We May Be Seeing Subprime “Fallout”: NAR
Some housing bubble news from Wall Street and Washington. “The Pending Home Sales Index, based on contracts signed in February, stood at 109.3 – down 8.5 percent from February 2006. The PHSI in the South was 8.0 percent below a year ago. The index in the Midwest was 9.7 percent lower than February 2006. The index in the Northeast was 8.2 percent below a year earlier. In the West, the index was 8.2 percent lower than February 2006.”
“David Lereah, NAR’s chief economist, said there has been a steady narrowing from year-ago readings since last July. ‘If it wasn’t for the unusually bad weather in February, we’d be seeing a better performance in pending home sales,’ he said. ‘We also may be seeing some fallout from a decline in subprime lending.’”
From Reuters. “Grant Thornton resigned as auditor for two troubled subprime lenders because ‘they no longer meet our requirements for client acceptance,’ the auditor said.”
“The two lenders, Accredited Home Lenders Holding Co. and Fremont General Corp., said separately Monday that Grant Thornton had resigned as their auditor after advising them that it needed to ’significantly expand’ the scope of its audit of their 2006 financial statements.”
“Both firms said they were now seeking new independent auditors but that there was no guarantee that they would be able to find them.”
From Bloomberg. “Fremont, the No. 5 U.S. subprime lender, was cited by federal regulators last month for giving loans to borrowers unable to repay them. The Santa Monica, California-based company shut its home-lending operations March 5, put employees on paid leave and hired Credit Suisse Group to sell the mortgage unit.”
“‘The subprime market is one that is getting additional focus by everyone, not just accountants, but in the entire business community’ said Grant Thornton CEO Edward Nusbaum.”
“Accredited Home Lenders Holding Co. said in a separate SEC filing today that Thornton resigned as auditor. Neither company gave a reason. Last month, Thornton said the San Diego-based lender’s financial problems were severe enough to cast a doubt on its ability to stay in business.”
“Thornton’s departure will cause an ‘additional delay’ in the filing of the lender’s annual report, Accredited said in a statement on its Web site.”
“‘I don’t think this is about reputation,’ Nusbaum said today. ‘It is about the risks and issues that are described in the filings’ by Fremont and Accredited.”
The New York Times. “From an 11-story steel-and-glass tower that housed its headquarters in Irvine, Calif., the New Century Financial Corporation ruled as one of the nation’s largest mortgage lenders to individuals with weak, or subprime, credit during the recent housing boom. That reign officially ended yesterday.”
“‘It’s definitely the end of an era,’ said Guy Cecala, publisher of an industry newsletter.”
“Earlier, New Century said it owed $17.4 billion on credit lines from investment banks; most of those debts were secured by loans that New Century made with those funds. Many of those banks, which declared New Century in default in early March, began seizing the loans or auctioning them off in the last two weeks.”
“The results of those auctions, which have not been disclosed, would provide an important benchmark of what New Century’s assets and loan portfolios are worth, said analyst Zach Gast. ‘The bids for the loans put up for auction will provide a pretty good estimate of how much debtholders will be hurt,’ Mr. Gast said.”
The Associated Press. “‘New Century’s failure raises the very real risk that the problems facing the subprime sector will spread into the broader mortgage market,’ said Octavio Marenzi, CEO of Celent, a Boston-based financial research and consulting firm.”
“‘Relatively lax lending standards were by no means limited to subprime lenders, and problems could easily spread to the broader banking sector,’ he said.”
From Business Week. “The fall of the industry’s biggest player to date underscores the market’s tough posture toward the whole field in the current era of rising defaults and shaky housing prices.”
“‘I would say to you that no matter what a NovaStar or a New Century might say to me, I don’t think I’d be reassured,’ says Theodore Kovaleff, a senior bank and thrift analyst at Sky Capital.”
The Kansas City Star. “H&R Block said Friday that problems in the nation’s troubled subprime mortgage market prevented it from meeting a self-imposed March target for selling its Option One Mortgage Corp. unit.”
“‘Clearly they’re in advanced negotiations, but it’s a moving target because of the meltdown in industry,’ money manager David Roberts told Bloomberg Market News. ‘Although it’s very disappointing they didn’t announce the deal today, I’m encouraged by the shares not tanking,’ Roberts said.”
“Michael Millman, a longtime analyst of Block, called the announcement disappointing. ‘We think (Block) lost credibility by waiting to the last minute to confirm what many thought,’ Millman wrote.”
“Moody’s Investors Service put the credit ratings of H&R Block’s mortgage-lending unit on watch for a possible downgrade, citing problems in the subprime mortgage industry.”
“‘While a sale of Option One could still occur soon, the timing is more uncertain,’ said Brian Harris, senior vice president at Moody’s. ‘We expect subprime lenders to be pressured for the rest of 2007 and very possibly into 2008 as well.’”
From Fitch Ratings. “As the U.S. subprime market stresses continue to materialize, 2005 and 2006 vintage structured finance (SF) CDOs will be under greater ratings pressure as they have substantially larger concentrations of subprime RMBS, according to Fitch analysts.”
“Ratings volatility arising from later vintage subprime RMBS will likely be experienced in 12-18 months as the actual loss experience becomes clearer, according to Senior Director Derek Miller.”
“‘Though 2006 performance will be very poor, Fitch’s more immediate concerns focus on near-term ratings volatility that will arise from earlier vintage subprime RMBS,’ said Miller.”
“For years, political leaders touted rising homeownership rates as a sign the ‘American Dream’ was being fulfilled but more than a million looming foreclosures have called the dream into question.”
“‘We no longer have a problem with loan availability … but a lot of our homeowners are one crisis away from losing their home,’ said Hope Wilson, a housing counselor in inner-city Cincinnati.”
“After stagnating at about 65 percent for much of the 1960s, ’70s and ’80s, the U.S. homeownership rate has risen slowly in the past 15 years to nearly 69 percent.”
“But with an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans they cannot afford.”
“Credit counselors facing a tidal wave of panicked homeowners say many should not have taken out, or qualified for, a home loan in the first place.”
“‘Everyone wants immediate gratification. All they think is ‘I want this house now,’ said Joann Brady, director of the nonprofit Home Ownership Center of Greater Cincinnati. ‘The lender was looking only at the bottom line. The client was not reading the documents. It’s both of their fault.’”
“‘We shouldn’t make believe we’re helping people into homeownership by giving them a predatory product that creates a temporary homeownership,’ said John Taylor, president of the National Community Reinvestment Coalition. ‘Two years down the road they are on the street and… in a much worse position.’”
“‘Is it paternalistic? Call it what you want. I don’t care, I’m not running for office. I just want to keep people in homes they can really afford,’ Taylor said.”
It’s odd. This is the least spin in a NAR press release that I can recall.
whats the point? they know nobody is listening. i think DL is preparing for his next job - wants to come away without looking like a total fool to the masses (tho to readers here his image unsalvagable)
They have been taken to task by the Florida realtors (I believe) for losing credibility by obvious cheerleading. They have also be critisized by their own for maintaining false hope in listing owners.
What is the NAR self-interest now?
Convincing sellers prices have fallen, so they will cut the price to a level buyers can afford?
Or convincing buyers the decline is over?
The best scenario for them may be the one Lereah predicted — prices bottoming out by the end of this year. To restore affordability, however, that would require one heck of a decline this year — and low mortgage rates to boot.
The only people they are hosing is themselves by stimulating false hopes. If they (realtors) want to start making some money, then their new campaign should be get folks to drop prices. The only people that lose in the stare-down/stalemate game are the sellers and the realtors. The fence sitters can hold out for a loooooooong time.
Realtors need to cut their fees. Trying to exact 6% from someone who’s underwater doesn’t help their image much either. GM can build a nice sized vehicle for the amount of money “realtors” want just to facilitate a real estate transaction. The title company who actually takes on some risk only charges a few hundered $$.
“Realtors need to cut their fees.”
Right on climber! Spoke to a realtor just yesterday and pumped him for info on showings, sales, etc. To get a dead patio home project moving, he said they offered $100 gift cards to realtors just for showing up and they want to offer “finder’s fees” to neighbors to bring a buyer.
I told him to lower the freakin’ price already . . . silence.
I think WT Economist has it exactly right. NAR needs transactions so that its members can put food on the table, and those transactions won’t occur with the present-day medians.
“I told him to lower the freakin’ price already . . . silence.”
There just isn’t much lowering of the fantasy prices to speak of. I think it’s going to come down to the foreclosures setting the new comps. And it will take quite a few of them since, initially, the pros are still buying those. Only a tsunami of REO’s sold at bargain basement prices will beat sense into the sellers heads.
These idiots don’t care if the market is going up or going down. They have rigged the game so they make money either way. The only quandary they are in is how to get back in the game without anyone sighting them up in their scopes for being a HUGE part of the problem. They were cheerleading and writing books on how it always goes up, and you can’t lose… they want to make money on the way down, but it takes getting the seller’s memories wiped clean of the realtor’s involvement in their pain.
It is too bad they are like cockroaches and will survive a financial nuclear bomb. I don’t see why their profession and commission is protected. Does any other profession enjoy such institutional protection and the right to make money on the upswing and on the crash? With no accountability for their role in it all?
Stock Brokers.
“I think it’s going to come down to the foreclosures setting the new comps. And it will take quite a few of them since, initially, the pros are still buying those. Only a tsunami of REO’s sold at bargain basement prices will beat sense into the sellers heads.”
Exactly BB - I just looked at some the Central Coast REO data over at our blog.
Prices will come down more slowly than you think in many places, IMHO. In desirable areas that weren’t overbuilt, but where prices climbed to the sky (e.g. CA inner Bay Area), prices may flatten or decline slightly in nominal terms every year for several years. Even with flat nominal prices, owners would be losing 2-4% a year just to inflation. Add leverage to that and soon you’re in a world of hurt if you bought at the top and ever have to sell, of course.
They have also be critisized by their own for maintaining false hope in listing owners.
Translation: Realtors ™ are going hungry due to the lack of commisions. They realize that real estate is an elastic market where the sales rate is a function of sales price. As the rate has dropped too low… the only solution is a “sale” to stimulate sales.
Bummer they’re just chasing the market down.
Not to mention the lack of sales will create more foreclosures which will continue the trend of tightening credit.
Who would have thought?
Got popcorn?
Neil
sounds like davidlereachwatch blog is getting to him!
we’re watching, david. someone has to hold you accountable.
The title company who actually takes on some risk only charges a few hundered $$.
Try $3600. That was what we and the buyers had to pay ($1800 each) last year. Separate “sellers” and “buyers” title insurance - what a scam.
Scam isn’t the word. If you get another loan, refi etc, then you need a new title policy (lender’s policy) to go along with it, and you pay again…
Chances are you, the seller, bought an owner’s policy that insures the buyer against any title defect (your sales contract required you to convey a marketable title to the seller). The buyer bought a mortgagee’s policy that protects his lender from title defects (the lender needs to be sure that the collateral in the loan - the house - is exactly as described).
The only potential scam here is the cost. $1800 each!?!? Holy crap! That’s about triple the amount I would expect here, and you have to understand that here nearly 100% of all property transaction records were wiped out about 130 years ago, leaving a huge opportunity to introduce some fraud into the ownership chain!
It’s a scam. There only needs to be one title policy, at most, per transaction. The buyer and lender don’t need to have separate policies - in case of a claim, the payout can go to the “owner”, who will still have to pay off the lender.
Title insurance is one of the most egregious and under-appreciated scams in the whole RE syndicate, 2nd only to the “normal” 6% commission.
“This is the least spin in a NAR press release that I can recall.”
There are good reasons. First, YOY pending sales were down in every single region. Second, MOM pending sales were down in 2 of the 4 reported regions — down in the NE and W but up in the South and Midwest. Thirdly, because pending sales in the higher priced/margins regions (NE and W) were down, median existing home prices will probably fall further. In short, if YOY and MOM pending sales both go negative for all regions and median prices continue to fall, there really is no room to spin.
Courtesy Paper D: http://www.realtor.org/Research.nsf/files/PHS.pdf/FILE/PHS.pdf
I’m starting to think DL takes this blog, and others like it, into consideration before he makes his public statements. He knows if he says something to far off we’ll rip him ’til his mommy cries.
“Well, let’s not start sucking each other’s d**ks quite yet.”
I seriously doubt DL cares one iota about anyone’s opinion other than his NAR benefactors’. That whole that “davidlereachwatch made my mom cry” story was a total canard –just another misdirection prop to be used by the chief minister of REIC propaganda for his own ends.
I don’t know. From what I read at http://news.yahoo.com/s/ap/20070403/ap_on_bi_st_ma_re/wall_street
it’s all good news in the NAR report and stocks are surging.
maybe that means the worst of it truly is over - if he has nothing left to lie about.
OT, some ideas for where to live rent free in Kiplinger’s (is this the beginning of a new trend?):
Yes, You Can Live Rent-Free
“The couple figures they’ve saved more than $10,000 in seven months by living in someone else’s house and basically watering plants, taking out the trash and making sure the home doesn’t look vacant.”
That is a hell of an idea - it would probably work great in Arizona or Florida where speculators are sitting on thousands of empty homes. It may be a good way to get a free stay in Las Vegas for a few vacation days as well. No need for a hotel. Just make sure the property has a lived in look.
Sounds cool until you read they’re on their SIXTH house-sitting tour in SEVEN months. Moving more than once a YEAR is painful enough, but moving, on average, once a month!?!? No thanks.
(And, yes, I know that they likely have less to move since these places are furnished, but moving is moving and, to me, it is a pain.)
Hmmm. If you managed to stay in the house long enough, I wonder if you could get title via ’squatter’s rights’? Possibly only if the owner stopped paying taxes and the occupant started paying the property taxes? I do know it used to be possible to squat in vacant property and gain title…
It is still possible to gain title by squatting, AKA adverse possession. However it generally doesn’t work if you have permission.
Don’t worry WS will always ppick up the slack…
http://www.signonsandiego.com/news/business/20070403-0722-wallstreet.html
“David Lereah, NAR’s chief economist, said there has been a steady narrowing from year-ago readings since last July. ‘If it wasn’t for the unusually bad weather in February, we’d be seeing a better performance in pending home sales,’ he said.”
What unusually bad weather? For most of the country, it has been incredibly good.
He meant “bad financial weather,” as in “sudden financial ice age.”
Good one!
What a freaking idiot….we didn’t get ONE DROP OF RAIN in California in Feb….it was a new record….this is insane….
No hurricanes in Florida either.
Boring weather NNV as well. We’ll be talking drought this summer.
Front Range Colorado weather was immensely better in Feb. than in Dec. or Jan.
He’d have more credibility if he blamed it on the NFC losing the Super Bowl.
The weather argument is such a load of crud. It was colder than normal in Chicago with a bit of snow, but 99% of the people who live here (and in the rest of midwest) don’t board up their houses and hibernate all winter. If you can believe it, Mr. DL, we actually live our lives fairly normally, albeit with a coat and hat and gloves.
The weather (barring massive crippling snowstorms, hurricanes or tornadoes) is simply not a major deterrent to house buying. Maybe the numbers are down for another reason?…
The real story is that in the face of truly exceptional weather, home sales were only flat after months of depressed sales numbers. If this is the Great Spring Selling Season of 2007, it ’s over before it started.
…99% of the people who live here (and in the rest of midwest) don’t board up their houses and hibernate all winter.
And some of us crazy eastcoasters actually travel to Chicago for a week’s vacation in February! In fact, the week I went out there I believe it was the 4th coldest week on record. Didn’t stop me from vacationing…certainly wouldn’t stop me from buying a house.
Mr. Lereah can believe it because, believe it or not, all he has to do is look out his office window.
The NAR is headquartered on Michigan Ave.
Wow, didn’t realize we’re the home of the NAR. Looks like per his bio he lives in VA.
http://www.realtor.org/Research.nsf/Pages/LereahD
LOL it’s been beautiful in the Bay Area. Wish we DID have more rain.
Agreed! Bay area weather for March was pretty sweet, and it continues today. If we don’t get a nice deluge soon it will be a thirsty summer.
A pending home sale is not the same as an actual sale (the pending number is much larger in most reports???). But I guess it’s the best they have.
BTW: Did we have unusually bad weather in San Diego in February? I don’t think so; but to quote Casagrand: “February 2007: San Diego Housing Market - single family attached and detached homes: Sales for the month of February were 1,725 homes sold, down 18% from last February and down 31% from February 2005.”
HP called this report “pending cancellations.”
Hey, in my business, I have several sales PENDING right now. But, as I found out a few days ago, a sale isn’t a sale until the contract is signed and the money changes hands. (In that case, I thought I had a good-to-go arrangement with the owner of the business. But then when I tried calling and e-mailing him to follow up, he was nowhere to be found. Reason: He’d just gone into cancer treatment, and, hence, the deal was off.)
“The Pending Home Sales Index, based on contracts signed in February, stood at 109.3 – down 8.5 percent from February 2006. The PHSI in the South was 8.0 percent below a year ago. The index in the Midwest was 9.7 percent lower than February 2006. The index in the Northeast was 8.2 percent below a year earlier. In the West, the index was 8.2 percent lower than February 2006.”
As there is no national U.S. housing market, the PHSI was coincidently down for February by 8 percent or more YOY in every corner of the country…
I went to the marketwatch website and the first story I read is that the DOW is rallying due, in part, to the .7% RISE in pending home sales. This thing is so stubborn that I am thinking it’s going to take several years to play out. I have no clue who all of these buyers are in the housing market. While transactions have cooled quite a bit from their dizzying levels during the height of the boom, the fact remains that there are still countless idiots buying homes. I don’t understand how this thing is still chugging along. My best guess is that people of means are still speculating.
I think the smart money is putting lipstick on the pig, so they can get the last penny out before the crash. It’s all smoke and mirrors.
These numbers are for pending sales. That obviously means they haven’t closed yet. Who knows how many of these “sales” will falll through after failing to get funding thanks to recent changes in the mortgage industry?
So let me get this straight. They are comparing today’s pending sales to the previous month’s actual sales? Becuase afterall, they would use pending sales for past months would they? This is another huge crock yet there are dummies that still fall for this kind of thing.
Wouldn’t .7% effectively be within the margin of error?
Josh
“Wouldn’t .7% effectively be within the margin of error?
Josh”
It would be if they were using sample statistics. However, I believe these numbers use all data, which means that inferential statistics do not come into play.
From the NAR release:
“The Pending Home Sales Index is based on a large national sample, typically epresenting about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer parallel between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than there is with month-to-month comparisons.”
So, it is a sample, but they do not state what the margin of error is. Also, the NAR states that YOY changes are more meaningful than MOM changes, especially because this is a new index (started in 2001) and they haven’t worked out all of the seasonal adjustments yet. To me, that makes the 0.7% rise fairly meaningless. Also, could there be more homes still “pending” because of problems with loans closing (i.e., typically a home would go from pending to a closed or actual sale w/in 1 or 2 months, but with problems obtaining loans, these pendings might be staying on a bit longer and therefore piling up)? Just a thought.
We’re still looking at February numbers here. Wait until the March ones come out.
From Reuters. “Grant Thornton resigned as auditor for two troubled subprime lenders because ‘they no longer meet our requirements for client acceptance,’ the auditor said.”
“The two lenders, Accredited Home Lenders Holding Co. and Fremont General Corp., said separately Monday that Grant Thornton had resigned as their auditor after advising them that it needed to ’significantly expand’ the scope of its audit of their 2006 financial statements.”
“Both firms said they were now seeking new independent auditors but that there was no guarantee that they would be able to find them.”
The rat’s are fleeing the sinking ship. We’re now seeing related businesses trying to distance themselves from the meltdown.
This isn’t going to help the OC job market…
Got popcorn?
Neil
Looks like Grant Thorton doesn’t want to become the next Arthur Anderson! Can’t blame them.
Next month DL will claim that tax season and the Easter Bunny slowed down sales.
Nah, the real reason is that sellers played a lot of April Fools Day jokes on buyers this year.
“From Fitch Ratings. “As the U.S. subprime market stresses continue to materialize, 2005 and 2006 vintage structured finance (SF) CDOs will be under greater ratings pressure..”
blah blah blah
If I want a pulse of the market I go to ml-imlode.com
San Diego foreclosures made it past 3000 this morning, there are now 3055 according to:
http://www.foreclosure.com/search.html?st=CA&cno=073&z=&tab=f
The number was 415 when I started tracking it on 7/3/2006.
7.36x in 9 months….
Tom,
Just to clearify, is that the # of foreclosures in San Diego ( a.k.a. whales vagina) or San Diego County? I’m just try to get a handle on the # of foreclosures based on population.
Chicago stands at over 6000 foreclosures but I haven’t been tracking it. I’ll start doing that now. Good idea!
San Diego County.
Zip codes from 91901 to 92173.
thanks!
can you email your data since you started tracking? mickey_schoene at yahoo.com. (thanks!)
Wall Street today sure likes these housing numbers, up over 100 points.
The economy seems to be doing fine. If home prices don’t start showing significant declines in the next few months, I think we may have to wait until the economy really starts to slow down and the unemployment rate rises before we’ll start to see large home price declines. People still have money to spend on housing and other things.
I don’t think the housing crash will bring the economy with it.
I think home prices will fall slowly for several years, while the economy maintains sluggish growth.
So, you must think that this so-called economy is based on something of substance other than housing. What’s going to keep the party going Justin, even at a “sluggish” pace. Please, enlighten us so the rest of us can share in your ‘better-than-ya-think” outlook.
Oh, I have no clue what’s going to happen in the market. But then again, neither do you.
I just don’t buy all the doom and gloom. I think there is a bubble. I think it will crash. And that’s it. I don’t think the economy will go down with it.
But who knows.
Ahh hahahahahahaha. A voice of reason! That’s not allowed on the Internet! Lol. If anyone really KNOWS what is going to happen while everyone else is speculating, all you have to do is leverage the crap out of a position that falls in line with your prediction, and you will never have to worry about the future again.
A friend of mine did just that.. that is to load up on just the right put options ~7 months ago. I remember the conversation we had right before he bought. I also remember not having the stones to do anything like that myself. Fortunately for my friend, he did, and now he’s sitting on around $1.4 mil. Life changing event for him… hard self-kick-in-the-groin for me (or at least that’s what it felt like). But in all seriousness, he had the stones, and it paid off so I’m happy for him.
did he buy leaps..what was his profit %?
Agreed. The U.S. will experience disinflation (not deflation) due to the housing crash, followed by hyperinflation after the Fed pumps more liquidity into the market. The “ka-poom” theory in a nutshell, courtesy of itulip.com.
“Wall Street today sure likes these housing numbers, up over 100 points.”
“I don’t think the housing crash will bring the economy with it.”
Depends on how you look at it…
The market is going to keep going up in my opinion, but this is not due to performance, but rather due to the devaluation of the US Dollar. Real inflation is probably over 5% maybe even closer to 10%, so the dollar is becoming worthless more quickly than reported. That means that the market must gain that much a year just to break even.
Bottom line is that even ‘growth’ on wall street isn’t really growth IMO, but rather flatness in relation to the real world dollar value.
On the international money markets, the last 6 months show the USD comparable to EUR and GBP, but down to the JPY and CAD. So not much story there yet… let’s see what China does.
Given just a bit more time on the record trade deficit, record levels of consumer debt and a prolonged or increased war in the middle east and the US economy will be brought to its knees.
Didn’t you notice how the Chinese Central bank decided to stop buying US treasuries 2 weeks ago? Kinda big don’t you think seeing how they were the largest purchaser for the last few years…
“Given just a bit more time on the record trade deficit, record levels of consumer debt and a prolonged or increased war in the middle east and the US economy will be brought to its knees.”
This is the bubble that I am really afraid of.
I have two friends that just bought new homes, one sold their condo and bought a house, the other couple bougth a condo. Insane prices to me. This is in Hampton Roads/Southeastern Virginia. They tend to think of my blog addiction as more tin foil hat than anything. They do see the news now, but their wives I’m sure drive a big part fo the demand. Another friend is planning to buy in Silicon Valley. He did well some time ago, and said the tax benefits would help him. He says there are lots of new companies springing up everywhere in the Valley, high paying jobs and all that. He talks as if the .com ordeal is starting to happen again.
Meanwhile, you can’t deny locally that inventory is sky high, and growing 400+ homes a week on top of the sales. My bet is that there is a bit of activity then it all falls off.
If anything, this bubble has made me rethink my desire to own a house at all in my region. I’m a tech guy, and the jobs I’ve had here have always been unchallenging and unsatisfying. The more I think about it, the more Washington DC area looks appealing. If I make more up there (no doubt), I spend more for a house… but when I do retire, I would have more equity…. on top of the fact that there are more tech people up there, and companies that do stuff other than leach from the gov’t. *shrug*
There IS alot of VC funding coming back to Silicon Valley. The Valley is doing well but it is not ‘roaring’ back. Also, alot of the funding is going to bio medical and alternative energy business’s not the standard dot.com chip making industries from the last cycle.
That said, prices in Santa Clara and the rest of the valley are still sky high and very unaffordable even by the ‘highly paid’ tech workers.
100k a year does not buy you an 800k mortgage.
100k a year does not buy you an 800k mortgage.
But he can just refinance next year and take equity out to pay off his credit card debt.
Va Beyatch-
I grew up on the north end of VB (Cape Henry area) and moved to Northern Virginia when I got out of college 20 years ago. Still get back down there a lot due to family. If you are seriously thinking about moving to DC, here’s my perspective. Traffic in DC is way worse than VB. Same crappy VDOT-designed roads with 10x the number of people driving them. Definitely you would want to live close to where you work. Also, DC was built on a swamp and in summer you can definitely tell. No nice ocean breezes! Housing prices are higher than VB, though not by a lot. On the plus side, salaries are a lot higher, there are plenty of great museums, theaters and restaurants and of course the Mall. Don’t know what you do in tech, but the tech market here is very strong. All in all, I would not go back to VB, but there are a lot of things about it that I miss.
Yea, I was born and raised here, and currently reside in Norfolk. Currently mostly sysadmin (UNIX/Solaris/IRIX/Linux) but have a pretty long resume and also keep up with computer security pretty heavily. I’ve worked for the names… NASA Langley, JLAB, JFCOM, NMCI, and one small startup. There is one last smaller company I will most likely work at but once that is up, I’m getting pretty tired of the area and there isn’t much left as far as fun, challenging jobs. Everytime I go somewhere that seems it would be great, it turns out to be a dissapointment. I’m pretty involved with the local tech community and am going to get involved with that up in DC. One thing is I would expect 2x the salary in the DC area based on housing costs, and I’m not sure how hard that will be to achieve. Not very difficult from what I’ve seen.
Well, if you come up to Northern VA it all depends on where you work as to your housing costs. Prices are getting cheaper all the time in the outer suburbs. Some McMansions have had 25% drops from ‘05 peaks. All my acquaintances/family do tech work and there are large tech job centers in Loudoun County and elsewhere.
Anybody betting their nest egg on the numbers submitted by NAR would be a fool. Even if they are “real” numbers, they are not very good in in light of the yoy decline. It won’t be long before tshtf and the dow will plunge.
Sounds to me like you’ve been watching or reading too much Bloomberg or CNN. If it makes you feel warm and fuzzy to have your ears tickled by the false prophets of the financial world, then knock yourself out. (I’ll watch a little CNN and Bloomberg from time to time myself, but purely for comic relief)
valuations for the major indices are reasonable…15.6x this year’s earnings is not exactly the stuff that leads to a bear market. Residential RE may be a lousy investment for the next few years, but that doesn’t mean the same is necessarily true for stocks.
15.6x using current guidance. We’ll see major revisions over the next few months IMO
Revisions from whom and by how much? ~16x just isn’t a very demanding multiple so the revisions will have to pretty deep and widespread to pull the market down a lot.
The combination of reduced current earnings are reduced future growth could cause a contraction - the Dow is still very disconnected from the long term trend line
the trend line of what? all I’m saying is that stocks aren’t pricing in a lot of growth here.
When you talk about a market and where it’s going but don’t talk about price/valuation you sound like a realtor.
I very rarely watch, listen, or read Bloomberg or CNN but I do read a lot about the housing bubble. I was actually hoping for quick crash in prices and since there have only been very modest declines in prices, I’m beginning to conclude that it may take a significant decline in the economy before prices decline.
Many on this board accuse Wall Street and other experts of being biased against there being a housing bubble but I have to say many of those same people are biased the other way. I’ve been reading articles and posts here for over a year and can’t count the amount of doom and gloom. No one knows how this will turn out, I’m just trying to get the best information before I buy again so I listen to consider both sides.
I have a feeling that outside of the bubble hot zones, like around Sacramento for example, it’s gonna be a couple years before we see price reductions that could be described as a “crash.” Seller psychology sets the asking price on houses, and it won’t be until the very last moment possible that homedebtors would concede to a significant price reduction.
Which is bad if you want to and are ready to buy, like me. It’s also bad if your mortgage payments are leeching every last cent of your savings. For housing bulls and housing bears its a lose lose situation either way. For the financial industry it has been good times.
Ack… just to clarify the above: Sacramento is a bubble hot zone, I wouldn’t doubt we’ll see rapid price declines there in short order. In other areas of California, like the bay area, it’s going to take quite a bit longer.
Not so sure the bad times aren’t a comin’ sooner than you thought to a bay near you.
http://www.contracostatimes.com/mld/cctimes/17019067.htm
The Govt should have been assisting borderline buyers get intothe market instead of leap frogging down to the very very low income people - the borderline folks made too much money for the govt and were forced to get risky loans since the govtwas getting all the lower incomepeepsinhomes….
To be considered eligible, participants must:
1. Have had Section 8 vouchers for at least 1 year prior
2. Be enrolled in a Self-Sufficiency program OR be referred by Section 8 staff
3. Have an income of at least $15,000 per year or $1250 per month (before taxes) (single person household)
http://www.housingwithinreach.org/index.asp?p=62
The government should get out of the business of “assisting” anybody to buy a house. Those who want to buy should save a downpayment and have the income to satisfy a decent bank. Those who cannot afford to save or whose income is too low should rent. The US is still nominally a capitalist country, but you seem to be in favor of socialism.
Amen! I can’t believe how many of my fellow citizens have bought into the whole Nanny State concept. Instead of trying to shoehorn low-income people (who tend to be lowlifes as well) into their own houses, and dragging down whole neighborhoods in the process, Uncle Sam should butt out and let people reap the rewards (good or bad) of their own choices, effort, and capabilities.
…or the government could just mind its own business.
spike: you beat me to it.
Which one of these things is not like the others:
1. New Century’s portfolio problems;
2. H&R Block’s inability to sell Option One;
3. Fitch issues CDO warning;
4. ABX index prices range from 66.59 for BBB to 99.5 for AAA;
5. LEND sells $800 million of mortgages for 100.63%.
“Accredited (LEND) also announced that it had obtained a new $500 million warehouse line of credit from a “large commercial bank” that it didn’t identify and renewed an existing $600 million line.
The company is also in discussions to renew another $650 million line and said it held $350 million in cash at the end of the quarter.
“These factors suggest that the company currently has adequate liquidity to continue operating,” broker Keefe Bruyette & Woods said in a note to clients. “We believe that the news about the improvement in the company’s liquidity position and the loan sales at prices above par will likely offset concerns about the resignation of Grant Thornton.”
However, KBW cautioned that the company’s longer term outlook remains challenging because of weak profitability and falling volumes.
The company originated $1.8 billion of loans in the first quarter, down from $3.9 billion in the fourth quarter and $3.6 billion a year ago.
Accredited Home sold $800 million in loans for 100.63% and entered into a forward sale contract to sell another $400 million at the same price in the second quarter.
http://tinyurl.com/2zbfhl
…and it’s auditor or whatever just resigned.
Good thing lines of credit can’t be withdraw at the first whiff of a problem. Oh wait….
You have GOT to be kidding me:
From Times OnlineMarch 25, 2007
Man, 102, takes out 25-year mortgage
Brendan Montague
A pensioner aged 102 has been granted a 25-year mortgage despite the fact he would have to live until 127 to pay the loan back.
The property investor from East Sussex has taken out an interest-only £200,000 mortgage and hopes to meet the £958 monthly repayments with income from rent as he joins a growing army of retired people hoping to cash in on buy-to-let schemes.
Most lenders set a limit at 75 years for mortgage applicants but a handful, including Woolwich, and Bristol & West, have no such restrictions. This has led to a rush of applications from older investors.
http://tinyurl.com/2fmzah
The loan is secured by the property, not the borrower’s ability to repay. It’s the new lending paradigm.
Sometimes a little age discrimination might be a good thing.
I hope it wasn’t his final breath that fogged that mirror?
Doubtful, but who knows? My grandfather took out a 5 year car loan at age 94 - he paid it off last year. When I asked him how much driving he did, he said he filled it up about 3 times a year. so 1,000 miles. But 127? Kind of a hard sell to an accountant.
Talk about lifetime debt serfdom! This gives new meaning to being a debt slave for life. WOW! I don’t care if the loan is secured by property. I would not want what basically amounts to a 400K (in US dollars) loan around my neck at 102. This lending institution is just wrong for lending and this old dude is out of his mind. My best case ending to this story is that everone loses. Guy can’t make payments and property is worth only 1/4 of the loan. What a joke banking has become.
Most lenders set a limit at 75 years for mortgage applicants…
Really? Well I may be screwed out of a 30-year fixed if I can’t buy a house in the next 4+ years…
Maybe he can refi in heaven…
Because Hell will give him a 80/20 suprime exploding ARM!
Geez
In the states a major lawsuit was won by AARP ( Ibelieve) a few years back about a retiree being denied for a 30 year mortgage due to age discrimination. For the lender it is about getting paid by the estate or heirs.
“‘The lender was looking only at the bottom line. The client was not reading the documents. It’s both of their fault.’”
Yes, it is, and it’s no one else’s fault. The two parties involved can figure out the mess themselves. No bailout. Let the market prevail and determine if these folks can afford to stay in their house or foreclose.
Its odd but the market is hailing the Jan/Feb uptick as good news. Lend may go in to a merger (uhg). I have a buddy with GS… nothing like grabing on to a multi billion liability to hemorrage some value.
Markets are weird.
The analysts still believe their is a subprime market.
It’s all quite meaningless in the end. Lending standards didn’t really tighten significantly until mid-to-late February, so the real pain won’t come until we see some numbers for March.
How would “regulators us(ing) their existing authority to contain subprime-lending problems” fail to make prices fall harder and faster, leading to more, not less foreclosures? I guess I just don’t understand Democratonomics.
‘New Century bankruptcy shows need for subprime action: Dodd
By Robert Schroeder
Last Update: 1:48 PM ET Apr 3, 2007
WASHINGTON (MarketWatch) — Monday’s bankruptcy filing by subprime mortgage lender New Century Financial should send a “serious signal” to U.S. regulators and mortgage-finance industry participants that immediate action is needed to prevent Americans from losing their homes, Sen. Christopher Dodd, D-Conn., said Tuesday. “New Century’s filing for bankruptcy protection is yet another illustration of the depth and breadth of the turmoil in the subprime mortgage market,” said Dodd, who is running for president in 2008. Dodd has said he would prefer that regulators use their existing authority to contain subprime-lending problems but hasn’t ruled out writing a new bill to deal with the issue.’
“For years, political leaders touted rising homeownership rates as a sign the ‘American Dream’ was being fulfilled but more than a million looming foreclosures have called the dream into question.”
Yes, ever since I was a little tyke, my dream was to commute two hours from my big-city job in horrific traffic to my cookie-cutter stucco sh**box bedroom community so I could pay 60% of my wages toward a mortgage and property tax and never afford a vacation, all while worrying about my ARM to re-set. Thank God (or common sense) that I’m a fencesitter.
What can I say?
D-FW apartment leasing sluggish
Weak housing demand is at odds with strong jobs data, analyst says
10:39 AM CDT on Tuesday, April 3, 2007
By STEVE BROWN / The Dallas Morning News
stevebrown@dallasnews.com
Dallas-Fort Worth’s apartment leasing continued to lag in the early months of 2007.
Only 480 net leases were recorded in the area during the first quarter – a fraction of the more than 5,600 units leased in the same quarter of 2006.
“I was a little surprised the apartment demand number was not stronger, but it wasn’t horrible,” Greg Willett, vice president of research and analysis at Dallas-based apartment consultant M/PF YieldStar said Monday.
D-FW APARTMENT MARKET PROFILE
First-quarter 2007 statistics:
Completions: 1,307 units
Demand: 480 units
Average monthly rent: $708
Average occupancy: 93.1%
Units under construction: 10,631 units
SOURCE: M/PF YieldStar
The anemic first-quarter apartment leasing follows a net decline in apartment leasing during the final quarter of 2006, according to M/PF YieldStar’s research.
With home sales slowing, Mr. Willett said, the weak apartment demand must be due in part to economic conditions.
But that’s at odds with the latest jobs data for North Texas. The Texas Workforce Commission recently revised its estimate of employment growth in Dallas-Fort Worth to 94,300 jobs in 2006. That would be the best job market in six years.
Initial estimates had put D-FW employment gains for the year at about 65,000.
“The new job numbers we are seeing don’t look realistic,” Mr. Willett said.
“I don’t know how you can be creating that many jobs and not have more housing demand than we are seeing,” he added.
Even with the recent poor performance, citywide apartment occupancy levels and rents inched up in early 2007.
“Dallas-Fort Worth is at least headed in the right direction in rents and occupancy,” Mr. Willett said. “Most of the other markets in the country are not at this point.”
Overall occupancy edged over 93 percent, and rents rose about 2 percent in the first quarter from a year earlier.
“Operators are getting a little more aggressive in boosting rents, after taking a conservative pricing position during late 2006’s slow leasing period,” Mr. Willett said.
Average monthly apartment rents in the D-FW area now top $700 a month.
With the slowdown in leasing, apartment construction far outpaces demand. Builders completed more than 1,300 units in the first quarter.
About 10,600 units remained under construction at the end of March.
Apartment markets are tightest in central Fort Worth, Las Colinas, Richardson and Allen-McKinney, according to M/PF YieldStar’s report.
Occupancy rates in some neighborhoods are increasing because of demolition of older apartments.
About 6,300 apartment were taken out of the market during the year ending in March due to demolition or conversion into condominiums.
“Investors” renting houses and condos competing with professional landlords? It’s what we call the “shadow supply” since the real estate industry only tracks the regular apartment market.
That’s also why a lot of these apartment owners are in for a nasty surprise if they get too aggressive with their rents.
Yep.
Funny that a month or two ago I was in my apartment office to talk to them about renting the guest suite ($100 a night for a fully furnished apartment in downtown Chicago - beats the hell out of a hotel!) and I overheard parts of a meeting in the conference room talking about how to set the rents for the next year.
One person seemed pretty concerned about going too high because of all the condos expected to be on the rental market.
I guess they decided it wasn’t a large enough factor - rents are going up about 5%. At least they told us with plenty of notice - I have until the end of July to find something better on Craigslist. On the other hand, it’s very possible that I have been underpaying, considering what comes included with the rent (heat, A/C, gas, water, washer/dryer, internet, satellite tv, fitness center, pool, etc).
Democracy Now is going to air a segment on subprime loans on its regular newscast tomorrow (Wednesday). It will be available to watch any time after noon eastern.
http://democracynow.org/
So, New Century had $17.5B in credit lines, to be covered by the sale of its loans. Take that number, multiply it by the average discount on the sale of loans (it will be nothing short of a miracle if they go for only a 10% reduction–probably more like 30-40%), and apply that to the bottom line of the investment banks. Anyone who thinks that this is just a sub-prime problem needs to ask the question of who the sub-prime lenders owe money, and how much of that they’ll be able to pay back.
“But with an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans they cannot afford.”
This brings to mind a farmer’s parable:
Mabel: Wilbur, the barn door was left open last night, and all the horses have run away!
Wilbur: I’ll go out and lock the door shut, to make sure that in case the horses return, they will not be able to get back into the barn.
This morning I heard the good news about housing on the radio AM 740 San Francisco and CNBC.
If one walks away from reality (this blog) someone on the sidelines would get sweaty palms.
I keep asking the same question. If it’s such a great time to buy and properties are such a “value” right now, why is it that the money spigot is shut off? The money lenders ought to be pouring it out since it’s such a nobrainer to buy here.
And what are all these people supposed to buy with since apparently lending restrictions have moved backward 5 years?
I don’t know. The stock market just had another good day and inventory is fairly low in some areas. I believe this is the year that seoarates the true bubble areas from the rest. Quite a few markets are showing signs of life.
So these are the people buying downtown San Diego Condos now. Where is all their money coming from? Do they read the news, do they see the crowds of homeless, do they hear the construction on all the new inventory that is threatening their condo-values?
http://www.sandiegometro.com/2007/apr/dtliving3.php
“We will be happy as little clams,” she says, “with just enough space to hang our clothes.”
Gretchen and her husband, Dominic, live in Scripps Ranch with their young children and a grandfather. This condominium will be the family’s “getaway place.” (its about 20 miles from Scripps Ranch to downtown - this is a getaway????$$$$????)
“Starting Smart: I’m not so happy that it’s a studio, but that’s all I can afford,” Joel says. “I wanted to get into the real estate market and I like that the space is Downtown.”
That could have been one of the most disgusting shill for downtown real estate articles I have ever read!
David Liar: “We maybe seeing some fallout from sub-prime.” Maybe!? Yeah, maybe you’re right and maybe smallpox kills people. Idiot.
wow the nar is admitting there is a subprime blowout. How nice of them since they saddled a bunch of zero debt zombies into houses they could not afford by their bs propaganda.
What a friggen shameful organization!
Sickening…..BS continues to flow from their cesspool.
Bottom line in US Housing …
Nobody should even Speak to a Realtor, a Seller, or even Look at a House FOR at least months if they can help it.
SHUN them completely.
These Greedy Parasites BOTH need to go Hungry and Feel some PAIN for a while…and BIG PAIN is coming.
I agree wholeheartdedly, but this is hard to do in So-Cal, where every other person is in the RE market.
My secretary? Loan doc notary.
Wife’s friend? Loan agent
Wife’s friend’s husband? RE agent
Wife’s other friend? RE agent
My Supercuts hairstylist? P/T RE agent (sticks her card in my shirt pocket while shampooing my hair).
And on and on…I will have to live like a hermit crab to acomplish this task.
While I understand the sentiment, I think “productive engagement” of realtors is a lot more effective than shunning them. I make it a point to go to open houses, armed with information (from the county assessor’s website) on what the sellers paid. Then I point out to the realtor that 1) I’m part of the rapidly evaporating pool of creditworthy buyers; and 2) I’m renting, and patient; and 3) realtors are the “enablers” for greedy and delusional sellers. I tell them why I think the properties they are offering (most of which have sat on the market for months) are overpriced. I’m courteous, but let them know in no uncertain terms that the party is over and I refuse to pay 2005 prices. They need to hear that, and to make the proper connection between overpriced homes and listings languishing unsold.
Leah is a joke. The only guy that has been right whole time, and has earned my respect, is Bill Fleckenstein. And you folks on this blog.
http://articles.moneycentral.msn.com/Commentary/ByAuthor/BillFleckenstein.aspx
Here’s the link to Fleck’s MSN articles.
David Lareah reminds me of that old Iraqi information minister guy. Also, wonder what the odds are of mortgage foreclosure sales contracts or the process of foreclosures itself being booked as sales. Nah, that would never happen eh? Don’t know who I have more disgust with, NAR/David L for spouting some toxic spew, the sheeple dumb enough to believe it or the Wall street thieves using this garbage and running with it to pump up their wallets.
You guys all have it wrong… The N.A.R. told us to expect a spring bounce and they just said it occurred in the February numbers… a 0.7% rise in homesales! YOU GUYS ARE SO OFF THE MARK IF YOU THINK A FEW SUB-PRIME LENDERS FOLDING IS GOING TO SCARE OFF HOMEBUYERS! TIME TO BACK UP THE TRUCK AND BUY SOME HOUSES!
BTW, I’m KIDDING! I think the housing market will be pushing roses come summertime.
Ah, the old Iraqi Minister of Information!
“There is no meltdown - no meltdown at all. It is plain that you can see that, yes? You would be an idiot to believe in a meltdown!”
“The buyers are coming - they are here right now! And they will buy our homes with much money. And the bears of real estate will die a thousand deaths and be priced out forever!”
“There is no meltdown - do you hear me? No meltdown! The NAR has said this, and it is so. Praise to the NAR! Our enemies will burn in a sea of lost equity!”
“The market correction will soon be over, and then will come the spring selling. The season is almost upon us! The real estate bears will wish they had bought a thousand houses a year ago, but we will laugh at them as they burn.”
“Subprime? There is no problem with subprime! We have much money with us, and even more is coming soon! The real estate bears are priced out forever and want us to lose money, but it will be they who lose money!”
And so on! Hehehe…
http://www.welovetheiraqiinformationminister.com/
The Iraqi Information Minister was the buffoonish mouthpiece of a thuggish and genocidal government. He risked a bullet to the head, or worse, if he told the truth. DL and his ilk in the NAR, on the other hand, have no good excuse for their shameless lying.
This really steams me. All the rats are jumping shit. LEND and FMT are losing their auditors who want out before the poop hits the ventilation device. Countryslide just had two board members resign and today their stocks are up.
Nice. As a new investor I’ve really had my eyes opened to the amount of ignorance on the stock market. That these stocks are going to go down is about the closest thing to a sure bet you’re going to get on Wall Street yet people keep buying them.
Even the “geniuses” at Goldman were holding 2 million shares of NEW as of December 2006.
“David Lereah, NAR’s chief economist, said there has been a steady narrowing from year-ago readings since last July. ‘If it wasn’t for the unusually bad weather in February, we’d be seeing a better performance in pending home sales,’ he said. ‘We also may be seeing some fallout from a decline in subprime lending.’”
He’s not a weatherman, nor an CEO of a sub-prime mortgage company, he’s just the Head Economist of the NAR, therefore none of this is his fault. If it wasn’t for all this unforseen shit his prediction of ever increasing house prices would be correct.
What a self-serving a$$hole.