills are rising sharply.” Rural boom could, in other words, turn to bust once again.”

and another reason to worry

There is a US billboard showing an American farmer beside a photo of an Arab oil sheik with the caption: “Who do you want to buy your gasoline from?”

It aims to promote homemade corn-based ethanol as part of a drive for energy independence.

The irony is that the US will need to rely heavily on nitrogen-based fertilisers to expand its maize production, and many of these are supplied by the very countries on which the country is keen to reduce its energy dependence….
The US now needs to import this type of fertiliser as many of the country’s petrochemical plants that made urea, a nitrogen-containing compound, were shut down when US natural gas prices spiked to then record highs in 2003. Urea is made from ammonia, which is a derivative of natural gas.

Mr Prince says urea production is a low-margin business and only the lowest- cost natural gas or oil producers can remain in the business when gas and oil prices rise. The Middle East and Russia have the world’s largest gas reserves.

In fact, US companies have been helping to finance and construct nitrogen plants overseas, as domestic producers are saddled with higher operating costs. US companies have also moved some of their plants to Trinidad and Tobago, where gas reserves have created a petrochemical sector, including ammonia-making facilities…”
From todays Financial Times

So if you haven’t stocked up your deep freezer - I would advise you to do it now. Welcome to “energy independence”. A spiraling inflation food, energy and resources.
http://tinyurl.com/2jphbq
http://tinyurl.com/2o6dov

Flip that house. I saw a re-run of Flip that house on A&E or whatever cable channel and this mexican/spanish girl bot a 670 sq ft 1 bed/1bath dump in Pasadena for $225k and put $75 into it. The place was a real bum’s galore, but renovated to make it look great. The real estate agent wanted to start to sell it at $549k…I almost choked on my potatoe chips….$549k for a 670 sq ft 1bed 1bath home??? That is over $800 bucks a sq ft……..Shows like Flip this crap hole and make a cool quarter of a million is what fueled the image of easy money…and the housing bubble….people are disillusioned by what new tile, granite countertops, paint, landscaping can do….really…make 1/4 of a million for 2 months of renovation….what a lot of crap.

A little shopping anecdote…

We’re looking to possibly buy one a new washer/dryer combo (the new front loading variety). I went into Home Depot this weekend and the salesman was falling all over himself trying to get me to buy. Actually, they had a decent deal (10% off any laundry appliance and an additional 10% off if you use a Home Depot credit card). That would have saved me about $400 on the spot. I think I’ll wait until next year (probably January) to see what deals are available then. I expect fire sales on big ticket items.

Local market reivew:

http://people.bakersfield.com/home/Blog/schuster80/6978

stockmartketguru - hehehe…I love watching those re-runs of “Flip This/That House” and “Property Ladder”….;-) I have the Malibu one, where the lady ‘wouldn’t consider anything less than 2.3 million’ for her place on my ZipRealty search. Unsurprisingly, it’s been on the MLS for almost 2 years now, and she still hasn’t sold it.

Sadly, $800 per sq ft still seems a quite ‘reasonable’ asking price here in Los Angeles, and you won’t get much change from $500K for anything here at the moment.

Put it this way, some mobile homes on the Pacific Coast Highway are listed at around $300K, and are by far and away the cheapest SFRs you’ll find within spitting distance of the Westside.

And, bear in mind, that if you were to pull the trigger and buy you’d A) be living in a trailer park, and B) live on the PCH…

If you don’t know L.A too well, the Pacific Coast Highway is basically an unoffical coastal freeway/parking lot (depending on the time of day), where it can take up to 10 minutes to pull in or out of your garage, while you wait for an infinite line of cars to actually stop long enough for you to turn.

$500K won’t even buy you a shack in South Central - beacuse, natually, prices there are still going up.

Global warming is already hitting some southern States’ RE hard, according to the following NYT article, “Heat Invades Cool Heights Over Arizona Desert”

It’s the 3rd most emailed article on
NYT’s most emailed article list

I’ve rather relentlessly hyped Gold on here, as some of you may have noticed…

Just got off the blower with one of the bigger players, in things Gold.

He said “it’s all buyers”

I have stood to not profit one red Cent, from my prognostications, and let’s be honest with one another, for once?

Somebody has to end up with the Gold

And i’m always babbling on about Mother Nature,(always bat’s last) and let me tell you how Gold works perfectly into her plans…

As we sit, there is a gross oversupply of fiat money and people, so much so, that if everybody desired their wealth in the yellow metal, there quite simply wouldn’t be enough to go around.

When an alluvial Gold nugget is fished out of a river or a larger Gold nugget is found with a metal detector, in the back of beyond, in Australia, typically, they are about 90% pure. Natural, the Perfect form of wealth.

Your Mother is more than a little pissed. We took 5,000 years to get to a Billion people in 1900, and then sextupled ourselves in just 100 years.

Some of you are going to have to get off.

Time is not on your side.

The following information is posted on the FICO website. In light of everything that’s transired lately I have a hard time believing thier statistics are accurate.

Number of Credit Obligations
On average, today’s consumer has a total of 13 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these 13 credit obligations, 9 are likely to be credit cards and 4 are likely to be installment loans.

Past Payment Performance
On average, today’s consumers are paying their bills on time. Less than half of all consumers have ever been reported as 30 or more days late on a payment. Only 3 out of 10 have ever been 60 or more days overdue on any credit obligation. 77% of all consumers have never had a loan or account that was 90+ days overdue, and less than 20% have ever had a loan or account closed by the lender due to default.

Credit Utilization
About 40% of credit card holders carry a balance of less than $1,000. About 15% are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When we look at the total of all credit obligations combined (except mortgage loans), 48% of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit, and loans-everything but mortgages. Nearly 37% carry more than $10,000 of non-mortgage-related debt as reported to the credit bureaus.

Total Available Credit
The typical consumer has access to approximately $19,000 on all credit cards combined. More than half of all people with credit cards are using less than 30% of their total credit card limit. Just over 1 in 7 are using 80% or more of their credit card limit.

Length of Credit History
The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time. In fact, we found that 1 out of 4 consumers had credit histories of 20 years or longer. Only 1 in 20 consumers had credit histories shorter than 2 years.

Inquiries
When someone applies for a loan or a new credit card account - in short, any time one applies for credit and a lender requests a copy of the credit report - this request is noted as an “inquiry” in the applicant’s credit file. The average consumer has had only one inquiry on his or her accounts within the past year. Fewer than 6% had four or more inquiries resulting from a search for new credit.

go to hgtv.com and go to buyers and sellers blog. you will see the real story about day on the market and lowering of prices. there are no buyers.

From Broward County, FL
As usual thank you Ben for all the great work and dedication. Thanks to other bloggers and “community members.”

Visited the Broward County Prop Appraiser’s website today to track a few props. randomly. I noticed that the current apprasials in some instances are less than purchase price, esp for props. purchased bet 2003-2006. Good sign for us “hold-outs”?

My superhero idol?

Why, Politenessman… of course.

A bit of a comma-kaze, when you get right down to it.

Did anyone hear the experts talk about out-migration from San Diego on KPBS this morning (around 9:45)? Now I know what the BS stands for in KPBS.
“People are willing to pay the sun-shine tax, bla bla, it doesn’t matter San Diego saleries are lower, bla bla, they just cut down on other expenses”.
Cut down? So all the Hummers and RVs and speedboats and 2007 monster SUVs I see around here belong to people from out of town? Makes sense.

A conservatively managed regional bank announced that they will be taking a [small] charge due to problems with a mortgage subsidary, stating: “Investor underwriting requirements for the 80/20 [mortgage] Program do not require independent verification of the borrower’s income.” As an investor in the bank I fired off an email to investor relations asking why they ever engaged in risky “liar loans.” The bank’s CEO just called me! What he said tells us all how bad this will get. He said that the subsidary made a lot of money for them in 04 and 05, everyone was doing it, and Wall Street was really pushing these products. They are now carefully reviewing all aspects of this (translation: drastic tightening of credit standards). The brakes are going to be hit hard, bringing the economy to a screaching halt.

As mentioned yesterday, Hillary is irrelevant, a non-issue.

http://thehill.com/campaign-2008/fifty-percent-of-americans-would-not-vote-for-clinton-2007-03-27.html

Don’t know if this has been posted or not but it has some pretty interesting comments:
Is the housing market affecting the U.S. economy overall?

Beazer Homes is being investigated for Fraud:

http://biz.yahoo.com/ap/070327/beazer_homes_investigation.html?.v=6

The Charlotte Observer reported last week that the company had an unusually high rate of foreclosures in many developments around North Carolina’s largest city. The paper reported that of the 2,900 Beazer homes built in Mecklenburg County between 1997 and 2006, at least 388 have foreclosed — a rate above 13 percent.

Nationally, fewer than 3 percent of buyers lose homes to foreclosure, the paper said. In its series, The Observer documented four examples where the income and debts of borrowers were misstated on their applications for government-insured loans.

You know…

If a few dozen honest men and women, all with a bit of do re mi, in the bank, were to all show up @ the same time and rightfully ask for their money out of said bank, in cash?

Maybe they’d be able to go to say the 4th customer and then, Boom! out go the lights, they’d run out of moolah, hopefully.

I’d be ok with some tv news goons covering the action.

Not that i’d ever endorse such behavior. Reprehensible.

No worries! No credit crunch around here!!!
———————————————————————————–
Posted on Sun, Mar. 25, 2007
PERSPECTIVE COVER STORY
Traps of easy credit
Reckless lending to blame for mortgage woes
By James Grant
COMMENTARY

THE TOP MAN at the Treasury Department urged calm this month in the face of losses on Wall Street brought on by fears of defaults on the riskier kinds of mortgages. Really, he said, the damage is easily containable. (CLICK)

But of all people, Henry Paulson, former head of the New York investment banking house of Goldman Sachs, should know just how reasonable this near-panic was. Easy credit has long been the American financial lifeblood. Anything resembling stringency on the part of our formerly carefree lenders would tend to set the economy on its ear.

Easy credit financed the bull market in houses and the flood of home refinancings. Americans felt richer and spent as though they were. It stands to reason that the withdrawal of this manna will lead them to spend less — with substantial collateral damage to the housing-centered U.S. consumer economy, and, perhaps, well beyond. Our captains of industry owe as much to their lenders’ leniency as does any subprime, or high-risk, home buyer. They, too, have been able to raise money on terms unimaginable only four years ago.

All this sounds scary enough, and it is. But financial history offers some solace. The U.S. economy excels in the art of facing up to error — of identifying it, reappraising it and then repricing it. Loans, especially the risky kind, have been mispriced. They were, and are, too cheap. They will be repriced — as they were, for example, in the aftermath of the junk-bond and real-estate troubles of the late 1980s and early 1990s. Borrowing costs will go up, and the value of the things that debt financed will tend to go down. In an attempt to ease the pain, the Federal Reserve will print more money.

A sign of the times was the announcement the other day by the top U.S. mortgage lender, Countrywide Financial, that it will no longer help the average Joe or Jane buy a house with not one dollar down. The era of lending home buyers 100 percent of the purchase price is over, it said. The other surviving mortgage originators have been forced to adopt similar policies — not as stringent as in Grandfather’s day, but a radical departure from the free-and-easy ways of the recent past.

It wouldn’t matter so much if the new sobriety affected only a narrow segment of the home-buying population. But no less than 40 percent of the residential real estate market faces a much higher borrowing bar, according to a new report from Credit Suisse. About one in five of last year’s mortgage originations could not have been booked if 2007 standards had applied, the banking firm estimates.

But the ripples from this cold bath go even further than the $8 trillion mortgage market. The truth is that the no-down-payment, no-documentation, interest-only mortgage loan has its counterparts in most branches of American finance.

http://www.contracostatimes.com/mld/cctimes/news/opinion/16970799.htm

We have nothing to fear but Wall Street

The US mortgage scandal shows the economy is being held hostage by speculators

Larry Elliott, economics editor
Monday March 26, 2007
The Guardian

Franklin D Roosevelt’s inaugural address to the American people in March 1933 is a work of oratorical beauty. Delivered at the nadir of the Great Depression, it struck the same chord as Churchill’s great speeches when Britain was at bay seven years later. Rereading it, one phrase sticks out. Not, perhaps surprisingly, “we have nothing to fear but fear itself”, but FDR’s tart comments on Wall Street’s role in the collapse of the world’s biggest economy between 1929 and 1932: “Practices of the unscrupulous moneychangers stand indicted in the court of public opinion, rejected by the hearts and minds of men.”

It could be said that Roosevelt’s rhetorical flourishes sit awkwardly alongside the way he snuggled up to corporate America, especially in the early years of his presidency. Yet, he was right when he said the “moneychangers have fled from their high seats in the temple of our civilisation”.

Wall Street’s influence was much diminished in the wake of the slump; there was less conspicuous consumption, a much diminished influence for the financial interest, curbs on capital, a more even division of the spoils. Now, the moneychangers are back, bigger and badder than ever. Sometimes it takes a particular incident to bring to public attention what should be blindingly obvious: that the power of the financial interest (not just in the United States, but in Britain too) has increased, is increasing and ought to be diminished. Unless that happens, there is no prospect of, as FDR put it, restoring the temple “to the ancient truths”.

The incident that has highlighted the problem of an over-mighty financial interest is the sub-prime mortgage scandal. One way of looking at what has happened over the past five years is that the innovative American financial services industry found a way of providing loans so that those on relatively low incomes could become part of a property-owning democracy.

The other way of looking at it is that a bunch of snake-oil salesmen, hucksters and crooks fleeced millions of vulnerable Americans in an attempt to (a) keep the housing bubble going; (b) make themselves fat commissions; (c) create new financial instruments that could be used as speculative plays on Wall Street; and (d) pick up property on the cheap when loans were foreclosed.

http://business.guardian.co.uk/story/0,,2042700,00.html

FDIC’s Bair Urges Congress to Pass U.S. Mortgage Law (Update3)
By Alison Vekshin and James Tyson

March 27 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said Congress should set a standard to protect borrowers against predatory lenders, becoming the first top regulator to urge a legislative fix for the subprime crisis.

“The time has come for national anti-predatory lending standards,” she said today at a House Financial Services subcommittee hearing in Washington. Legislation “should raise the bar by strengthening protections available to borrowers” and be broad enough to cover state-regulated lenders who issue most subprime loans, she said.

http://www.bloomberg.com/apps/news?pid=20601170&sid=aiJAbLZ808Og&refer=home