Bits Bucket And Craigslist Finds For April 11, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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buy vs rent / nice realtor bashing plus an excellent buy vs rent calculator!
Most Americans Fear Recession in the Next 12 Months
An Inflation Heat Map
just in time to stand then spin after the fed minutes release today….
http://immobilienblasen.blogspot.com/
Half expect a recession in the next twelve months. The same half expects home prices to hold.
Expect a recession in the beginning, but will develope into a full blown depression. The government can’t stop it.
As long as the stock market keeps going up, I don’t foresee any problems.
————————————————————————-
Macbeth, SCENE V. Dunsinane. Within the castle.
“I pull in resolution, and begin
To doubt the equivocation of the fiend
That lies like truth: ‘Fear not, till Birnam wood
Do come to Dunsinane:’ and now a wood
Comes toward Dunsinane.”
– William Shakespeare –
People are not living in reality. They are in these imaginary worlds where everything turns out great. “And they lived happily ever after.” The smart money is leaving the markets and will be smiling all the way to the bank. Take a look at your state, city, county and township economic situations. This is on top of the federal economic situation. People are blind.
“People are blind.”
People are blinded, by economic propaganda spewed forth in the MSM.
I did a less-detailed “rent vs. buy” analysis on just one house offered up for sale or rent here in my part of South Florida several months back. The asking price? 985,000. The asking rent? $2,000 a month. Needless to say, monthly costs on a mortgage, plus insurance, taxes, upkeep, etc. are so far and away above the rental cost that the owner of this place should have his or her head examined. And this is by no means the only example of pricing nuttiness … just a particularly egregious one.
By the way, my original analysis and post was from September 2006. I’m sure no one is shocked to learn the house is still on the market today. What may be surprising is the fact the asking price hasn’t budged. There’s your textbook case of denial.
Here’s the original post …
http://interestrateroundup.blogspot.com/2006/09/buy-vs-rent-insanity-in-south-fl.html
Never overlook landscaping when trying to sell your over-priced POS:
http://boycotthousing.com/houseoftheday.aspx
LOL!!!!!!!!!!!!!!!!!!!! You owe me a keyboard.
I wouldn’t use the toliet in that house.
1/2 a million dollars; is the whole world insane?? The only way that makes ANY sense is if the value is going up 20% YOY. Even then, I might be embarrased to tell my friends I owned a place that looked like that, even if it was making me 100K a year in appreciation.
It’s stuff like this that makes the “fly over” parts of the country look so nice.
Toilet… wait. Do you think there is running water?
Are the walls paneling or cardboard?
That’s my favorite ever! The landscaping is wonderful!!!
I think “low maintenance yard” is their best shot at putting some positive spin on that one. At least it is pretty easy sweeping off the driveway every few weeks.
Classic!
Sorry, I’m confused…
…theres a house behind the prominent 1-car garage…..
Tom Lorch, a high school principal who is looking for a house in San Francisco, adds, “When we talk about houses, it’s money, money, money—not how we’re going to live, which seems wrong. And these absurd numbers, $100,000. It’s some kind of fantasy world.”
Taken from Time magazine Sept 12, 1977.
Frank Fischer, 35, sold his solidly mortgaged house in Erie, Pa., for $40,000 when he took a job as an executive of a Florida medical-equipment manufacturer. He then set out to find a four-bedroom, two-bath home near Miami, figuring that he would have to pay about $75,000. After looking at some 60 houses, he and Wife Jeanne settled for one in Coral Gables that has four bedrooms and two baths, all right, but no dining room, no eat-in kitchen and a yard somewhat bigger than a pool table. Price: $115,000. Says Fischer: “If anybody had told me six months ago that I would spend $115,000 for a house, I would have laughed out loud.” Rather than laughing, he sold all his bonds and cashed in his savings account to help raise $40,000 for the down payment. He had to put up that much to hold monthly payments to the $700 (insurance extra) that he figures is the most he can afford.
History does repeat itself.
I remember my parents bought their house in 1977.
1500 square feet ranch, full finished basement, builder’s acre of land. Out in the DC-area boonies at the time.
Total price was about $65K. At the time they closed similar houses in the neighborhood were going for $70K. But my dad had convinced 2 coworkers to buy those $70K houses, so my family got a little bit of a seller’s discount.
Sweet deal!
OMGFG.
In Australia that place would be termed a sh*t box
here too
Take a look in the northern suburbs. There are plenty of $500K sh*t boxes close to home.
In places outside the bubblicious areas, that place is considered a sh**box. You can get a darn nice place around here for that price. Compare and contrast: (The view from this road is breathtaking.)
http://tinyurl.com/2afcb2
And many think this home might be overpriced. It has been on the market all winter.
Casanovia is beautiful - anywhere along US 20 between about Auburn and Sharon Springs. I used to drive that between Canandaigua and Schoharie County as a yong man. Much preferred to taking the Thruway. Lots of nice small lakes and farm country.
That whole site is great. Going through those pictures reminds of the days Overvalued was still online.
Boy, I miss that site. remember the teardrop trailer for sale in the OC? I was LMAO.
ROFL. “Plus One Extra Bonus House Below!”
Maybe it’s a high yield marijuana plant.
You’d think they could have Photoshopped some landscaping in. Seems to be a trend:
http://www.bankrate.com/brm/news/real-estate/20070411_real_estate_photos_a1.asp
Here’s a funny line from the article:
“If the buyer wants to raise a legal claim, he must show material representation that the photo caused him to be injured,” he says. “If he says he was duped by a bush airbrushed out of a backyard photo, what is there to do? You cut down the bush. After seeing a photo, the buyer will eventually see the house and notice the differences anyway.”
Bush OK perhaps - but I can see it being a problem if you break out the hedge lopper to try to trim down the power lines.
OMFG - thanks for the link eastcoaster.
from the article: bold is mine
…Many, such as Vince Malta, a real estate agent in San Francisco and past president of the California Association of Realtors, don’t understand what the fuss is about.
“In my opinion, photos that take out visible utility lines are not trying to conceal material facts from prospective purchasers,”
Malta says. “It’s just a form of marketing so that buyers can see the house.”
Malta admits that he airbrushes out utility lines running in front of a house and cars parked in front. “The photo may not be accurate but it does allow one to see all the features of a home, otherwise the power lines may block the view. I don’t believe that’s concealment, and it’s much better than concealing pure defects. When they come to view the house, they’re going to see the utility lines anyway.”…
I’m just getting tired trying to note and steer clear of all the crappy stuff people are willing to do to sell me a house.
I’m fairly savvy and cyinical, but even I feel the need to curl up on my sofa under a blankie when I read this guy’s craven response.
Is there any other industry where this kind of $hite seems to be ‘par for the course’?
Reminds me of John Humble’s Urban Landscape series I saw at the Getty recently.
http://tinyurl.com/3y8o79
To me it’s the sheer audacity to ask that price ,and then not even coil the hose and pick up the kids toys before the ‘glamour shot’. Utter and complete arrogance…
Ya think they got the white plastic chair out of the dumpster?
“Upgraded kitchen” too. Think maybe they screwed a bottle opener into the wall?
Where is that POS?
WAMU ABOUT TO SNEEZE AND CATCH A COLD?
From the article………..
Washington Mutual plans to have an earnings conference call on April 17th. If Cramer is right, there will be a huge charge off against future earnings stemming from existing sub prime loan buybacks. I wouldn’t be surprised if WM cut its’ dividends completely out to stem the bleeding.
http://www.americanchronicle.com/articles/viewArticle.asp?articleID=23821
Wouldn’t it be counterintuitive to call it a “earnings conference call”?
Can we have a good old fashioned run on a bank?
Any bank, please.
Options speculators are apparently expecting bad things from Washington Mutual (WM). It will report earnings on 4/17. Today more than 10,000 April 35 puts have traded vs open interest of just over 7,400. More than 14 thousand April 37-1/2 puts have traded vs open interest of 19.7k. KBW recently stated, “WM which has a large share of production in Alt A products and, in our view, has a large share of its balance sheet exposed to mortgage.”
Is this a candidate for a pre-announcement, or are these speculators going to ride to the cliff by holding through to earnings next Tuesday, just 3 days before expiration?
is it just me or is that article poorly written? The content is great though… I’ve got about 80 Jan 08s @ $35 & $40 strikes. And some DSL too!
FYI, the “Smart Money (Read Mutual Funds) are dumping WM…per Investor’s Business Daily analysis!
My favorite way of checking how things are going is going to their website and looking at their online job ads (I did and you can look for yourself). WaMu has been cleaning up their mortgage mess for at least a year now and layed off a lot of peaple in the process.
Love those typos!
From today’s Boston Globe:
“Plan will aid those facing loss of homes” or Priming the pump to use your tax dollars for a bail out of fraudsters, deadbeats and real estate speculators.
A panel convened by Massachusetts banking regulators is recommending the state provide refinancing and other financial assistance to borrowers facing foreclosure…
…The group did not put a dollar amount on the aid that should be extended to troubled borrowers, but it did suggest the financing come from a combination of sources: banks, mortgage companies that specialize in subprime loans, and state funds.
Massachusetts residents, start writing your Reps and demand that your tax dollars not be used to bail out fraudsters, deadbeats and real estate speculators.
The whole article is at: http://tinyurl.com/32jatl
Every one of the proposed “aid” packages treat these “victims” better than those of us who bought responsibly and continue to pay our loan on time.
Help them pay down a portion of their loans? Should we pay down the jetski portion or the SUV portion?
Give them a better rate? Sure, but lets make it a teaser rate. God knows they aren’tgoing to read it anyway.
How do I find out which lawmakers are backing this rediculous idea?
I’ve probably come across 10 his and her’s jetskis for sale, in driving around a bit. Always for sale, with a nice trailer, all hardly used.
Funny, were you required to buy them in pairs?
An abomination on the face of the planet. Learn to sail, you redneck a-holes.
Well, to be fair, what it seems like they are proposing is 40 year adjustable rate refis with down payments provided by the state.
These sure aren’t any better terms than us honest folks got when we took our 30 year fixed rates.
These packages will ensure that these deadbeats are locked into their homes, underwater but paying.
The more you think about it, the more it seems like it’s actually a bailout for the lenders. Use state money to back up mortgages that are otherwise surely to die, that way banks don’t have to eat foreclosures. Socialize the risk, privatize the profit. Good old American capitalism in the 21st century.
Tried to find an email address for this guy but came up empty handed. Doesn’t look like this is actually in the halls of the statehouse, yet, but this guy Antonakes recently made a similar pitch in testimony in DC recently.
I’d write your Rep now to cut these guys off at the pass. Lot of good it will do, because I can guarantee you Massachusetts WILL attempt to fund a bailout of fraudsters, deadbeats and real estate speculators.
I have said this a few times. The bailout is for the lenders, not for the FB. It will be spun as a “helping the little guy keep their home”, but we all know it will just ensure debt servitude for a long, long time for these idiots who went it way over their heads.
The part that really steams me? People who are WAY WAY over their heads (Casey) will still be able to go BK, because there is just no way that without massive appreciaiton they can pay the note. Those who really just wanted to get into a home and are just a bit over their heads (say 100% or less) are the ones that are going to suffer. It’s like a trap, where they keep moving the cheese on you.
Absolutely. And a bailout for the Big Boys at that. Sure some smaller outfits will be allowed to fail, but none of the big, well-connected banks will. The name of the game is bailout. In this way, the banks are able to make reckeless lending decisions secure in the knowledge that if things go bad, they will be bailed out by govt.
For a brief flash back in time:
The S & L Bailout:
$32 billion every year for 30 years
excerpted from the book
Take the Rich Off Welfare
“…According to author Robert Sherrill, Volcker stated, upon taking office, that “the standard of living for the average American has to decline.” Sherrill says Volcker was recommended by David Rockefeller because “Wall Street and the international banking fraternity loved [Volcker]. They hated inflation-bankers don’t like to be repaid in money that is softer than the money they lend, even if the softer money makes the economy hum-and they knew that Volcker was mean enough to destroy the economy to save the hardness of their dollars.”
Volcker’s policies caused a combination of inflation and recession called “stagflation.” This put the squeeze on S&Ls. Most S&L mortgages were fixed-rate, so the S&Ls couldn’t raise the interest they charged on those.
But because their depositors were withdrawing money by the billions and placing it in higher-yielding money market funds or government bonds, the S&Ls did have to raise the rates they paid on savings accounts and CDs. Finally, because of the recession, homeowners started defaulting on their mortgages in droves, and S&L bankruptcies skyrocketed….In 1989, Congress finally came up with $157 billion to bail out the S&Ls. But by that time, the costs were over $200 billion (and they continue to rise to this day). To make up the difference, the Resolution Trust Corporation was formed; it sold off the assets of failed S&Ls, mostly at bargain-basement prices in sweetheart deals.
For example, Robert Bass, one of the richest men in America, bought American Savings and Loan for $350 million, then received $2 billion in government subsidies to help him resurrect it. (With that much money, you could probably raise the dead.) During one week in 1988, the government promised $8 billion in assistance to nine S&L purchasers; one of them put $20 million down, and the other eight paid nothing….”
http://tinyurl.com/284t27
Check Please, I think its time to leave.
Hoz — Based on that post about the S&L bailout, I am wondering if a foreclosure bailout will be delayed until the end of the shakeout of the credit industry? It would make perfect sense to let the strong hands (owned by the richest Americans) to first have a chance to pick up the surviving scraps of the lending industry at fire-sale prices before putting the full faith and credit of the American taxpayer behind a reflation of asset prices…
Interesting thought, GS
The S & L bailout was chump change compared to the mortgage debacle.
32B/yr for S & L vs 320B/yr for mortgage bailout.
I just would like to borrow 2B to save a bank! None of the money would go to me, Honest.
Of course it’s a bail out for the lenders. The MSM and Wall Street just wants to make everyone think that it is to help out the poor old home owner to save their pice of the American dream. Another fine pice of coporate welfare in America brought to you by the rapists of this country.
>> Well, to be fair, what it seems like they are proposing
>> is 40 year adjustable rate refis with down payments
>> provided by the state.
>>These sure aren’t any better terms than us honest folks
>>got when we took our 30 year fixed rates.
You must be kidding. I don’t know where you live but Mass wasn’t providing me with my downpayment when I took out my loan.
I live in Mass. You’re right, I didn’t get a free down payment either. My point was that a 40 year, adjustable rate refi is hardly probably isn’t a good deal for these people. They’ll still probably be under water for years, or decades, with no other options.
Why can’t they just walk?
Yep. Let them rent.
Let the markets run their course. Charles Dickens would never have written a novel about someone in America in 2007 facing foreclosure. It’s not a disaster. It’s not tragic. They lose the house and go live in an apartment. Living in an apartment is not that bad. In an apartment foreclosed Americans will still be able to watch American Idol, the latest news on Anna Nicole Smith and the Today show and get fat from eating too much.
That’s what drives me nuts about these bailout discussions, too. We must save people from “losing their homes”, as if they’re gonna end up eating rats out of the sewer. As long as they still have jobs, they’ll be fine. We’ve come to the point where even relatively minor discomfort is something to be bailed out with tax dollars.
There is no reason one cannot fit a flat screen TV into an apartment, either.
Of course the bank wants the state to pick up these people’s bills. Otherwise, the bank will not get paid, which is appropriate considering the position in which it put itself. Surely the state legislature of Massachusetts is not THAT stupid. Are they?
“”Everybody I talk to is wondering, ‘Why isn’t my house selling?’ It’s because they’re still thinking they should be getting 5 percent price appreciation a year,” Moore said. “You should be happy if you can get ‘04 prices.”
http://www.jsonline.com/story/index.aspx?id=589824
5% assumption may represent a vast improvement in expectations.
sure; in europe many sellers still expect to bank 50% yoy gains, judged from current asking prices …
Stephen Colbert recommends using pheromones instead of cinnamon or fresh baked bread when showing your home: http://www.comedycentral.com/motherload/index.jhtml?ml_video=85072
Why is a bid of 10% below asking soooo shocking. My wife and I plan on looking at the end of the summer and from what I see today, I plan on asking for a discount well over 10%.
If you insist on buying that soon offer 30% below the latest comp.
I’ve never understood the whole “insulting sellers,” thing. They ask, you offer. If the proposed price by either is absurd, you can feel free to be amused, or think that they’re stupid but what insulting? It’s MONEY people and everyone is trying to get the best deal possible.
‘I’ve never understood the whole “insulting sellers,” thing.’
I’ve understood it perfectly. This is something that Realtors (TM) say to scare buyers into offering more than common sense would dictate. Realtors (TM) will say anything to increase the chance that a deal will go through, as they only make money when a home is sold. If they were talking to the seller, they would be telling them to lower their price or keep their home on the market forever.
Oh, I think the sellers actually do feel insulted. That’s because they themselves might have paid asking price or more when they purchased the home. Offers very close to asking price are what they think is normal. It will take time for people to realize that this is not the case.
I don’t get it either.
I remember one real estate guru who wrote back in the 80s who said you always offer 30% below asking price. But then he was talking about real estate as an investment.
Time to put my plug in for Milwaukee’s Journal-Sentinel (JSOnline is the online version): That paper does some of the best reporting I have seen for a mid-market newspaper.
I have lived in Orange County: (sorry OC Kurt, but the Register sucked — at least it did back in the 80’s)
Memphis, TN: The Commercial Appeal was terrible.
Connecticut: The Hartford Courant was “better” than the other two I cited, but didn’t have the level of investigative reporting that the Journal-Sentinal does.
Just my $.02 worth on a quality MSM outlet. They don’t always publish the best story, but when they decide a story is worthy of a real investigative reporting - type series, they usually hit one out of the park.
From the New York Times: A Word of Advice During a Housing Slump: Rent
http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html
The headline is of course backward. The time to rent is during a bubble when prices are unfairly unaffordable, not during a bust unless that bust has a long way to go. It was a good idea to buy in 1994, not so much in 2005. But the Times is right about this:
“Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years.”
In New York City, at least, prices are still to high even for those who plan to leave their home in a casket.
Very good points. I bought my house in 1994, and had a lot of leverage with the seller. The house had sat there empty for six months (owner transferred). Made what I felt to be low-ball offer (25% off original asking - they had lowered asking a bit here and there). They didn’t even counter. Even got them to throw in a few goodies. Plus I planned to stay there a while, so I wasn’t really worried about the value going down.
Not that I am that smart, but was buying at the right time. Did I buy right at the trough? Probably not. But close enough.
So my point is if you are looking to buy, wait until it’s the right time. Buying at 5 or even 10% off the peak price now is probably not the right time, unless someone can pull a rabbit out of the hat and reflate this bubble. Maybe in a few years will be the right time.
All the data about buying vs. renting presented on the blog shows that buying is not better anyway unless prices start to go back up real soon. So why hurry?
“better anyway unless prices start to go back up real soon”
Did you consider interest rates skyrocketing? There is less money to loan, inflation is heating up, and our dollar is tanking. I just have this errie feeling that these historic low rates will kick up overnight when the credit crunch really hits the fan. Getting a 30 year fix at these rates on a house in a great location for a long term hold seems OK to me
The purchase price is forever. Interest rates are transitory. You can always refi and get a better rate at periods when they are low. You can never “repurchase”. Plus, if rates skyrocket, prices will drop thru the floor. Smart buyers with 20% down, will now have 50%!!! Why then, it may even make sense to buy homes as rental investments.
Seriously, wait this correction out. Even if you miss the bottom and prices rise 5% suddenly (so unlikely), the odds are we have another 20-30% drop to go.
Thanks for taking the words right out of my mouth, jingle.
I would be much more willing to “stretch” my buget a little if interest rates were double and housing prices were down 50%. Of course, prices should be down a substantial chunk even without interest rate hikes, so that might still be something of a rip off, but what a great deal…live the same way I am now (still ading to the downpayment fund) and be able to see a huge reduction in mortgage payments in the future when rates do their normal cycle thing.
Bring on the rate hikes!
You can never “repurchase”
——————————-
Have you seen some of the legislative proposals for helping the FBs out there?
“for helping the FBs”
More like helping the FLs (L=lender)
I wouldn’t ever buy a house in NYC, the neighborhoods are just too unstable. Sure, it’s all shiny now, but eight or twelve years of crazy mayors and whatever you bought could be worthless however well the rest of the country is doing.
(Actually, in NYC, all real estate is local).
You know, no one has a crystal ball. I’m sure all the rent vs buy calculators said “rent” in 2003 in California. And we will indeed probably end up with 2002 nominal prices by 2009. Oh well. My only solace lies in hoping the clowns who hit the lottery liberated all that equity…
Many don’t realize the power of what’s inside your crytal ball, atop your shoulders…
Engage numer one
This is my favorite part:
“But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.”
Don’t know what happened this was supposed to be under the nyt link:
http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?em&ex=1176436800&en=d42163eb18350f1f&ei=5087%0A
“It’s almost as if they have thrown money away, an insult once reserved for renters.”
That’s an excellent quote.
“The headline is of course backward. The time to rent is during a bubble when prices are unfairly unaffordable, not during a bust unless that bust has a long way to go.”
You are backward. This bust has legs. Absent divine intervention, prices will keep ratcheting downwards through 2011 at least.
“There is obviously no way to know what home prices will do in the next few years. But there are two big reasons to doubt the real estate boosters who insist that it’s once again a great time to buy.”
DL is probably having a hissy fit over that one.
“DL is probably having a hissy fit over that one.”
No — believe it or not, the NAR is suddenly forecasting national price declines through 2008. And I predict the end of the world is near!
“The time to rent is during a bubble when prices are unfairly unaffordable, not during a bust unless that bust has a long way to go.”
Why would one want to buy a home now, when even the NAR is predicting price declines through 2008 (and they will naturally spin their estimate of the duration of the bust to the short side)?
bubble update from Europe:
Dutch AEX stockindex set a new 5-year high yesterday on rumours about a takeover bid for a large RE fund (mostly commercial RE). The takeover would be the largest ever in the Netherlands; the fund soared 10% yesterday, obviously people still can’t get enough of RE over here. As an aside, there is definitely a spring bounce in the Dutch RE market, asking prices are more crazy than ever and inventory seems to be declining (maybe because some homes were finally taken off the market after remaining unsold for many years?). All thanks to more easy money from the ECB and more crazy lending; no sign that anyone learned a lesson from the recent US troubles.
Foreign lenders like GMAC and Bank of Scotland, are gaining bigger market share in the Netherlands thanks to rock bottom interest rates. Japanese banks are also expected to gain market share in the next years (maybe we then get negative mortgage rates on 30-year fixed loans?). Of course the Dutch banks respond with lowering their rates as well.
The newspaper reports today that more and more young Dutchies are getting deeply into debt. They take out huge home loans for often 6x household income (even 10x is not unusual); many spend more than 50% of their income on home loans, often for homes that are far too big and luxurious for their age and income level. On top of that they cash out to the max on their bank accounts, credit cards etc. Living life to the max, USA style. It’s relatively riskless here, because most of the downside risk (e.g. for the mortgage) is covered by the government. Even if they they hit financial bottom, e.g. after a divorce, there is a special ‘debt counceling procedure’ that prevents bankruptcy and clears all debs within 3 years. People can only keep about 90% of the minimum wage in this procedure (but usually when they get there they already have minimum wage or less anyway) and they have to attend some debt counceling classes (I guess that is where they learn how to make even bigger bets in the next round of the game).
When mistakes are not painful they will be repeated over and over again. I think the victimization and welfare culture has proven that a thousand times over.
I remember one of the video games of my youth…
It was building a house of cards~
A 52 card deck would suffice (2 decks would be better) and you’d try and build a multi level structure and if memory serves, you could get up to 4 or 5 stories, before things started getting shaky.
Adding more stories was a recipe for disaster.
The Dutch are in a “story acquisition” phase, of their version of my childhood game.
Connect the dots.
Do they have a video game of that for today’s generation??
not a video game, but a board game (and emphasis on “board”)
Cash Flow 101
Or maybe tetris…
Just have your kids play with old-fashioned jenga blocks. You lay three block side by side, then another three on top but perpendicularly, and so on until you run out of blocks. Then you begin to take blocks out one by one and putting them back on top. It all works until one of the “fundamental” blocks is taken out and the tower comes crumbling down. I play that game with my kids all the time. It teaches you about solid foundations and you don’t need a GameCube for that.
that sure is one of the biggest problems in the EU housing market; privatize the gains, socialize the losses. Because of this, every stupid speculator in the RE game can simply pass their losses to society and try their luck in the next round.
I wouldn’t call it a welfare culture. I’d call it an entitlement culture. As in, even if you make sh*t for salary, you still feel “entitled” to get expensive overblown crap because that’s what you’re supposed to do to show that you’re a member of the middle class.
The first crack is appearing in the Houston market:
http://www.chron.com/disp/story.mpl/business/4704368.html
Looks like the HAR can’t claim “it’s different here” now.
“We’re bucking the trend because we’re very oil-related,” Cook said. “We haven’t had a bust. We’ve always had slow growth annually. That’s healthy.”
They should stitch this into his straitjacket so he can read it over and over and over……..
So I just need to vent one second:
Best friend is now going to be FB. I had convinced him to hold off on buying.
Long story short, he and his partner have been together maybe 1.5 years or so. But they’re “in love” and all that.
After only 6 months dating they talked about buying in SF. I went over why not to buy. They were cool with this all the last year.
Suddenly got a call from him. They’re buying in 1 Rincon Hill. (it’s supposed to be the next big condo tower in SF)
714 sq ft 1 BR apartment, $800,000.
They currently rent for $1800/month just a few blocks away.
The new mortgage payment will be around $5,000/month EVEN after the mortgage deduction.
But the RE machine has gotten to them, so no talking any sense.
Instead, I just covered the basic of the basics. Get a 30 yr fixed first mortgage (they will do this). They will put 5% down (so $40k). they’re using a second mortgage for the rest (I’m sure it will be adjsutable ARM or a HELOC).
so I covered the basics, about reading the contract thoroughly, hopefully getting a contract lawyer to read it. (they won’t do this I know). Also about putting in a stipulation that if they don’t get their loan funded that they can get their deposit back, and also what happens to deposit if building isn’t finished or if building is worth less than it is now.
That said, they kept falling back on “the mortgage lender at Wells said we’re pre-approved, so why wouldn’t the loan get funded? we already HAVE the loan” and “they told us we can easily afford this on one of our salaries”
Of note, one of them makes $70k/year. The other is psychologist with somewhat cyclic income, who makes I THINK around $120k or so. So maybe they can afford it. (that said the $70k/year person is going to school next year so severely reduced income).
The building finishes in summer 2008. It’s most of the way up, and I do think it will get finished.
Anyway, just needed to write out my thoughts in an area where I don’t feel like I took a crazy pill!
there are MANY MANY FBs out there remaining.
If they can afford it more power to them. It’s about 4x income, its better than most borrowers. I don’t about the buying it with a “partner”. That can cool really fast.
I know I know.
That said, it’s 4.7x CYCLIC income. And it doesn’t include the loss of income my friend will have when this actually closes. Which will bring them to 8x income. But maybe after schooling their income will cycle UP and not down, bringing it more down to 4x or 3x income in the more distant future.
that said, I’ll take a small victory where I can. they’re going to do a 30 year fixed 1st mortgage so all is not lost.
and the building looks pretty cool, although out of place.
“that said, I’ll take a small victory where I can. they’re going to do a 30 year fixed 1st mortgage so all is not lost.”
They didn’t listen to you about not buying now, Why do you think they won’t come back right before closing with this great financing “interest-only” loan from their new best friend at Wells Mortgage?
Dear HIC:
You are a nice guy to try and help your friend. Unfortunately, you are going to have to be even nicer now that said friend is acting like an IDIOT and buying a 1 bedroom condo with his GF for $800,000. Instead of telling him “I told you so” when he moves into the place after its value has gone down, you can come and rant to us. We will listen to you and also help you talk trash about him, and he will never know.
Now for the trash-talking:
If these two are in love, then why don’t they just get married already? It sounds like miss lovey-dovey needs a partner so she can become miss middle-class property-owner dovey (for lack of a better name to call her).
Oh, and for the 4.7x income thing, that’s BS. The 70K income is not to be included because it will be gone for 2-5 years, depending on the degree he/she plans to get. And then there will either be babies or a breakup. So we’re counting on maybe $120K. 800/120 = 6.66.
Now, to the real meat of the matter: That condo will not sell for more than what your friend is paying. It will probably sell for less. No matter what his income, he is most definitely THROWING HIS MONEY AWAY by buying instead of renting. He would have more $$ come retirement if he invested his money in stocks and bonds while simultaneously renting. Now that he is buying, he will have no $$ to invest. Everything will go to that crappy condo. In the best-case scenario, he’ll live there for 30 years and end up with 3% appreciation. Would have gotten 7-10% from the stock market.
No matter how you slice it, your friend would have been better off saving, investing safely, and waiting either for rents to go up unreasonably or for house prices to go down.
So you were right HIC. It’s OK to say it. You were right and he was wrong. Just don’t lend him any money.
Your friend,
Big V
They can’t afford it. Besides, what the hell ever happened to value? What the heck do the get, for 800K? A one bedroom apartment? Does this come with daily, full-body massage from a group of nubiles? Jesus H. Christ, give me a break.
The media still has people. The headlines about the slowdown and price drops are all it takes to get the “pent up” buyers out the door this spring. IMO, as long as interest rates are so low (historically), this thing is going to drag on and on.
They still have chance to rethink about it before closing the deal on summer 2008. Lets say their deposit is 40K. Before summer 2008, if they can find similiar home for, let’s say, 600K, they can just walk away while losing their deposit.
Save your self. Done your part. Warned friend about storm.
A gave a good friend my dire predictions, based 100% upon the information flow I can see…
I couldn’t make her understand that if el lay survives this summer on meagre water rations, that it has stockpiled up…
If we have another bleak snowfall next year, every last house, rich or poor, will have no water, starting in the fall.
In the city of angles.
Combine a falling star, with a lack of falling water~
Let me end this on a good note:
http://en.wikipedia.org/wiki/Fallingwater
“Save your self. Done your part. Warned friend about storm”
Agreed.
now my job is to truly be happy for them. And I will be. It will just take some time!
On a side note, they already know all the numbers, the “nesting” instinct is just too strong.
In fact, when they called me about it they said:
“Uh, Clouseau, we’re going to tell you something now, and we know that you will disapprove, but we also want you to know we’ve really thought this through and it’s really important to us to do this”.
So I’m off the hook!
and again, *if all goes well*, once they’re both done with school and training they could make in the combined $200-300k/year range which is enough to “afford” the PITI payments. That said, I don’t know how someone only making $200k/year can stomach such a high PITI, but that’s because I’m frugal!
Don’t sweat it, HIC, they’ll NEVER close.
By the time that building opens the economic & real estate carnage will be nightly news. They’ll likely lose their $40K, but that’s a small price to pay for their freedom.
If this condo project goes bust, so will their relationship.
I’ll be waiting to see them on “The People’s Court”.
No kids planned ? Or maybe because its SF its not that kind of partnering? because thats the only way to afford living in that city, dinks “duel income no kids”
Why would you choose to pay the bank $4000/mo in interest just to avoid paying the govt $500/mo in taxes on rent? Plummeting prices aside. How much equity do they think they’re really going to build up assuming they leave this place in 5 years? $50k tops while living off ramen. Cyclical income. 714 sf. Partners. Recipe for disaster.
Show them the loan payment schedule, total interest, accrual rate, everything. That might shock some sense in, assuming they’re truly Kool-Aid free.
$190k per year combined salaries and you get a 714SF hotel room. That is so California. No wonder everyone wants to live there. You should make them read this thread before buying the place…
One of them’s a psychologist? Say no more. Some of the loopiest people I know are in that field.
yeah, and the other is GOING INTO psychology (hence the pay cut this year).
they are both really in the “we’re in love” stage, and really wanting to nest.
I won’t make them read this thread, it’s not worth it. they have all the knowledge and info, but they’re both very “emotional” people, and they lead with their hearts, and rationalize all their hyper-emotional decisions with their brain afterwards.
My choices are:
1) try to make them see the light (already did that the last 1 year) and then if they don’t buy they’ll be bitter at me
or
2) let them buy. they might be able to eek it out. It’s out of my hands now!
That’s why I just needed to vent here a little bit.
Instead, I’m just trying to set them up for the realities of this. so I:
1) gave them a list of questions to ask their lender
2) gave them a list of questions to ask the builder
3) told them they need to have life insurance naming the other as full beneficiary for at least $800k to pay off mortgage just in case
4) told them they both need disability insruance
5) told them they need a contract written about what happens in case of break up, in case one can’t pay their half, and so on.
they feel very secure, because their mortgage broker told them that they can “afford” the mortgage on even one of their salaries (on $120k/yr self employed… yeah right)
Again, caveat emptor I know, but the problem with this whole system is that people don’t realize (even after we tell them) that mortgage brokers are SALES people, and Real Estate Agents are SALES people. They think they’re “experts” so they trust them a lot. And worse, they are “experts” who are also “friends”.
“714 sq ft 1 BR apartment, $800,000″
What is the cost…really…of earthquake insurance for this unit?
They should move to Bakersfried, pay $300,000 cash for a 4bdrm 3 bth with jacuzzi and since “they’re “in love” and all that” they really wouldn’t notice their surroundings that much, plus they could “make love” all day long for the next 5 years…going outside only to get the mail and verify their $500,000 money market balance is still gathering some interest.
Just one of many possibilities open to your love-bird friends, they’re smart… they’ll understand…just give them a little hug and a gentle smile…all will be well.
What is the cost…really…of earthquake insurance for this unit?
1 Rincon Hill is a modern high rise, it would take one hell of an earthquake (by San Fran standards even) to cause serious damage to it.
The effects of wind load on a tall building are remarkably similar to an earthquake, and structural engineers have been dealing with this stuff for over 100 years.
That said, I wonder how much the insurance company will factor that in. The industry isn’t know for giving huge discounts or anything.
they bought their tickets, they new the risk, I say let em……
“One of them’s a psychologist? Say no more. Some of the loopiest people I know are in that field.”
Man…that is SO true! And I have met plenty of them.
In the interest of not pissing people off and becoming totally socially alienated, I give people thinking of buying the quick one-minute abstract of the situation, and if they are interested in hearing more they are free to ask for more details, or not.
That said, I might take the 120k partner aside and warn him/her of the greater risk being accepted compared to the 70k -> back to school partner– and that s/he should make sure this partnership is secure. Being in love is the worst time to judge these matters.
So is Wells Fargo lending them the money?
“Suddenly got a call from him. They’re buying in 1 Rincon Hill. (it’s supposed to be the next big condo tower in SF)
714 sq ft 1 BR apartment, $800,000.
They currently rent for $1800/month just a few blocks away.”
You need to immediately, heartily congratulate your extremely intelligent friends. Clearly, they will look back on this as the best decision of their lives. Not only is it obious they thought this major decision through with due diligence–they kept emotion out of the equation.
Sarcasm off.
Sorry, couldn’t help myself
If they could only come up with 5% down, they cannot afford an $800K apartment.
I never understood these people who get into serious financial commitments like this without being willing to commit to marriage first. If they aren’t willing to get married, it’s usually because they expect (hope for) something “better” to come along.
This will not end well, IMHO.
Sorry to hear about your friends, HIC. Maybe they will change their minds. Please keep us updated.
Off topic, there have been 4 carjackings just this week in our metro area of SC. Two thugs on Sunday hit an 80-year old woman and pulled the diamond earrings off her ears before taking the car when she had just left church. I have lived here 9 years and would say we averaged less than one per month in the past. Things are going downhill fast. I would hate to be in Charlotte where crime is 10X worse, or Atlanta, where it is 20X worse…
Funny but people up here in NY don’t hear there is a lot of crime in Charlotte and Atlanta. Charlotte especially I think of as a very low crime area.
I saw 6 more of the new ex middle class homeless classification in a boring Central California burb, yesterday…
They look just like you and me. Scary stuff, kids.
I know more than a few gun nuts and it’s been my experience that the very last thing said enthusiasts will give up, is their armament.
I wonder how many of the half dozen were carrying?
Charlotte has some of the scariest areas I’ve ever seen. West Charlotte, near the airport, can be truly frightening. Uptown Charlotte is filled with suspicious characters wandering around. Don’t kid yourself. For all of you Yankees that think the Carolinas will be your paradise, Charlotte is no Mayberry. I won’t even mention how awful the drivers are.
The think is, because the banks are there and finance is otherwise centered here, lots of NYers end up making business trips to Charlotte, or even moving there. Haven’t heard my wife said “I’ll be spending a week in Charlotte but don’t worry, I’ll be careful.” And, of course, NYers would be walking around rather than driving SUVs with bulletproof glass.
My fervent hope is that we experience hyperinflation to the power of 10, fairly quickly.
This would immediately make the price of gasoline around $25 to $35 a gallon, stranding most everybody in place, a drive would really have to be essential.
Oil and Gold are strange kissin’ cousins. Both 100% natural.
Both have insatiable demand all over the world.
There’s a reason many of us tucked ourselves away from the madness of your violent cities, America.
There’s still time to get away…
Not nearly as far ahead of the game as you are, but I do have a plan!
METH METH METH you can’t really run METH houses in NYC, but Charlotte…Savannah, small towns….
Somebody would notice the smell…..
dude , Atlanta don’t look too friendly to me unless you think the Bronx looks cozy
Yep, over the weekend, rival gangs had their “traditional” Easter Sunday shootout on Bradenton Beach. The police knew it was going to happen, because it really has become a tradition. But they didn’t bother to head it off, just like in Mexico or South America. They also thought about shutting down the beach area, but since it was Easter Sunday, they didn’t want to interfere with families enjoying the beach. Otherwise, locals might realize that criminals have taken over their lives.
Whoa - you got my attention there. You’re talking about Anna Maria Island? We vacation there all the time, up the island at least in Holmes Beach. Is it really that bad down in BB? Are we talking the area where Cortez Rd comes out?
The area of the beach where it happened was reported as “Coquina Beach”. I’m not familiar with that section of beach, though.
Ah. That’s the very southern tip of the island - relatively uninhabited park / public beach areas. I just went bike riding down there for the first time a few months ago. Sounds like it’s a “beach ghetto” area if you will, at least on Easter weekend! Funny since it’s right across the bridge from Longboat key (very high-end mostly).
Some day we’re talking about buying a place on Anna Maria. I figure I’m giving it about 5-10 years to bottom out first. At this point though the island isn’t nearly as affected by the downturn as is the eastern part of Bradenton & Sarasota, at least it seems that way.
Here’s a link, packman. Really disgusting story.
http://www.firstcoastnews.com/news/florida/news-article.aspx?storyid=79644
palmetto et al…
You guys really want to live in a place like that?, and things are calm, now…
Re=Think where you live.
There’s a rare spring hurricane coming your way.
You just showed me a funnel cloud.
What a great opportunity. I will call a friend that is a special events planner. We can set up scafold seating charge an entrance fee and bus in the tourists. To spice up the action we can lease some large scale armorial pieces from some museums. WOW - kinda like Spanish bull fighting but on a bigger scale! How much do you think we could charge for admission? Maybe Spielberg would be intetrested in the movie rights and we could sign a deal with a Sports network for live play by play action - what kinda ratings could we expect?
Suing Wall Street over bankrupt Subprime Lenders, from Bloomberg.
http://www.bloomberg.com/apps/news?pid=20601087&sid=avI34G5JBAjQ&refer=home
Evidently, there are people who took their entire life savings and put them in an “uninsured” high rate money market account at a single subprime lender, and then lost it all when that lender went bust. They are suing big Wall Street firms for making fees off repackaging money from these lenders as they became insolvent.
The Wall Street firms clearly outsourced unethical behavior while collecting some of the gains from it. But why did these people thing they were getting a 10% interest rate in 2003? Because they were smart and everyone with money in a bank or lower-rate diversified money market was a moron?
Read and weep.
“It would take a heart of stone to read that story without laughing aloud.”
“American Business was offering 13-month notes with a yield of 12.99 percent and an “uninsured money market note” with a yield of 6.05 percent three months before seeking bankruptcy, according to a filing with the U.S. Securities and Exchange Commission.”
The game is similar to S&L crisis; names of players changed, however.
Also, some similarities to high yielding CDs, no?
“The company recorded as profit fees from administering mortgages that it would receive in coming years, using standard accounting rules, said Miller. The amount was inflated because American Business underestimated the rate of defaults, making it look like they would receive more fees and resulting in “phantom” gains from the sales of mortgages.”
Sounds familiar, no? CFC and others record unpaid pay option ARM interest as income.
These WS jerks pulled out all the stops to pay those gigantic bonuses last year. None of this surprises me in the least.
Just so no one forgets:
“Last year Goldman set aside $16.5 billion for salaries, bonuses and benefits, or an average of $622,000 for each employee.”
http://www.iht.com/articles/2006/12/12/business/goldman.php
How about this? Bold is mine:
New Century Asks To Pay Millions In Exec Bankruptcy Bonuses
DOW JONES NEWSWIRES
April 11, 2007 4:51 p.m.
By Peg Brickley
Of DOW JONES NEWSWIRES
With a crucial hearing on rules for auctioning off major pieces of its collapsing subprime mortgage empire less than 24 hours away, New Century Financial Corp. is asking bankruptcy court permission to pay millions in bonuses to company leaders.
In court papers, New Century refuses to identify participants in the proposed bonus pools but admits that the chief executive and seven members of the management team could get bonuses of between 45% and 90% of their annual base salaries under the plan.
The Irvine, Calif., lender filed for Chapter 11 protection April 2 in Delaware, and is racing to throw its loan-servicing platform and a parcel of mortgage loans on the bankruptcy auction block.
Thursday, a judge in Delaware is scheduled to evaluate auction rules, which have drawn fire from a series of creditors.
General Electric Capital Corp., for example, faulted New Century for flawed drafting of rules for the auction of the loan-servicing business.
In court papers, GE Capital says New Century forgot to insert in the sales proposal a breakout of how much secured creditors should expect to collect from the sales proceeds.
In contrast, New Century’s “emergency” bankruptcy bonus plan contains a complex formula for figuring out how much executives will collect from the loan-servicing sale.
New Century says its bankruptcy bonus plan, to be paid out 50 days after a successful sale is closed, is a necessary incentive for a sale.
In February, New Century said it would restate financial results for the first, second and third quarters of 2006, due to “accounting errors.”
New Century has been summoned for discussions with the Securities and Exchange Commission, and federal prosecutors have begun a criminal inquiry.
“New Century says its bankruptcy bonus plan, to be paid out 50 days after a successful sale is closed, is a necessary incentive for a sale”
New Century says??? Can the company talk? Are we supposed to believe that this legally created ‘person’ is making a decision on these bonuses independent of the CEO and the other executives? What a crock. Throw the bastards in jail where they belong and distribute their bonuses to creditors where they belong.
“The Wall Street firms clearly outsourced unethical behavior while collecting some of the gains from it.”
That’s exactly what they did. The top creditors of New Century where the leading investment banks.
1 Goldman Sachs Mortgage Company
2 Credit Suisse First Boston Mortgage Capital LLC
3 Credit-Based Asset Servicing and Securitization LLC
4 Morgan Stanley Mortgage Capital
http://tinyurl.com/yr78av
How could any politician even think of taking taxpayer dollars to assist people facing foreclosure when it is perfectly clear that the borrowers, who signed up for toxic loans, and the lenders such as Goldman Sachs, who made BILLIONS from subprime, are responsible for this mess - not taxpayers.
“The top creditors of New Century” = subprime kingpins
“How could any politician even think of taking taxpayer dollars to assist people facing foreclosure when it is perfectly clear that the borrowers, who signed up for toxic loans, and the lenders such as Goldman Sachs, who made BILLIONS from subprime, are responsible for this mess - not taxpayers.”
Follow the campaign contribution money trail for your answer.
Home prices fall lower than year ago levels: PA
http://tinyurl.com/yu7ror
Anyone who bought a home in Lehigh and Northampton counties in 2000 for $150,000 now has a property worth $270,000, assuming it appreciated at the average rate. Typically, homes in the Lehigh Valley appreciate about 5 percent a year.
Help me out here. Using this calculator http://tinyurl.com/2xz8z6 I come up with the $150,000 home now being “worth” $211,000 at 5% appreciation rate. Am I missing something?
Furthermore, is 5% annual appreciation really “typcial”?
I calculated it by hand. Your $211,000 figure is correct based on 5% compound gains….
…a historic milestone that has gone strangely ignored: For the first time ever, more poor Americans live in the suburbs than in all our cities combined.
http://www.alternet.org/story/50211/
Great link, thanks.
I lived in Howard County until last August. Housing there is outrageous. A 1200 sq. ft. townhouse without a garage in Ellicott City costs upward of $350k. A nice area, to be sure, but not that nice.
Do you know what the average annual rate of appreciation was for Howard County before this run up? I was just wondering how far things will need to fall there to be in line with where they would have been had this bubble never happened.
–
Quote For the Day:
“Moreover, bankers may, at some times and in some countries, fail to be up to the mark corporatively [emphasized]: that is to say, tradition and standards may be absent to such a degree that practically anyone, however lacking in aptitude and training, can drift into the banking business, find customers, and deal with them according to his own ideas.” – Joseph Schumpeter in Business Cycles
He goes on to say that when the bankers behave like salesmen they pave the road for catastrophe (depression). Let us see if it would be different this time.
Jas
50 Year Mortgage:
http://westpalmbeach.craigslist.org/rfs/309296249.html
In The U.K. a lot of properties used to have long leaseholds, and it wouldn’t be unusual to see a property offered for sale, with a 532 year leasehold.
Is this still common practice for older properties?
Didn’t they get rid of the lessor’s right to take posession at the termination of the lease a few years ago? Makes me glad that we have a “takings” clause in this country.
Not sure…
My memories are from long ago~
in Europe 50-year mortgages and generation mortgages haven been used for several years already …
“50 Year Mortgage:”
Designed for stupid people who want to give away a large share of not only their own wealth but also their childrens’ wealth in interest payments to the lender.
obviously that depends on what you expect for rates and home price inflation in the long run. If the trend of the last 25 years continues it looks like a clever bet … the children will get a multi-million dollar home and pay just pennies a month for the mortgage (relatively). But the chance that this trend continues is not so good
AP now has an Alt-A article, linked here
http://www.msnbc.msn.com/id/18043828/ Which means all the little newspapers may now report it.
WTE:
Sad but true. The content of most daily newspapers is 80% ap stories.
Morningstar highlighted a similar piece entitled “How Mortgage Troubles Impact U.S. Banks” in their “Morning Digest” email today. The piece includes a couple of tables that give
1. Estimated Earnings Impact of Alt-A Liquidation
2. Estimated Worst-Case Scenario for Alt-A Mortgage Repurchase
for banks significantly involved in Alt-A lending.
I’m so glad to hear that the absolute worst that can happen is for alt-a loan portfolios to be sold off at 98.64% of their value. And that this is only three times earnings for the bank with the heaviest alt-a loan portfolio proportion. I mean, what are the chances for more than 1 in 5 (17.79%) of those loans to be based on fraud or otherwise go to foreclosure and return 60% on the dollar (I assumed 7% normal return to make the set earn -1.36%). Let’s not panic here. >
The only problem might be if such huge foreclosure numbers caused some sort of cascade effect that somehow caused the whole model to be bad. What’s the chance of 18% foreclosures of 13.4% (Alt-A) of the mortgage spectrum (plus the other mortgage sector problems) causing some systemic price crashing overload anyway?
I used to design rocket trajectories to withstand 1.5% dispersions in thrust (and so on.) I remember once being in a meeting where concerns about uncertainties on the order of 10% were suddenly discussed due to obscure technical uncertainties having to do with spinning the rocket much more than ever before. Strangely enough, this woke me right up. Oh well, the mission ended up very successful with the dispersion being around 1 sigma IIRC. So hey, it could happen!
I’m so glad to hear that the absolute worst that can happen is for alt-a loan portfolios to be sold off at 98.64% of their value. And that this is only three times 2006 earnings for the bank with the heaviest alt-a loan portfolio proportion. I mean, what are the chances for more than 1 in 5 (17.79%) of those loans to be based on fraud or otherwise go to foreclosure and return 60% on the dollar (I assumed 7% normal return to make the set earn -1.36%). Let’s not panic here. >
The only problem might be if such huge foreclosure numbers caused some sort of cascade effect that somehow caused the whole model to be bad. What’s the chance of 18% foreclosures of 13.4% (Alt-A) of the mortgage spectrum (plus the other mortgage sector problems) causing some systemic price crashing overload anyway?
I used to design rocket trajectories to withstand 1.5% dispersions in thrust (and etc.) I remember once being in a meeting where concerns about uncertainties on the order of 10% were suddenly discussed due to obscure technical uncertainties having to do with spinning the rocket much more than ever before. Strangely enough, this woke me right up. Oh well, the mission ended up very successful with the dispersion being around 1 sigma IIRC. So hey, it could happen!
What I didn’t like is how the writer bounced back and forth between “as long as underwriting remains sound” in one paragraph to talking about a company buying back 10% of its loans because of defaults in the first 90 days in the next paragraph.
Oh - missed the last paragraph: “Readers should note that the risks we have written about are short-term risks. Credit problems in the overall mortgage market create the potential for even bigger longer-term problems. We will explore the potential credit quality problem in part two of this article in coming weeks.”
thanks
Rollin’ down the inland empire
With big nasty no doc loans on either side
Santa Ana winds blowing hot from the north
And we as born to ride
Roll down the value, may it ever drop
Crank up the beach boys baby
Don’t let the music stop
We’re gonna ride it til we just can’t ride it no more
From the south bay to the valley
From the west side to the least side
Everybody’s very happy
’cause the real estate values used to go up all the time
Looks like another perfect day
I love el lay (with or without drinking water)
I love el lay (we love it?)
Did you ever look at your home loan?
Did you ever look at the impossibilities?
Look at that homeowner over there, man
He’s down on his knees
Look at these women
Buying junk they don’t need
Unfortunately, there’s plenty like them everywhere
Century Blvd (we love it)
Victory Blvd (we love it)
Santa Monica Blvd (we love it)
Sixth Street (we love it)
I love el lay
I love el lay
(we love it?)
Let me redeem the city de los diablos…
Turns out you are sitting on a fortune.
http://www.whiskeyandgunpowder.com/Archives/2007/20070404.html
Per Stephen Colbert (Apologies for typing too slow to get it all.)
We didn’t have time yesterday to get into the bursting housing bubble but we will today. Now there’s no better time to buy real estate with….. No Money Down!!!!
The housing bubble has burst. These days to buy or sell a house you need someone with years of experience or a bright red button to help you [Button voice "Sell!"]
Folks – to sell your home you have to fill the house with enticing aromas.
Cinnamon?
[No!]
Baking bread?
[No!]
Pheromones?
[Yes!] That’s right – make your house feel like a willing sexual partner.
If this doesn’t work slash your price. If you paid 1.2 million for your house price it at 10 grand. The reason is simple – when things cost less people want it more. That‘s what economists call [Stupid!] – close enough “supply and demand.”
Three important things in buying a house: Location, location, bees!
Stephen:
I get the feeling you while away the time, when you aren’t causing us 30 minute laughing spasms, (with commercial breaks, to keep us sane) by watching the real estate bubble shenanigans, through this very portal…
Tonight’s New Word for you is “Pendulumly”
Dare you to use it.
I thought the new word was “Flagophile”….taking the place of “Eneagled” from last week.
I’m really glad he hasn’t lost the “Bees!” angle. I loved that…
A larger banking concern just announced they will be laying off 17,000 people…
NEW YORK - Citigroup Inc., the nation’s largest financial institution, said Wednesday it will eliminate about 17,000 jobs as part of a companywide restructuring to reduce costs and improve profit.
That was the leader article…
The rout is on.
WSJ Page A6 “Fannie, Freddie Dug a Big Hole, Regulator Says”
“They dug an extremely, extremely, big hole.”
OMG
Online (subscription):
http://online.wsj.com/article/SB117625257842565785.html?mod=todays_us_page_one
Neil
“UPDATE 2-US mortgage applications dip, spring sales murky”
These headlines keep making us look like prophets
Nah, just smarter than the average bull.
(With apologies to Yogi.)
Excellent start to the trading day. Have we got a double top with a lower high???????? Maybe.
Also anyone see Jumbo Crames touting the natgas stocks. All gapped up. That is a good group to be in, it was even better 2 weeks ago when the hurricane forecast came out.
I posted a few sold homes from Verrado in Buckeye, AZ the other day. Here are a few more. This is one of those master planned communities that will never lose value. Cheapest house is now under $300k.
List price: $362225 Sold Price: $287225
Beds: 3 Baths: 2.5 Sq Ft: 2090
List price: $426414 Sold Price: $365000
Beds: 3 Baths: 2 Sq Ft: 2256
List price: $523359 Sold Price: $479000
Beds: 4 Baths: 2.5 Sq Ft: 3538
This one was sold last June:
List price: $569900 Sold Price: $569900
Beds: 4 Baths: 3.5 Sq Ft: 3489
A $90k reduction from the comparable sale this month.
A realtor attack on Zillow:
A recent search on Zillow.com of properties in the East Hampton estate section off Further Lane -actually between Further Lane and the Ocean, shows their (under)zestimates averaging about 100%-300% below actual values. This continues to amaze us how they can actually allow this ridiculous information to be available.
http://thehamptons.wordpress.com/2007/04/11/zillow-is-still-waaaay-off-in-hamptons/
How can you be 100-300% below actual value? Isn’t that less than zero.
Notice that they average 100%-300% below actual values. There are probably a couple of estimates that are 500% - 800% below actual values.
That makes sense. You have to pay someone 1-3 times of the houses “value” to get it off your hands. This won’t be as rare going forward.
Barn door closed. Horse gone.
http://www.npr.org/templates/story/story.php?storyId=9512768
Horton: Orders for new homes off
No. 1 builder signals more housing blues
UNION-TRIBUNE STAFF AND NEWS SERVICES
April 11, 2007
DALLAS – The peak spring home-selling season is off to a slow start, builder D.R. Horton Inc. said yesterday, another sign that bad times in the housing market may last longer than expected.
Horton, the nation’s largest home builder by deliveries and the second-largest in San Diego County last year, said its sales orders in the most recent quarter fell 37 percent, led by declines in California and the Southwest.
The report trumped recent indications that sales of homes, especially existing houses, had been improving.
“It appeared demand had stabilized, but this throws that into question,” said Bernard Markstein, an economist for the National Association of Home Builders.
Horton’s founder and chairman, Donald R. Horton, said conditions for selling homes “continue to be challenging in most of our markets,” as the supply of unsold new and existing homes remained high.
“We continue to sell more homes than any other builder, even though the spring selling season has not gotten off to its usual strong start,” he said.
http://www.signonsandiego.com/news/business/20070411-9999-1b11housing.html
Attention main_________________ stream media (yes, you are that disconnected)
Go ahead and steal this from me:
9/11/01 Terrorrism from without
4/11/07 Terrorrism from within
Citibank picked a really shitty day to get things rolling, in ernest.
And I used to laugh at people that thought history was all rote date memorization?
Check this out … Many on zovall’s blog are wondering if it is terrorism (look at the names involved in this fraud). Are they using all of the money they got from these fraudulent purchases to fund terrorism?
http://www.irvinehousingblog.com/2007/03/19/the-plot-thickens-in-fraud-park/
the terrororism thing is a leap BUT there is an excellent discussion there of what happens when you rent property from an RE fraudster.
Well worth taking a few minutes to check that out.
Yes. One of the downsides of being a renter right now. You have to be very careful about who you rent from.
No recession worries. Move along folks, nothing to see here…
——————————————————————————–
Citigroup to cut 17,000 jobs, take $1.38B charge
Reductions aimed at saving $2.1 billion, improving profit margins
By David Weidner, MarketWatch
Last Update: 10:35 AM ET Apr 11, 2007
NEW YORK (MarketWatch) — Citigroup Inc., which failed to fully capitalize on one of the most prosperous eras for U.S. financial-services companies in recent years, announced a sweeping expense-reduction plan on Wednesday that includes 17,000 job cuts and a $1.38 billion pre-tax charge.
The financial-services giant also will take an additional $600 million in pre-tax charges spread during the last three quarters of the year. Citigroup, which is thinning its back-office ranks and moving another 9,500 jobs to lower-cost locations, said the cuts are aimed at reducing $2.1 billion in expenses this year. Analysts estimate the savings will translate into a 6% boost to earnings by the end of 2009.
“This effort should enhance our capacity to grow,” said Robert Druskin, given a mandate to find waste when he was named chief operating officer in December. “There will be very little impact on ‘client-facing’ functions, other than additional efforts to enhance our service levels.”
http://www.marketwatch.com/news/story/citigroup-cut-17000-jobs-take/story.aspx?guid=%7B1E806003%2DAFA0%2D4871%2DB221%2DD7A8F9E9495E%7D
I guess real estate doesn’t always go up after all…
———————————————————————————-
Realtors Predict Annual Price Drop, Lower Forecasts for Home Sales
By Campion Walsh
Word Count: 339
WASHINGTON — A real-estate trade group lowered its forecasts for U.S. home sales this year, while projecting what would be the first annual decline in the median national existing home price since it began keeping records in the late 1960s.
In its latest forecast for the real-estate market, the National Association of Realtors projected that existing home sales will fall 2.2% this year to 6.34 million, compared with …
http://users1.wsj.com/lmda/do/checkLogin?mg=evo-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB117630064272466348.html%3Fmod%3Dhome_whats_news_us
NAR to buyers: “Buy now and try to catch yourself a falling knife.”
============================================================
ECONOMIC REPORT
Realtors see home prices falling in 2007
Tighter lending standards will reduce sales even more, forecast says
By Rex Nutting, MarketWatch
Last Update: 11:35 AM ET Apr 11, 2007
WASHINGTON (MarketWatch) — U.S. home prices will probably fall this year for the first time in at least 38 years, the National Association of Realtors said Wednesday.
In its monthly housing outlook, the real estate industry group said tighter lending standards will cut into home sales even further than it had been projecting, driving prices lower.
Median sales prices of existing homes are now projected to fall 0.7% in 2007 before a modest 1.6% gain in 2008, the realtors said. Read more.
Since the realtors began tracking prices of single-family existing homes in 1968, the smallest price gain was 2.0% in 2006. The average gain has been 6.5%.
After adjusting for inflation, real home prices will probably decline for three straight years from 2006 through 2008.
http://www.marketwatch.com/news/story/realtors-see-home-prices-falling/story.aspx?guid=%7B2142F346%2DAEC0%2D441C%2D9BDB%2D5B0C382DDF93%7D
Similar article on CNN Money:
http://tinyurl.com/2zbs6j
“In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase.”
That’s a pretty darn big forecast change in just a month. Spring season must be a lot worse than they thought. Say it ain’t so!
I guess it was hard to foresee the collapse of 50+ subprime lenders over three months time. But even the NAR can see the handwriting on the wall — lower prices are in the bag with the subprime collapse and tightening lending standards in the surviving portions of the lending industry.
Digging Out of Delinquency
By Ruth Simon
Word Count: 1,234 | Companies Featured in This Article: Bear Stearns, Countrywide Financial
As mortgage delinquencies climb, lenders say they are taking new steps to work with homeowners in financial trouble. But many borrowers say red tape and other obstacles are keeping them from resolving their problems.
The sharp rise in delinquencies in recent months is straining mortgage companies’ ability to respond quickly to borrowers, with such solutions as new repayment plans or modifications to loan agreements. Borrowers often must make many calls before finding someone in a position to help them, by which point their problems may have worsened. The process can be particularly complicated when mortgages have been packaged into securities and sold to investors, which can limit the mortgage company’s flexibility in working out a solution. And for some borrowers, there may not be a good solution, apart from the sale of their home or foreclosure.
…
“The erosion [in credit quality] is greater than I expected” says Mark Zandi, chief economist of Moody’s Economy.com, who expects mortgage delinquencies will peak at about 3.5% in mid-2008. “It’s the noxious mix of all those aggressive loans now facing resets combined with falling house prices and deceleration in job growth, particularly in some markets.”
http://users2.wsj.com/lmda/do/checkLogin?mg=evo-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB117624718322565654.html%3Fmod%3Dhpp_us_at_glance_pj
“And for some borrowers, there may not be a good solution, apart from the sale of their home or foreclosure.”
So foreclosure is now a good solution for some borrowers? It’s a solution, certainly.
Don’t know if this was already posted:
Jim Jubak
Risks remain in housing
http://video.msn.com/v/us/fv/money/fv.htm??g=aa7c41bd-b671-4cbc-83c3-5a20da02b8f3&t=&f=15/64ceomansionsastockindicator&p=&fg=
Will a trade war with China lead to the death of the symbiosis? Higher mortgage rates would be a logical result, as less trade with China would imply fewer dollars for them to repatriate in U.S. MBS.
———————————————————————————-
China hits out as US launches trade cases
By Richard McGregor in Beijing and Eoin Callan in Washington
Published: April 10 2007 12:09 | Last updated: April 11 2007 01:50
China on Tuesday reacted harshly to a US decision to take it to the World Trade Organisation over piracy and copyright protection, saying it would “seriously damage” bilateral co-operation and harm business ties.
The statement from China’s commerce ministry followed the announcement by the US that it was lodging two cases with the WTO – on intellectual property rights protection and market access for US movies, DVDs, books and music.
The decision to file the cases amid pressure from Congress and Hollywood represents an ambitious attempt by the US to force politically sensitive changes to China’s tight media controls.
The response struck a significantly more combative tone than previous Chinese reactions to other trade disputes with the US, which appeared to accept that some tensions were part of the rough and tumble of being a global trading power.
http://www.ft.com/cms/s/79c28df2-e751-11db-8098-000b5df10621.html
“It’s not a rational move for the US to file such a complaint,” said Tian Lipu, commissioner of the State Intellectual Property Office of China.
and this
“The re-employed retired and outgone workers, an estimated total of 10 million in China, is adversely affecting the Chinese labor market by taking up posts that should belong to young people, according to an labor law expert.”
and this
“Trade volume between China and Japan hit a record US$211.3 billion in 2006, accounting for 17.2 percent of Japan’s overall foreign trade, and China is expected to surpass the United States to become Japan’s largest trade partner in 2007, said a senior official from the Beijing office of the Japan External Trade Organization (JETRO).”
and this
China’s trade surplus in March narrowed drastically by 38 percent year-on-year following government measures to curb the imbalance.
It stood at $6.87 billion, the first time in 13 months that the monthly figure dropped below $10 billion, according to the China General Administration of Customs.
Exports gained 6.9 percent to $83.4 billion in March while imports climbed 14.5 percent to $76.6 billion.
plus this
“U.S. Trade Representative Susan Schwab appeared to be taking a harder line than U.S. Commerce Secretary Carlos Gutierrez, who said last week that the United States would do all it could to help Russia enter the WTO.
Schwab said Monday that Congress was not ready to repeal Cold War-era legislation known as the Jackson-Vanik amendment to normalize trade relations with Russia.”
“China, the world’s second-biggest corn producer, would aim for at least 26.67 million hectares of corn in 2010, said Chen Mengshan, director of the Planting Management Bureau with the Ministry of Agriculture.”
Equals
US government insanity. A stupid trade war started by the American Taliban.
I apologize in advance if this has already been posted. LOL when I saw this:
MSN article
Quick summary:
Guy who won over $100 million lump sum with Powerball is “investing” to get it up to $1 billion. Expects 23% rate of return. Guess what he’s investing in.
It reminds me of an interview I saw with an old time (1950’s) NFL player who ran a mom n pop restuarant somewhere (really low key place, he sold kielbasas). When asked what he thought of contemporary football salaries, his reply was “You can only eat so many sausages!”
I mean, what, 100M is not enough? Even if it produced only a 5%, super sage return that 5M a year! You can live like a king with that. Why does he suddenly need 1 billion?
If he’s buying raw land and building commercial and residential developments he might need 1 billion soon? Think really, really big alligator.
You suck, Elaina Haley.
“Buyers, this is your market. Don’t miss out on this rare opportunity to grab such a deal. Who knows when the market will turn and prices will begin to climb? If you don’t have the money for an enormous down payment, or your credit is only so-so, don’t let that stop you from realizing your dream of home ownership. We’ll consider a lease option, too. That way, you’re building equity and your credit during your lease term. Or if you just need a place to call home for a while, and you are only interested in leasing it, that’s fine too. If you are interested in one of these options, or you know someone who is, please don’t hesitate to contact me. I’ll be glad to send you the details.”
“$5,000 bonus!!!!!
I considered buying brand new furnishings for this home and offering it for sale at this price fully furnished, but then I considered the fact that I don’t know what would suit you best in your new home. Maybe you like luxurious suede leather, or perhaps you have small children and durable microfiber works best for you. So I have decided to offer a $5,000 furniture allowance, which would help furnish your new home nicely in any style you choose. Or maybe you already have the perfect furniture. Let me know, and we’ll work out something else. $5,000 goes a long way toward a new pool or paying off your car. This bonus is not contingent upon a higher offer than the listing price, and the price of the home has not been inflated to cover such a bonus. In short, acceptance of the $5,000 bonus has no bearing on the price of the home. Bonus does not apply in the event of a lease or lease option.”
http://phoenix.craigslist.org/rfs/304734426.html
I want to ask a question to experts regarding my 401K/IRA, what funds to choose. I saw article regarding people losing their retirement savings in bonds fund? So want to make sure if my bond fund (even though they have 70%+ in AAA) will also lose money or not? Do you think I should move from bonds to money market ?
I have 40% in VBMFX and PBDIX ( both US treasury bond index)
40% in VMMXX,PRTXX,SWIXX ( money market),
20% in VEIEX,VDMIX,PRWCX ( stock funds)
Appreciate your inputs/suggestions.
Be very careful - a lot of these funds’ “treasury esquivalent” components have toxic mortgage and corporate junk in them. You need to contact your account administrator (Fidelity, Etrade whatever it is) and get the full breakdown of each fund and unless it’s all US govt bonds, dig deeper into the actual holdings. You’ll be surprised. Personally most of my IRA (2/3rd) is in pure US treasury bonds, medium maturity, and 1/3rd is in gold funds (I am young, so I can afford to speculate a bit). Anyways, do your homework and I’d stay away from anything containing mortgage, sorporate and emerging market bonds, no matter the yield.
Also consider http://www.treasurydirect.gov IRA accounts.
PDXrenter,
thanks for the info. I looked at vanguard VBMFX holdings and see the following in holding.
Asset-Backed 1.4%
Commercial Mortgage-Backed 5.2%
Finance 8.2%
Foreign 2.7%
Government Mortgage-Backed 35.5%
Industrial 8.9%
Other 0.2%
Treasury/Agency 36.1%
Utilities 1.8%
Total 100.0%
Here is the details on VBMFX,
http://tinyurl.com/ywpu4o
Can you please spare a moment and see if this should be moved to cash/money market?
Thanks in advance!
Hindsight vision is 20/20…
IRWIN KELLNER
No surprise
Commentary: End of housing bubble should have been obvious to everyone
By Dr. Irwin Kellner, MarketWatch
Last Update: 10:38 PM ET Apr 9, 2007
HEMPSTEAD, N.Y. (MarketWatch) — Why are so many people so surprised that the housing market has weakened and that a growing number of loans are in default? It should have been as plain as the noses on their faces.
A roof over one’s head is one of those things that everyone needs. Those who can afford to will buy while those who can’t must rent.
Since the 1930s, it’s been national policy to encourage people to become home owners. Besides creating wealth for individuals and growth for the economy, homeownership is believed to reduce crime as well.
People who own their own homes can deduct the interest they pay on their mortgage, as well as state and local taxes. But for these incentives to be helpful, housing must first be priced within a range that people can afford.
http://www.marketwatch.com/news/story/end-housing-bubble-should-have/story.aspx?guid=%7B080E214B%2D4E40%2D482E%2D9A1F%2DF9000ADFD296%7D
Some people who should “get it” clearly do not. See the lead article in this UCSD Econ Department newsletter for evidence (”For Sale — Reduced Price — Is the Boom Over?”).
Caution: .pdf file
http://econ.ucsd.edu/publications/newsletter/WinterSpring2007.pdf
P.S. The figures in that article are quite hilarious to anyone familiar with San Diego’s housing prices. The article talks about a house “fundamentally valued” at $320K, while the median SD SFR list price stands around $599K. No bubble here — move along folks…
From Kellner’s article (linked above); here are your fundamentals:
“Thirty-five years ago, in the early 1970s, the average home cost about 2-1/2 times the average family’s annual income. This was considered very affordable, and so the rate of homeownership rose sharply.
But for one reason or another, home prices soon began rising faster than incomes. By the mid-1990s, they averaged almost four times the typical family’s income. Affordability sank and with it homeownership.
In response, policymakers and lenders devised ways to make borrowing easier, since interest expense is the biggest cost of owning a home. These helped a bit - but they really didn’t kick in until the Federal Reserve began cutting interest rates in early 2000, eventually pushing them to 45-year lows by 2003.
Since short-term rates were well below long-term rates, many people borrowed at adjustable rates, believing that rates would stay low indefinitely, or that housing prices would continue to rise indefinitely, thus enabling them to refinance at a fixed rate at some future date.
Needless to say, home prices rose even faster than before, as these lower rates (along with new types of loans and creative sales tactics) increased the effective demand for housing faster than supply.
In some areas, homes wound up costing five times the average family’s income or even more. Nationwide, average home prices shot up 50% from 2000-2005 - clearly exceeding household income growth by a considerable margin.”
that’s similar to the EU experience.
In the Netherlands in 1990 a nice home would cost 2-2.5x average income (just one of the incomes per household counted, and if you were lucky maybe half of the second income). Fast forward to 2007 and the average home costs more than 8x average (personal) income. But we aren’t even talking about the same homes here, this 8x income home is POS compared to what you could buy on 2.5x income in 1990.
According to the statistics the average homeprice in Netherlands has increased about 400% between 1990 and 2007, but because of a huge shift in the type of homes sold (lower quality, bigger homes split into apartments, apartments getting smaller every year, expensive homes removed from statistics etc.) this tells only part of the story. If you look at individual homes, appreciation in the last 15 years was 600 to more than 1000%, while nominal income growth was just 40-50% over this period and real income growth probably negative. It’s all about crazy lending, and of course it helps to have 400-year lows in mortgage rates.
The average Dutchie now has a EUR 130K mortgage, that is 3x higher than in 1990. For homeowners, the average income they received from home equity gains was 30-50% of their official income. Of course economists tell us not to worry, because our homes have appreciated even more than the debt. Most of the equity gains in the Netherlands have been spent just like in the US … not for cars, plasma TV’s etc. but mostly for buying more real estate (often in other EU countries).
This morning, Thornberg was with Larry Mantle on KPCC. Not that the guy said anything new, but hearing him spell things out on the radio was a true “driveway moment”. I circled around the grocery store until the interview was over. One caller asked how long he should wait to buy and Thornberg told him to paint his rented apt. and stay put for a couple of years.
http://www.cnbc.com question of the day:
should there be a bailout for subprime? Go vote!
The purple finger of diatribe was raised!
Sales are up as prices drop in AZ. Imagine that. This new ought to entice more folks to get their houses listed now that things are recovered.
http://tinyurl.com/yudkso
“The annual home resale season appears to be off to its normally strong spring start, as the number of houses sold in the Southeast Valley increased an average of 28 percent from February to March, according to Realty Studies.
However, prices were down from the same month last year.
The number of sales increased from February to March in each community except Tempe, where the number fell from 135 to 125, or 7 percent.
Sales elsewhere increased: Mesa, 460 to 620, or 35 percent; Chandler, 280 to 380, or 36 percent; Gilbert, 230 to 290, or 26 percent, and Ahwatukee, 85 to 120, or 41 percent.
However, median prices fell throughout the Southeast Valley in March, compared to a year earlier, as the high number of homes for sale created competition among sellers.
Median prices for existing homes fell from March 2006 to March 2007 in every community in the Southeast Valley, with Ahwatukee Foothills and Gilbert experiencing the greatest decreases of 7 and 8 percent, respectively, according to the latest numbers released Tuesday by Realty Studies at Arizona State University.
“People are lowering their prices, if they can, to sell,” said Jay Butler, director of Realty Studies.
With the Arizona Regional Multiple Listing Service reporting almost 16,700 homes for sale at the end of February, the Southeast Valley has a glut of homes on the market that will take some time to sell. Homes are taking an average of at least 98 days to sell in the Southeast Valley, according to ARMLS.
Butler said he can’t predict when the inventory will be sold off.
“It raises a lot of issues like why is the inventory so high? If we had tremendous population growth that everyone is talking about, why are we looking at high numbers?” he said.
Possible explanations could be investors trying to unload homes, and that January is usually the month when the Phoenix area tends to get the highest listings and fewest buyers. “
Frank to investment bankers: Go bail yourselves out.
———————————————————————————-
House mulls more subprime resale regulation: FT
Reuters
Wednesday, April 11, 2007; 8:30 PM
LONDON (Reuters) - U.S. politicians are putting together a bill that could make it less attractive for banks to repackage risky mortgages into securities and sell them to investors, the Financial Times reported on Thursday.
The proposal would be debated next week by the House Financial Services Committee, headed by Massachusetts Democratic Rep. Barney Frank, it said. “We will regulate mortgage brokers,” Frank told the FT in an interview.
…
“It is no part of my concern whether investment banks make money … the purpose of housing finance is to get people in houses, not to finance the U.S. financial markets,” he said.
“Securitisation has not been an unalloyed good thing. We have a situation where unregulated entities have made these loans and no one now is responsible for it. There is a complete absence of any place to look when things go wrong.”
http://www.washingtonpost.com/wp-dyn/content/article/2007/04/11/AR2007041102017.html
Have these guys heard about 12%+ delinquency rates in the SF East Bay?
=============================================================
Subprime mortgage market woes seen well contained
Wed Apr 11, 2007 7:19PM
By Jim Christie - Analysis
SAN FRANCISCO (Reuters) - Defaults in the U.S. subprime mortgage market have generated a lot media of headlines, but the vast majority of home owners with mortgages are repaying their loans and their consumer spending power dwarfs that of subprime borrowers.
Subprime mortgages to less creditworthy borrowers comprised only 13.7 percent of outstanding U.S. mortgage debt in the fourth quarter of 2006, and their delinquency rate was 13.3 percent, according to the Mortgage Bankers Association.
The subprime mortgage market is “little more than an asterisk in the overall U.S. credit economy,” said Roth Capital Partners economist Donald Straszheim.
The concern that rising defaults among subprime borrowers would spill over to lower consumer spending in the broader economy is unwarranted, said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness.
“It’s the latest episode of housing hysteria,” Snaith said. “It’s a small segment of the overall mortgage market and its problems are not akin to a currency crisis where there is some contagion that just ripples through an economy.”
By contrast, some argue that a systemic problem is in the making and government action is needed. A week after a coalition of civil rights groups called for a six-month halt to foreclosures on subprime borrowers, several Democrats in Washington called on Wednesday for the federal government to bail out troubled subprime mortgage holders.
“The federal government can send in an infusion of (money) to prevent foreclosure,” said U.S. Sen. Charles Schumer, citing the possibility of “hundreds of millions of dollars.”
http://www.reuters.com/article/reutersEdge/idUSN1159729020070411