Borrowers Need To Understand Worse-Case Scenarios:NAR
Some housing bubble news from Wall Street and Washington. CNN Money, “The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold this year. A month ago it had been projecting a 1.2 percent increase.”
“The Realtors noted the problems in the subprime mortgage market had led it to cut its sales forecast.”
“Tighter lending criteria and fallout from the subprime loan debacle will lead to a healthier housing market with greater assurance that owners can handle mortgage adjustments, but higher loan standards will slow the housing recovery, according to the latest forecast by the National Association of Realtors.”
“David Lereah, NAR’s chief economist, said the changes are necessary for the long-term health of the housing market. ‘We want to people to be able to stay in their homes with mortgage terms they understand and can handle,’ he said. ‘Simply stated, a loan with the lowest monthly payment probably isn’t in your best interests, borrowers need to understand worst-case scenarios. If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.’”
From MarketWatch. “The chief executive of KB Home, one of the nation’s largest home builders, said Tuesday he expects the housing slump to worsen, even though sales have improved in some areas of the U.S.”
“‘I think we’re still early in the cycle here,’ Jeffrey Mezger said. ‘I think it’s going to be tougher for a little while before it gets better, but there will come a day when it gets better, because the underlying demographics in job growth are there.’”
“Last year, 13% of the homes sold by KB Home were purchased with subprime loans, he said, adding that the homes represented an even lower percentage of overall revenue.”
“‘We don’t know how it’s going to play out,’ Mezger said. ‘You hear the doom-and-gloomers saying there will be 2 million foreclosures and the buyers going away. We don’t think it will be anywhere near like that, but in the short-run, it will have an effect on things.’”
“He said his company is doing well in states such as North Carolina and South Carolina, but the market in Texas is softening. ‘Each marketplace will get back into balance at its own pace,’ he said.”
From MSNBC. “In an interview with MSNBC.com, inspector general for the Department of Housing and Urban Development Kenneth Donohue reviewed the scope of his office’s work, the root causes of the jump in fraud and abusive lending practices, and his concerns about proposed changes at the FHA in response to the turmoil in the subprime mortgage market.”
“Q: What has happened to the mortgage lending process that created these problems?”
“A: ‘What I found, like I found in the savings and loan industry, is there are those out there that are going to do what they possibly can to bring in the business.”
“The (mortgage) industry was trying to create additional homeownership. And that’s very nice, and I think that’s a great thing to allow people homeownership. But at what cost? … I think what happened is that people — unscrupulous people — took advantage of that, and what they did was go out and solicit prospective buyers.”
From Bloomberg. “National City Corp., Capital One Financial Corp. and SunTrust Banks Inc. may report lower first- quarter profits as the worst housing slump in more than a decade reduces income from mortgages.”
“‘We could see other similar earnings shortfalls,’ said Mark Batty, an analyst at Philadelphia-based PNC Wealth Management, which oversees $50 billion and owns shares of Wells Fargo & Co. and Wachovia Corp. Wells and SunTrust reduced mortgages requiring little money down or proof of income, he said. ‘We’ll see whether they moved fast enough.’”
“‘Nobody wants these loans right now,’ said Steven Picarillo, an analyst at Dominion Bond Rating Service in New York. ‘Why take a 30 percent haircut on these loans just because they have the word ’subprime’ on them?’”
The Associated Press. “Alt-A lenders have taken hits in the market in recent days. Guy Cecala, publisher of Inside Mortgage Finance Publications, said a ‘backlash’ from the subprime market meltdown is part of the equation.”
“‘While you’re starting to see some deterioration of the quality, it’s not so much that investors should be dumping (mortgage-backed securities),’ he said. ‘But nobody wants to own a security that goes down in value, whether because of public perception or the reality of the market.’”
“Glenn Costello, a managing director with the Fitch Ratings agency, said that some of the Alt-A lenders were trying to distinguish themselves from others. ‘But the fact remains that for some of the riskier products they originate, there’s a lack of demand for them’as investors get pickier about the market, he said. ‘Investors just aren’t willing to pay what they used to.’”
From Morningstar. “When a bank sells a mortgage it attaches a temporary money-back guarantee. Basically, a bank guarantees that borrowers will pay on time for the first 90 days after the loan is sold. If they don’t, the bank will repurchase the loan. When it repurchases the loan, the bank will have to write it down to fair market value and take a loss.”
“We are already seeing this occur in the market. Fulton Financial recently announced that it would need to repurchase 8.9% of the $247 million in Alt-A loans it sold into the secondary market. Fulton recorded a $5.5 million loss on the repurchase. Based on this information, the fair market value of these loans is just 75% of their original value.”
The New York Post. “The collapse of subprime mortgage giant New Century Financial, which created more than $220 billion in shaky home loans, is growing into one of the biggest bankruptcy tangles ever to hit Wall Street as shocking new claims of insider windfalls and hijacked millions emerge.”
“At least 95 lawyers have fought all week in the Delaware bankruptcy court to alter New Century’s own breakup blueprint, which has triggered several red flags.”
“When Buck Meyer thinks about the $300,000 he lost after he bought a subprime mortgage lender’s bonds, he doesn’t hesitate to denounce financial titans Bear Stearns Cos., Credit Suisse Group, JPMorgan Chase & Co. and Morgan Stanley.”
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy.”
“‘At what point did it become a Wall Street Ponzi scheme?’ said Meyer, who almost wiped out the nest egg he received from selling his home in Doylestown, Pennsylvania, six years ago.”
“Whether Wall Street’s best and brightest were reckless in their pursuit of profits and somehow responsible for the consequences will be decided in a Philadelphia court. That’s where the four top brands of finance are accused of creating an ‘illusion’ that American Business was a safe investment, according to a lawsuit filed on behalf of Meyer and more than 20,000 other individuals who held about $600 million of the company’s bonds when it went bankrupt in 2005.”
“Anyone searching for someone to blame has an obvious target in the New York-based securities industry, which, according to estimates by Bear Stearns, earned $540 million last year turning subprime home loans into bonds.”
“‘There is the potential for a lot more of these cases to be filed as the subprime lenders continue to fail,’ said Charles Tatelbaum, a Florida lawyer who has represented creditors in some of the U.S.’s largest bankruptcy cases. ‘I’d expect to see companies like Bear Stearns and JPMorgan running for cover by negotiating quick settlements.’”
“Retiree Joseph Funk lost $70,000 in American Business notes. He says he became too confident and too greedy as the high-yielding notes continued to pay. Funk says the Wall Street firms were greedy too, yet didn’t pay a price for it.”
“‘These people are supposed to be the great financial minds of the world so they must have had some inkling that this was coming,’ said Funk. ‘They got their money out before the little people.’”
LIErahs hood near DC is off 13% since may 05 - anyone have theose FL holdings ?
some prediction folks
expects a 0.7 percent decline in the median price of an existing home sold this year. A month ago it had been projecting a 1.2 percent increase.”
“some prediction folks”
Predictions of what has already occurred tend to be 100% accurate.
How can this be a great time to buy? The NAR should be sued.
The NAR is still pumping its “Public Awareness Campaign: Good Time to Buy”:
http://www.realtor.org/pac.nsf/pages/buynow
It’s a good time to take a Realtor to court for breach of fiduciary duty.
better hurry as they’ll all be broke soon– when RE returns commisions will be lower ,like in EU and mort brokers will be replaced w robots - 5 clicks to the quote
The New York Times article about it being a good time to rent has a reader discussion going today. Here is a link to the whole thing:
http://news.blogs.nytimes.com/2007/04/10/a-word-of-advice-during-a-housing-slump-rent/
But I think my fave post of all might be this one:
Theis article addresses the most expensive areas in the country. I’m so tired of the media driven sensationalism regarding the housing market and real estate brokers. I would like to see every broker just quit for a week and let everyone sell their homes themselves. See what that would do to the economy. Realtors are held to a very strict Code of Ethics. They are probably more self-policed than any other industry. I’d like to see one of these journalists spend a month doing what they do and then continue to complain about them. But then again that wouldn’t sell papers would it?
— Posted by Kathleen
This one is my favorite:
“This rent, credit card, and live for today mentality is why the US will become a oligarchy (if it hasn’t already has) because the masses are financing everything instead of saving and investing in a diversified portfolio of stocks, real estate, and savings.”
Yeah, I can see how renters are taking out massive HELOCS to buy a Benz and re-do their kitchens. We also finance our first/last/security deposit the same way home buyers finance their down payment/closing costs…NOT.
Seriously, why does society hate renters today?
Lurker, society hates renters today because we’re not keeping our yaps shut about how ridiculously priced their homes are, thus making it more difficult to get out of their money-pit intact.
Country’s gone down hill since the days of the foundin fathers after we let them renter folks to go a votin.
Since when did they have a fiduciary duty? They’re just salespeople. They’re not all bad, but you have to take anything that they say with a grain of salt because they don’t get paid if you don’t buy.
Yes, but the so-called ‘buyer’s agent” at least implicitly is working for the buyer. For instance, that is why they have ‘ethics’ rules such as keeping the buyer’s agent and seller’s agent at arms length from each other (tho’ they may be in the same office, heh). What if your financial consultant was caught selling you junk for an under the table commission (not that they don’t do this constantly..)- you would sue their a$$ off whether or not they claimed to be ’salespeople’ after the fact. If the RE people don’t want to be accused of not upholding their fiduciary duty, they should quit representing themselves as AGENTS for the buyers.
jiim A,
Real estate agents aren’t just “salespeople”. They’re agents with legal duties of full disclosure, loyalty, and reasonable care. http://www.exclusivebuyersagents.com/duties.htm
bulwark,
IANAL, but my understanding from people who are is that, unlike stockbrokers, Realtors are not “real” fiduciaries. Basically, they cannot be prosecuted for any breach of a “code of ethics”, like the CAR’s or the one you cited. They are not federally regulated/policied the way stockbrokers are (SEC, Sarbox, etc.), so compliance with any rules/ethics (barring outright lawbreaking) is strictly voluntary.
HARM,
I am a lawyer and I can assure you realtors are real fiduciaries and can be sued in civil court for breach of the fiduciary duties of disclosure, loyalty and reasonable care, among other things. In addition to civil liability, they can lose their state real estate licenses for misconduct.
A realtor can stand in front of a group and say real estate only goes up. They can stand in networking groups in San Diego and say there is no housing bubble. They can browbeat someone into buying a house with dire threats of what will happen if they don’t. They do not have to indicate in any way shape or form that real estate may go down. They must disclose known defects but have no obligation to tell a client they are buying way out of their means.
They are NOT fiduciaries. They are salespeople. You cannot sue them for putting their interests above yours. You can sue them for lying or other technicalities.
BTW Stockbrokers are not fiduciaries. They are sales people. Goggle “Merrill Lynch Rule” if you want to know the SEC debate about who can call themselves what.
Never, never, never trust that a salesperson will put your interests above theirs. They have to sell to make money regardless of how crappy the product is. (And they probably drank the kool-aid like many realtors and believe the crap they are saying.)
If your realtor told you real estate only goes up and you’d better buy now or be forever priced out of the market but your home is now worth less than you paid for it - good luck suing them.
I agree you should never trust Realtors, but that is not the point. They are fiduciaries in every sense of the word. Unfortunately, they (and many people like yourself) don’t know the law.
To be clear, I should add there’s a big difference between a Realtor’s standing in front of a group and giving a speech, in which case no legal relationship is formed with the listeners, and that Realtor’s making an offer on a property on your behalf. In that case the Realtor becomes your agent and assumes fiduciary duties.
And here is an ethics rule from the National Association of Realtors on point:
# Standard of Practice 11-2
The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of a fiduciary.
DL thinks of himself as the CEO of a major F50 corporation.
You can see his EGO on CNBC all the time.
The fiduciary duty of a Realtor, like all commissioned salespeople, is to the seller. Only exceptions are people like stockbrokers who have statutory duties to both parties.
The Realtor has duties exclusively to the seller only where there are two realtors in the transaction. In such a case, one Realtor will represent the seller and the other, the buyer. Where there is only one Realtor, however, he or she is in the precarious situation of dual agency. Unless such a Realtor gets the written agreement of the parties that he or she will not disclose to the buyer that the seller would take less, or to the seller that the buyer would pay more, the Realtor may be liable for the difference. The same goes for disclosure defects of which the Realtor is aware but the buyer is not, and for other factors affecting the value of the house, like a collapsing resale market. The Realtor must disclose these things to the buyer, including the fact that the property will almost certainly be worth much less next year. Otherwise, the Realtor will breach the fiduciary duties of disclosure, reasonable care and loyalty.
The NAR is still pumping its “Public Awareness Campaign: Good Time to Buy”:
http://www.realtor.org/pac.nsf/pages/buynow
Gosh, Lereah seemed so sincere today I almost believed him.
NOT! (sarcasm off)
If you follow the advice of NAR and DL, your money will find its way in their pockets in no time.
Realtors and DL himself are all loaded with “investment” properties. They are now looking for the last fool to hold the bag for them.
I love Liereah’s line that realtors want to make sure people stay in their homes. Hello?? Realtors want everyone to move! That’s how they make money!! They don’t make a dime if people “stay” in their homes. This guy needs to be brought up on charges of treason.
Treason?… Are you kidding me?
Not good, huh? Hmmmm,…..can we get ‘em for murder?
Fraud and misrepresentation.
Well, yeah. But some might say that his words and actions led millions of sheeple out of their McMansions and back into the renter’s pool. It’s not selling state secrets but he’s ruined the “American Dream” for a lot of undeserving people!
Treason actually seems like a fine charge, considering how the US dollar has been doing. Against the Euro, down 10% in a year. Against the Australian dollar, down 13% in a year. Oh well, the Fed is the main villain I suppose, but the REIC did participate.
If d.l. were put on the d.l., not a bad thing…
Disabled comes in many flavors~
Oh come’on guys… Treason? DL is a lot of things but it’s not like he outed a CIA agent or something and ex-nnvmtgbrkr, Murder?…. Bwwwaahhaa stop it your making me spill my coffee.
They were yelling ‘FIRE’ in a crowded theater. Jail their butts.
“‘I think we’re still early in the cycle here,’ Jeffrey Mezger said. ‘I think it’s going to be tougher for a little while before it gets better, but there will come a day when it gets better, because the underlying demographics in job growth are there.’”
BZZZZZZT, wrong answer! Job growth cannot save the housing market. Not at these prices. I am getting really tired of this conjecture. These idiots will use job growth in the service sector as the basis for their argument. Sorry, those $8.50 per hour Circuit City jobs don’t cut it, Jeffrey. The previously skyrocketing prices are about to “rocket” downward.
“ZZZZZZT, wrong answer! Job growth cannot save the housing market.”
Bingo. As the market disconnected from family incomes, job growth can never replace the magic of voodoo financing.
It will take a while, but once the MSM makes the connection that the boom had nothing to do with fundamentals (like job growth) and everything to do with never-before-seen drunk lending, then maybe we’ll stop hearing this crap.
Job growth is a myth. Talking heads in Government and the media spout off to no end these days about “job growth” but the reality consists of little more than living-wage jobs being replaced by near-minimum wage jobs.
Look at the announcement by CitiCorp today that they are laying off 17,000 and moving another 9,000 jobs overseas. This is the new norm. A couple of weeks ago a major electronics retailer announced a plan to fire 10,000 workers making $12/hr and replace them with new hires making $8/hr.
Where is it going to end? I know where: 20% of americans will work for the government or in corporate upper management or as doctors or lawyers. The other 80% of us will be making $8/hr. How much of a house can a married couple buy if they both make $8/hr.
Business is desperate to cut any job that pays a livable wage because that’s the easiest short term route to maximizing profits and bonuses. So, I agree with you Banteringbear, continuing declines in jobs that pay a livable wage means the bottom of the RE crash is a LONG way down.
So true. Some people ask why I don’t “work” any more. I do a little work to maintain my portfolio of trailer-park loans, but if I took a “job” at $20/hr, the federal, state, and FICA bites would cut that wage immediately in half. Basically I would be working all year just to pay my Federal income tax. So why work.
Even if this happens, people still need to be able to afford housing. Even if they have no access to credit, the rents that they pay their landlord cannot forever be below the landlord’s cost. This would mean over time that ~80% of the housing stock fell in price to where ~80% could affort it on $8 an hour.
Exactly, Jim, given current trends in wages 80% of housing stock will fall in price to where a couple or a couple plus a kid or two, all making $8/hr, can afford a typical house.
Of course we can’t predict exactly how this will play out. I think that a lot of the assumptions people make about the middle-class american lifestyle will go out the window. We have no inherent right to live in small family units that reside in huge houses. We also have no inherent right to drive 3 large cars per family or own a great quantity of expensive electronic toys.
So maybe a huge number of unoccupied mini-mansions will be sub-divided so that 4 families can live there. Maybe the suburban clusters out in the middle of nowhere will sprout small supporting towns. Maybe when wages here get cheap enough and chinese workers start wanting more some of the factories that have moved overseas will return here. Noboby can say.
But the current structure of free trade and globalization means that the American middle-class is toast. This is simply because the average american does not work hard enough or well enough to justify a big wage premium over the average chinese or indian worker. So real wages will equalize over time.
The recent asset bubbles have simply delayed the day of reckoning. But there’s a big price to pay for the last 30 years of putting the needs of global corporations above the needs of average Americans.
I have had the same foreboding sense that you have described for years now. I think it is inevitable. It will probably take many years to fully play out, but it will be devastating for family s when it happens to them. I wonder what the far future of lawyers will be. Used to be that tribal elders mediated disputes that lawyers do now. Should be interesting.
So there are two choices:
1. Prices come down to median of say $60,000 for a house which would be easily affordable if a couple each makes $8/hr.
2. The dollar is inflated away so that $8/hr. becomes $80/hour. Then that same couple can afford a 600k house.
20 years ago I would have said that asset deflation would be allowed to happen to protect the value of dollar. There was something to protect. That’s what happened in Japan. But now, inflation would also be a useful way to stiff foreign creditors as well. So gentlemen, start your (printing press) engines! Too bad about the 20% interest rates!
Hey, maybe it IS time to buy gold.
It *is* time to buy gold. Most people don’t really understand what inflation is, or that its currently running completely out of control despite the government’s hilariously unconvincing statements to the contrary. (We have a government entity that simultaneously hides data for the first time in its history, and then serves up dubiously rosy reports on a “just trust us about that data you can’t see” basis). Everyone knows that the US cannot possibly pay its debts or financial obligations (social security, medicare, iraq, bonds, etc.) but most people haven’t yet realized that the full intent of the government is to manufacture dollars to pay these debts off (hence — hiding the money-supply data for the first time in US history). The US dollar is like a stock that’s being diluted. People on fixed incomes and salaries will be the huge losers in this game. The American people can already see the prices of things going up, but hey.. that’s just oil, right? Things that can’t be diluted will skyrocket in value. Got gold? Got silver? Because holding dollars is like holding water in a bucket that has a hole in it. When the markets tank, the true gold mania will begin — its just a matter of mom and pop Americans figuring out that their currency is being diluted at a faster rate than ever before…
The high interest rates you predict are the very reason that in a debt/money supply economy there will be deflation. Japan had the luxury of being able to export to the US economy where demand and an ability to generate debt still existed. Who will we export our deflationary pressure to? China? Don’t count on it. We are all going down the deflationary hole.
Yeah, I was thinking about that. It’s a catch 22 isn’t it? If you inflate, interest rates go up, and the $80/hr couple couldn’t afford the payments on the $600k house at %20 anyways… So even if they try and inflate away demand will drop, so at least for housing deflation will be the order of the day. So is gold the answer? Just move anything that you don’t need to eat or pay your bills with into gold/silver and wait it out. What do you think aladinsane?
So we will get the worst of both worlds. Asset deflatio
I think Big time inflation will only happen if wages go up, they won’t because of outsourcing and technology.
I think the inflation we will see will come from a falling dollar. Imported goods will go up and anything that can be exported will go up in Dollars and cost Americans more as they have to compete with foriegn buyers. deflation will ocurr with unnecessary things, luxuries. gold and silver ? I don’t know ?
I have a dumb quesiton. How does one buy gold? When I was growing up, my parents bought gold in the form of jewelery. My mother wears some, some has been given to my sister-in-law, and some is just in the bank locker.
I have 6 months expenses put aside for emergency purposes in a moneymarket account. But if the value of the dollar is going down fast, that money may not buy me much.
Do you buy gold in the form of coins? Can I get them in a coin-shop? How and who do I sell them back to when I need cash? Can someone advise me?
Honest questions are never dumb!
I’m no expert but I’ll try to answer your question. When most investors talk about “buying gold” they are actually talking about buying stock in businesses that mine gold or own mines or would otherwise profit if the price of gold went up.
But individuals can certainly put some money into physical gold if they wish. Don’t buy jewelry whatever you do! But most nations that produce a lot of gold mint some kind of bullion coin - usually each coin will be exactly one troy ounce in weight. South Africa mints the Kruggarrand, Canada the Maple Leaf and so forth.
Do a google search for “buy sell gold coins” and read what the big dealers have to say. I’m not sure what kind of commissions they take on the transaction.
If you have the cash to spare it wouldn’t hurt to hold a few thousand dollars worth of gold coins. Especially if you are a doom-and-gloomer like I tend to be.
Check out Ben’s Money and Metals blog (see link above right). The easiest thing these days is to buy the gold ETF, symbol GLD, or the silver one, SLV. Coins can be bought at tulving.com for example, if you want to buy a lot at good prices, or at a local coin shop or on ebay, where you can buy small amounts at higher prices. Those are some of many options.
Before any of you spend one red Cent on your choice of yellow or grey metals…
Do yourself a favor and google the name of whomever you are thinking of buying it from~
You’ll find out if they are naughty or nice.
The internet knows all.
Check out kitco.com as well. They buy and sell gold and silver in different form factors.
Try http://www.apmex.com they seem to have the most competitive pricing and I’ve purchased several times from them with no problems.
Why don’t we forget Iraq and get into a war that is (1) painfree (2) entertaining and (3) profitable. I suggest storming the Cayman’s, Bermuda, etc and making all the offshore money-launderers (i.e. our ‘proud’ US corporations) walk the plank. Heck, I’d vote for a war-monger who suggested that….
It’s time for Argentina to re-invade the Malvinas again. Maybe the US can get into some of that action this time.
But, but … calm DOWN Tony B. We were just trying to help when we sent the Marines into New Georgia. I’m told that the oil rigs make the best temporary platforms for the helicopters. We don’t want those sneaky Argies to sneak in under the RADAR or something do we?
“…because the underlying demographics in job growth are there.”
Aren’t we at or near all time low unemployment? How much more job growth is this guy expecting?
That’s simply because they no longer count the unemployed.
“If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.’”
Just as easy as that, huh DL? You don’t think folks have thought of that you brilliant genius? The problem is they can’t, DL, and even if they can they don’t want to because a refinance into a coventional loan at historically low rates still puts them in r the heads and in the crapper.
Knew it. Saying it.
Rifinance id!
Darn spellchecker!
Refinance id!
DL is like those old fashioned guys in the beer comercial.
BRILLIANT.
Like say:
Scams, the beer refreshing…
Do they still make Hamm’s?
“Do they still make Hamm’s?”
Yes. But it’s not made in Minnesota anymore.
I miss the Hamm’s beer bear.
BayQT~
If it wasn’t coming from DL, I might actually call it good advice.
I spoke with a friend who owns a home already. His ARM has another 3 years on it. He asked what I thought he should do short of selling his home. I told him he should try to refinance now and lock in a rate that’s liveable for as long as possible–it’s only going to get more difficult to refinance over the next couple of years, not easier.
But I also told him he should go to his existing lender and see if they’d refi the loan for no fees. He’s been a good payer for a number of years…if they can refi his loan and keep his payment roughly the same, it should actually be a loan they can resell, even today.
Trying to turn this disaster into another way for REIC to collect another bunch of FEES.
Lereah: If you’re in a mortgage you aren’t comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.
“If you can” - and if not? No worries, all RE is local, right Dave? Too bad financing isn’t.
Mezger: I think it’s going to be tougher for a little while before it gets better, but there will come a day when it gets better, because the underlying demographics in job growth are there.
Job growth in RE and finance? Someone turn on the lights and tell the drunk guy to go home, the party’s over.
You beat me to it.
My thoughts exactly.
You even highlighted “if you can” as I would have:)
“We’re in a very uncomfortable place right now.”
Cary Leahey, senior economist at Decision Economics Inc., after U.S. service industries grew at the slowest pace in almost four years in March, leaving the economy more exposed to slumps in manufacturing and housing.
“…tell the drunk guy to go home, the party’s over.”
The partiers are too drunk to realize the party is over, the cops have arrested them, and they are sitting in the back of the paddywagon on the way to the slammer.
The partiers are too drunk to realize the party is over, the cops have arrested them, and they are sitting in the back of the paddywagon on the way to the slammer.
and with the new BK law, the judge can’t be lenient, their punishment is already set in stone by the “mandatory minimum”.
and they are so drunk they think the paddywagon is a party bus and they think they are on the way to the next party. They have no clue. The hangover will be a bitch when they sober up tomorrow.
So, the buyers coming in on buses are now in paddywagons?
Why the hell did these people ever get into the suicide loans in the first place? It’s not because they couldn’t afford “conventional” loans.
Didn’t DL once say that getting into a fixed loan and quietly paying off your mortgage was for suckers? Can anyone point me to something he said like this? Thanks.
Sorry, it should say, “it’s not because they could afford a conventional loan in the first place.”
http://www.latimes.com/business/la-fi-homedebt28aug28,0,6044251.story?coll=la-home-headlines
“If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah, chief economist of the National Association of Realtors and author of “Are You Missing the Real Estate Boom?” “It’s as if you had 500,000 dollar bills stuffed in your mattress.”
Another choice one from that page:
Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. “If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing.”
If you own your own home free and clear, people will often refer to you as a fool.
I refer to them as lucky!
I refer to them as true real estate investors.
I refer to them as lucky!
All you Ben Jones followers must be too old fashioned to get with the new paradigm.
” I refer to them as true real estate investors. ”
Sounds good but I would have to disagree with that. Having a paid off house while comforting is probably not the highest and best use of funds and more liely than not your’re probably not the sharpest tool in the shed.
Rather be a dull tool than a “TOOL”.
The funnest thing about owning your property free and clear is, it doesn’t matter what it does, up or down, pricewise…
It becomes a moot point if you aren’t of the heloc persuasion~
Paying a tiny rent while investing in assets that actually appreciate would be a better use of funds. However, it’s a lot of work to identify those other assets. People who have other concerns in life are best off living in paid-off, low-taxed homes.
“Rather be a dull tool than a “TOOL”.”
Ummmm, ok i’ll bite. What’s the difference between the two.
This is true only in a few limited circumstances that don’t come along often. If you borrowed a small amount of money against your home, leaving a massive equity cushion of at least 50% (thus protecting you against virtually any downturn), and if you were able to borrow against it at an extraordinarily low fixed rate, AND you expect interest rates to rise, you might park your money in a safe investment, earning back most of the interest you pay on the loan, making up even more of the gap with tax savings, and then — when interest rates rise — park your money in a safe investment with a higher interest rate than you have locked in on your house.
Let’s say you bought your house for $200,000 and it’s now worth $400,000. You borrow $100,000 against it at 5%. Of that $5,000 in annual interest, which is tax-deductible, if you’re in a 40% combined marginal tax bracket (which you are if you make over about $110,000 in California), you’re saving $2,000 in taxes. Let’s say the rate on a safe investment, like U.S. Treasuries, is running at 4% at the time, and you invest your withdrawn $100,000 there. You get $4,000 in annual interest, on which you owe $1,600 in taxes. With everything factored in — interest paid, taxes saved, additional taxes paid, and interest earned — you’re coming out $600 in the red each year. Not much, but obviously not something you want to continue indefinitely, either.
Then, in a year or two, interest rates rise. You still have your loan locked in at 5%, but now Treasuries are earning 6%. Now, your interest costs are still $5,000 (with tax savings of $2,000), but your interest earnings are $6,000 (with additional tax owed of $2,400.) Now you come out $600 in the black per year.
As another example, in early 2004, you could have gotten close to a 5% fixed rate on a 15-year loan. The present national average yield of a AAA-rated insured tax-exempt municipal bond is 4.36%. So if you’d borrowed $100,000 at 5%, you’d have a net outflow of $3,000 (after taxes) and a net gain of $4,360 (which isn’t taxed), for a total net of an extra $1,360 per year.
Call me back in 11 years, you can call me a fool all you want.
“Having a paid off house while comforting is probably not the highest and best use of funds and more liely than not your’re probably not the sharpest tool in the shed.”
There’s something to be said for being comfortable at home. Leveraging your kids’ home specifically to “invest” is probably not a bright idea. It might keep you awake at night when those stocks or futures start to tank and your house is losing value at the same time. I’ve tried it both ways, and having the mortgage paid off makes me a better investor — or at least I can sleep at night with a fairly aggressive portfolio.
Thomas, your analysis is spot on. The only problem is that the REIC never told anyone to invest their HELOC money. In fact, if you told them you wanted to cash out some equity to “invest” it, they’d very quickly tell you no. They’re the only ones allowed to invest other people’s money.
Instead, they told people to spend all that money. That guarantees them interest payments over the long term, and it reduces the possibility of default, or at least reduces the possibility that the FB can claim to have lost the money through no fault of his own.
Mortgage paid in full; no HELOC — I must be the biggest fool who ever walked upon the face of the earth!
It’s very surprising that the CEO of a mortgage company would think paying off your mortgage was a bad idea.
Dude, your Hummer potential is off the charts!
What they mean is that your money is sitting there, doing nothing ‘for them’. You’re not paying any fees, points, interest, etc. How convenient that their mortgage strategy for the rest of us involves the exact transactions that make them their money…
Do they really think we’re that stupid? (Looking at the state of the housing market…) Oh…
What kind of Hummer? Are you saying that paid off mortgages are babe magnets?
I’m really surprised you “went there” before I did.
Following up on SD_FotBotD’s comment. “Sitting there doing nothing” implies that housing isn’t a good investment. Wait, housing isn’t a good investment? I thought we should put all of our money in housing, since it only goes up. Or should we only invest in housing (a non-cash producing investment) if we are highly leveraged?
I think I’ll take my financial advice from all the people without their hands reaching for my pocket.
I’d wager they will be in short order.
Paid-off homes as babe magnets, that is.
That article looks so ridiculous now. How about Doug Levy, the FB who said his Marin county condo was “like … sleeping in my piggy bank.” I’d love to see where he is now.
Maybe he means that the cardboard box he’s sleeping in now is shaped like a piggy bank!
“…like sleeping in my piggy bank.” How well is he sleeping now that he’s seen the greedy kid with the hammer?
Why is owning your home free and clear considered “foolish”? I own my home free and clear and I look at it as having “peace of mind” plus I get to save probably around $2,000/month to be invested elsewhere that I normally would be sending to the bank. Has anyone ever done an analysis of owing a home outright versus a mortgage to see which person is better off? Maybe, I have it all wrong?
Observer, the mortgagor is better off only if he can earn a return on his investment that is higher than the rate he is paying on his mortgage loan. Of course it’s POSSIBLE, but it requires both effort and some luck. If he/she has some other job, the simplest investment is, pay off the house.
az_lender… That’s true if the borrower is thinking of paying extra, or has an Option ARM. However, in many cases one would have to compare current HELOC rates with other investment returns.
If you bought your house for $200K in 2000 and saw it appreciate to $400K in 2004, and you guessed, correctly, that interest rates, having hit a record low, were due to rise, you could have locked in a 5% rate on a $100,000 15-year loan, paid the $600 in interest (net of tax savings, assuming a California-style 40% combined marginal income tax rate) for a couple of years, and then bought tax-exempt munis this year, which are presently yielding 4.36%.
$5,000 interest paid - $2,000 tax savings + $4,360 interest earned = $1,360 profit.
Not bad, and very safe. Absent Armageddon, your house won’t decline 75%, so you won’t ever get upside down, and a good diverse muni fund isn’t likely to default completely.
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy.”
This whole thread reminds me of how odd people are about speculation. They think that what you need is money and cojones, but no (even rudimentary) mathematical ability or rudimentary finance/economics. They alway think ‘Duh. High yield, good. Me think it funny that noone else noticed dis. Me buy lots!’ Whether you believe the Capital Asset Pricing model or not, why does nobody ever remind themselves that high yield = high risk? And what about diversification of assets? Why would anyone park all of their cash in bonds that are clearly junk- they COULDN’T pay that high of an interest rate if they did not have incredibly high risk associated with them- the market would have bid the price up on issue. Letting these people even manage their own money is like giving a handgun to a toddler.
On another note, isn’t it astounding that 8.9% of the mortgages handled by Fulton Financial were issued to borrowers who couldn’t pay their bills on time FOR 90 DAYS!! And they probably had low teaser rates and were years from their resets. It boggles my mind that almost 1 in 10 borrowers immediately fail to meet their early (small) payments- even stated-loan liars who thought they could refinance right away ought to have had enough firing neurons to notice that they could not even cover the first months payment!
Most Americans aren’t going to invest wisely, therefore paying off the mortgage is certainly their best bet.
I’ve wondered what kept them from offering “not-even-any-I for three months” Option loans. Too blatant for even the MBS investors?
Hey buddy can you spare a buck?
http://www.amazon.com/gp/offer-listing/0385514344/ref=dp_olp_2/104-4571409-8329515?ie=UTF8&qid=1176313534&sr=8-2
No.
It costs more ($3.95) to ship Lereah’s book than it costs to buy it ($1.05). I wonder if his mother will start crying again?
You’ve just encountered one the uglies of the internet book world…
Quite often i’ll buy perfectly good used books for one Cent and the shipping is $3.49.
So as a society, we value the shipping @ exactly 349 times the value of the contents of the book.
Says a lot.
“All that money sitting there, doing nothing.”
The joke here is that if houses were really great investments like they said, then money left in your house would NOT be doing nothing, it would be appreciating. What they were arguing for with these stupid statements was not just “putting your money to work”, but LEVERAGE. And anyone investing in 1929 (if they were still around!) could tell you leverage is a double-edged sword.
In other words:
You should buy a home at all cost since you’d be more secure while owning your own home. It’s a lifestyle choice, not an economic one.
And you should also leverage to the gills to maximize your return on equity, thus stressing yourself out while skirting the edge of financial ruin, since real estate is an investment and only goes up.
Lifestyle or investment? Both? Neither? I’m going to be sick with all this spinning.
I certainly sleep well at night in my paid off home. My biggest concern is raccoons coming in the cat door at night.
Why the hell did these people ever get into the suicide loans in the first place? It’s not because they couldn’t afford “conventional” loans.
Answer: Greed. They thought they could buy more with the suicide loan. To wit: they would then make more profit then if they had bought with a conventional loan. Then the music stopped. FB’s don’t have a chair to sit down on. The renters all have the chairs when musical chairs music stopped.
Go to David Lereah Watch for more dirt on Lereah!
In many cases, this will work about as well as using a condom AFTER becoming pregnant.
“No worries, all RE is local, right Dave?
Isn’t that exactly the same as saying it’s different everywhere.
A paid off home loan gives you freedom . I talked to a guy yesterday who told me he spent the last nine years paying off his house ,(young guy, maybe around 40). This guy worked his ass off to obtain that goal . This guy was one of the few people that I have run into lately that seemed stress-free and very happy -go-lucky .He told me he works when he wants to now .I advised him to never be tempted to pull out the equity.
Count me in as one of the morons who is free and clear. I’ll leave the leverage to the “geniuses” who are invested in hedge funds and private equity, many of whom will be blindsided by the inevitable and unpredicted Black Swan events to come. A la Buffett, my first rule is do no harm.
The dangling participle of my holdings will soon be in my hands…
I’ve decided a 40% hit on my retirement nest egg, tax-wise, ain’t a bad thing~
Really the only piece of my puzzle of the karats that I had no control over, in the hands of a brobdiagian korporate monster, that is now showing their ugly face.
If I left it in their capable? hands, the result would probably be a 100% hit.
It’s a time to be happy with 60% and be done.
I’m with the “pay the mortgage off” crowd. It is the best feeling in the world .
And if you buy smart, you can make money off the house after you own it outright ( ie. a rental apt. out back, etc.)
That’s just one of the reasons why (among many!) why I don’t at all understand these people who were gung ho to jump at these high home prices. There’s no way they could EVER pay that princpal off, not to mention that the longer they held the loan, the more the house cost in the long run.
It is a new tune. Wow!
Some housing bubble news from Wall Street and Washington. CNN Money, “The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold this year. A month ago it had been projecting a 1.2 percent increase.”
A new tune alright but he’s playing this one on a harmonica.
And since you’re from Chicago, you already know that a harmonica is a great instrument for playing blues.
BINGO!
A song for NEW CENTURY..
Since my banker left me, I found a new place to dwell…
I’m down on the edge of bankrupcy, in liquidation hell.
FB has left the building! (And left the keys.)
USA Today article: bailout problematic due to securitization. Ouch, that knife cuts both ways.
http://tinyurl.com/2jgh9l
(Servicers are caught between legal documents and a “huge wave” of consumer advocates, lawmakers and others talking about changing the rules “to force them to do something that might be contrary to what these documents are telling them,” says Diane Pendley, a managing director of Fitch Ratings.)
Recall a reporter at the Dallas Morning News much admired here (DiMartino was it?) who left for Wall Street? I predicted that she was coming to NY to make money while sorting out this very mess. The only way out I can see — a re-securitization with a loss factored in, with Wall Street connecting another fee.
She went to the Dallas Fed, not Wall Street.
WT Economist: I enjoyed reading Danielle DiMartino. You say she went to Wall Street?
That’s what I recall, others recall otherwise.
To repeat, she went to the Dallas Fed.
A nation of whiners. Pathetic.
And scammers.
Most of you only saw the tip of the iceberg of what we’ve become…
More will be exposed, soon.
A nation of gamblers.
1/2 the country seemingly has turned into Marge Simpson pulling the handle of the slots.
The house always wins indeed.
This article actually sheds some light on why people are willing to pay my 9% rates. Apart from my motto (”No Points No Fees No Boolsheet”), they also know I am very accommodating if they need or want to skip a couple of payments. I have my 11-year-old mortgage accounting assistant push a few buttons to run a new amortization table. I bet he is just as good as most of the clowns who are now losing their jobs in the loan-origination so-called industry.
Everyone repeat after me: “Real estate only goes up!”
Post-bubble mantra: “Buy now and get priced in forever.”
owning is thowing money away
PITI the poor fool!
The “P” in PITI went the way of the dinasours several years back. Today they’re lucky to have “I” in the PITI.
Hence, buying, which was recently PITIable, is now
ITIotic.
Everyone repeat after me: “Real estate only goes up!”
Exactly! Only now the reason it’s going up is that everyone is… “upside down.”
…and then it comes back down and lands on you like the Wicked Witch of the East.
Real estate only goes up!
Good work, Citizen!
Despite this story in the LA Times:
http://www.latimes.com/business/la-ex-subprime11apr11,0,5562529.story?coll=la-home-headlines
but the public still believes in housing:
http://www.latimes.com/business/la-fi-housing11apr11,0,5209585.story?coll=la-home-headlines
Amazing.
Over the long term in nominal dollars it does only go up. The problem is 95% of people don’t think it through and they keep propelling the market upwards. If everyone thought it through like those on this blog, you’d have a real crash. Mankind succeeds in spite of itself.
From the late 1920’s into the mid 1940’s it went down in nominal dollars. Maybe your “long term” is longer than that.
“From the late 1920’s into the mid 1940’s it went down in nominal dollars.”
Moreover, over at least some of the 1930s, nominal dollars went down in real dollars (deflation), which made the real loss larger than the nominal loss.
It’s different here….sorry, I was never very good a following instructions.
“‘These people are supposed to be the great financial minds of the world so they must have had some inkling that this was coming,’ said Funk. ‘They got their money out before the little people.’”
Oh you naive fool. Of course they ‘”had some inkling this was coming”. The whole idea is to make money off of screwing the “little people”. Welcome to Wall Street.
I came to a realization a year ago regarding the modern securities market. Everything is a zero-sum game to the extent that everyone is counting on capital appreciation. Presumably a stock share should be valued based on its ability to produce income for the holder in the form of dividends. But nowadays, the valuation and expectation of stock’s performance based on dividends has long fallen out of fashion. The primary concern is how much someone else will be willing to pay for the stock a few weeks, months, years down the line with little to no regard for dividends. But at some point the stock will have to produce income on its own to justify its price to the last bagholder, right? Well, wrong, the modern stock market, with its lack of dividends and lack or regard for dividends, is akin to a Ponzi scheme always in search for the greatest fool. And the Wall Street professionals know how to play all the retail folks like fiddles.
Right. The old rules no longer apply. If you go in playing by the old rules, you’re in for a thrashing. Wall Street today is a game of covert manipulations. In order come out ahead, you’ve got to outscam the scammers.
In order [to] come out ahead, you’ve got to outscam the scammers.
Yup… be a flea on the dog… index puts anyone?
You’ve never heard of the Dividend Discount Model? It’s even a function on the Bloomberg. A method of valuing stocks based on their present and future earnings.
Would not this yield an infinite price? (assuming a corporation never dies)
No, because of time preference. Money at an earlier date is preferred to the same amount at a later date, so later and later payments are discounted by an increasing amount. The sum of this (possibly infinite) series of payments is finite. See any calculus textbook for details.
One of the reasons that dividends fell out of fashion is that they were double taxed. Tax on the business’ profits, then on the dividend.
Theoretically a stock that gives out a dividend of 1% should be equal to a stock that doesn’t give out a dividend which has a profit of 1%. But after the dividend/earnings period, the stock that doesn’t give out the 1% dividend should be 1% higher.
That’s why people often look at a company’s earnings rather than it’s dividends. It isn’t unreasonable to assume that reinvested earnings will yield future dividends and earnings while also adding to the liquidation value. But that still doesn’t justify the crap game get in and get out greater fool valuation in the current equities market.
I kind of have to disagree with this. I’m looking at Warren Buffett as the example (Berkshire Hathaway has never issued a dividend). Mr Buffett considers issuing dividends should come secondary to the company placing the money into a value (keyword is “value”) investment.
Basically, he considers that a company should be looking into investing $100 into an area that will bring money into the companies coffers that exceeds the $100 investment. If a company can not do this, then the money should be sent back to the investors in the form of a dividend.
They key to this is that the investor must scrub a companies financial reports to ensure that this is happening. Unfortunately, many investors don’t do the research and some companies try to hide it with fancy accounting…aka Enron.
I always look at cash flow. For example, it’s easy for banks to declare revenue in the form of option-arm loans by adding the unpaid interest to the principal of the loan even though it has never been paid. It is hard for them to hide the lack of cash-flow from the unpaid “revenue.”
TRich, you are right, and you may be interested that the few minutes I watched CNBC this morning were all about … high-yielding stocks ! As in utilities, especially foreign utilities. Like, the biggest power companies in Italy, Brazil, and the UK. The Brazilian one pays a 7.5% dividend that appears to be a safe payout if our depression doesn’t spawn one there.
Add also: “When Buck Meyer thinks about the $300,000 he lost after he bought a subprime mortgage lender’s bonds, he doesn’t hesitate to denounce financial titans Bear Stearns Cos., Credit Suisse Group, JPMorgan Chase & Co. and Morgan Stanley.”
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy.”
“‘At what point did it become a Wall Street Ponzi scheme?’ said Meyer, who almost wiped out the nest egg he received from selling his home in Doylestown, Pennsylvania, six years ago.”
With such super high yields, it has to be a Ponzi scheme. There is no way a investment can give you such high yields without a lot of risk. Ex-nnvmtgbrkr, you are right he was a fool. Wall Street will rip off the little guy and do it legally with their friends at the SEC. Guys on Wall Street are there to make themselves money not make money for the little guy.
And as Leona Hemlesy said ” Only the little people pay taxes.” This is what was said by the Kings of long ago.
This why I just laugh at the PPT conspiracy theorists. There’s no doubt that markets are supported at certain points but instead of bitching about it, use it and run with the pack! Hello! How hard is this?
I agree with you chick. In order to play the game and win you have to play by the new rules. Instead of bitching, think like a criminal and make some money. But the question is how long can this go on? Initially, the game was meant to be played based on rules having to do with sound financial fundeamentals and a little thing called ethics (whatever the hell that is). Can a market that has eliminated a foundation built on these principles survive?
Yeah, sure it can. Eventually Uncle Sugar steps in and fixes everything. I’ve been in the market since I was a preteen and it’s been scary at times (1973, 1987, 1990, 1998, 2001) but the long term trend from early in the century is up and I doubt that will be broken in our lifetimes.
Really? I guess I’m overly sceptical. I just see serious cracks in the foundation. History tells us that no Empire lasts forever, nor do the financial systems they’re built on. So when is it our turn, or is it “different this time”? I don’t know about you, but I can see the end game, and it won’t take much to get there from here.
The U.S. is too big to fail. It would take a catastrophe of proportions we can’t even imagine. If I didn’t believe that, I’d be out of here already.
So was Rome, and Greece before; the Spanish empire, The French empire, the British empire -
The world is littered with fallen empires from days gone past and the US is not immune to the ravages of time.
I hope you’re right, but we’ll see…….
The above post was the response to chicks ‘too big to fail’ post. But I agree with you, Hoz. Eventually everything succombs to the ravages to time.
One other thing - as far as the US being too big to fail, are we really that “big” anymore? Maybe in our own minds.
You are all witnessing history, some of which, we’ve correctly pronounced ahead of time and many of us acted, using good old fashioned reasoning and common sense to come to our conclusions, and will profit handsomely, for our acumen~
I along with many of you, you my band of brothers and sisters, that suffered the slings and arrows of supposedly being “negative”, when we were all founts of knowledge, in reality~
This is our hour.
We prepared and will continue to live useful lives…
What more could you ask for?
Those empires didn’t fall in a day, or even a lifetime. Even though I tend to suspect that we may be on our downward arc, something like the Rule Britannia in the 20th cen. I suspect that we’ll still be doing pretty well compared to 80% of the population of the world for the rest of my life.
The fact that folks don’t see a problem with criminal activity being engaged on a somewhat regular manner in a market that is supposed to be free (not manipulated by insiders) says a lot. I wouldn’t say an end to the US, but an end to a democratic, capitalistic, republic–that should be obvious.
Tx states that she’s been trading since ‘73. What she’s witnessed in her career is an attempt to defy history and have an economic system based on paper currency.
Those other empires eventually came undone when the politicians realized they could buy the people with the people’s own money (someone else said it, but I couldn’t agree more). We’re there. Ref: Schumer wanting to bail out the subprime with a few hundred million. Where you going to get this money? Raise taxes or cut entitlements? No way. Just get the Fed to purchase more of the Treasury debt. That means debasing of the currency and more inflation. It is game over.
…but the long term trend from early in the century is up and I doubt that will be broken in our lifetime.
Don’t know, txchick57. I figure we’re starting an EW3 down, and very little short of Zimbabwean-style hyperinflation will get us back to where we are now before 2025.
10:30 a.m. and 2:15 p.m. always look like attractive entry points on intraday long positions.
With what “high yields?” It doesn’t even say what the “yields” are. It says “… yielding 10 times the going rate on Treasury bills…” That would be 50%. I’m pretty sure that stuff wasn’t yielding 50%. So the reality it, we don’t even know what the notes were paying - thus can’t really comment.
Didn’t the good old leona serve time in a fedpen for federal tax evasion? And she married into money
Actually, she paid something like 25 or 30 million in taxes that year, but the feds went after her for failing to pay either an additional million, or the taxes on a million (I can’t remember). Either way, she didn’t deserve jail or anything of the kind. The gov was just making a big show, as usual. She paid more taxes that year than 99% of Americans, and probably more than 90% of millionaires/billionaires (many of whom manage, somehow, not to pay any). The tax quote attributed to her was bogus.
Also, the “Queen of Mean” label was disputed by many of her employees, who said she was great. These slanders/libels were concted by writers trying to sell books, and picked up by the Press.
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy.”
What a maroon. Dude, when something’s yielding !!!!50!!!!! times Treasuries, you might suspect it’s just a *little* riskier than Treasuries, right?
Blah blah blah. Everyone involved was greedy. Returns like that don’t come without outsized risk. I don’t even want to hear it. They’re luck I can’t be on their jury.
Ten times treasury note returns means somewhere above 40% a year. Hello? Don’t you think that kind of return is without risk?
Man, it is so easy to shear the sheeple in this country. They even get in line and push to be among the first.
I don’t think it was 10x the current rate.
I think it was when some of the treasuries were around 1.5 to 2%. (making the “investment” a 15-20% investment)
You have to be right with that one. A 40% return usually involves drug mules stuffing things where they shouldn’t and making a run for the border.
That’s more in line with that kind of stuff.
Hey Neil, got any popcorn to share? This is getting more entertaining by the day. Do you suppose Lereah can look at himself in the mirror in the morning?
Vampires have no reflection.
Have you thought about what happens when one day YOU decide to buy a house? You are now one of them. You are now a vampire. Who here will succumb? And what will that day be like?
That would make Ben our Van Helsing.
Yo Mr. Roboto, your humor chip is malfunctioning, while your drama-queen circuits are overloading. CRT-ALT-DEL and reboot.
I didn’t jokingly compare Lereah to a vampire because he’s a homeowner, dolt. He’s NAR’s evil sockpuppet.
After I saw the picture of your house, err Betamaxi Pad, I realized why nobody would want to buy it.
http://tinyurl.com/4ghp2
This is getting more interesting!
I keep telling people, you can think I’m insane until June. Then come talk to me about real estate and the economic impact.
April and May are the start of layoff season.
If you look at the Credit Suisse report, you can also see that May is the first month with a large spike in ARM resets.
Then in October it gets much worse (ok, builds up to it… )
So this is getting very interesting.
Thankfully, they do sell popcorn by the pallet.
Got popcorn?
Neil
The only credit suisse report you should be looking at has serial numbers and has reached the outer limits of karatdom…
I agree with Neil about the Credit Suisse report. I don’t know how immediate the effect of the ARM-reset increase will be, but I am convinced the Credit Suisse report gives us good reason to expect increasing foreclosures throughout 2007 and to be highly suspicious of any easing-up in 2008 (while we await the option-ARM resets of 2010-11).
Thus the other credit suisse reports, I mentioned~
That USA Today article mentioned total delinquent subprime ARMs at 14.4% of the total. We’re already at 14.4%!!!!
Damn, if you believe the Credit Suisse ARM chart, that number will be 2-3x by year’s end.
Wow.
Betamax: good one!
Say…
hollyweird keeeps remaking awful 60’s and 70’s tv shows into even awfuler movies…
Dark Shadows, with Barnabus Lereah in the lead role.
Cue that awful opening theme, somebody.
Was Baranabas a old screaming queen, or what? In the 80s or 90s there was an expensive television remake of Dark Shadows with much better props that didn’t fall over, but it was on only one night a week, and lasted about two moths. Missing was the actress who originally played Dr. Hoffman, the single most melodramatic, lip-smacking, head tilting actress in human history–and for this reason, one of the most entertaining.
I have vague memories of the show…
It was utterly creepy soap opera with a twist, 1969 style.
Money talks, BS walks.
“‘At what point did it become a Wall Street Ponzi scheme?’ said Meyer, who almost wiped out the nest egg he received from selling his home in Doylestown, Pennsylvania, six years ago.”
Probably about the time they started offering yields way out of line with the conundrumishly low yields on all other assets. A high risk premium inside a conundrum should be a good hint of future asset price collapse.
And the “yield” ITSELF should have been a warning sign.
In this case, negative yield similar to “inverse appreciation….”
The yield turned out to be highly volatile.
Thank you. This crap about not understanding the risk and downside is disingenuous in the extreme. But it will play well if they can find a bunch of nincompoopia to serve on the jury.
“”if they can find a bunch of nincompoopia to serve on the jury.”"
Oh they will…
“‘At what point did it become a Wall Street Ponzi scheme?
Isn’t it all a ponzi scheme like social security???
I’ve got $1263.00 a month coming at me in 17 short years…
Anybody wan’t to make me an offer on my social security moolah, right now?
Entertaining all offers~
I think, tragically, I have $0 coming in 30 years…
“At what point did it become a Wall Street Ponzi scheme?’” When Crammer became the American Idol for investment advice!
The Perfect Pied Piper for the get rich quick crowd.
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy.”
BWAHAHAHA! What a maroon! Wall Street would collapse if fools weren’t so easily parted from their money.
Remember, if you’re not an insider you are an outsider. If you are an outsider you will, on average, always be transferring your perceived wealth, (perceived as usually it’s some form of margin that’s being used to speculate), to the insiders. In cases like the above, I start thinking that maybe it isn’t such a bad system after all!
“Remember, if you’re not an insider you are an outsider.”
So, are you for or against privatizing SS?
Against. Unless privitization means that any money that would have gone to SS goes straight into my pocket and I get to do with it as I please. If it means that I have to chose between a bunch of Wall Street products and the decisions made by the Street scum then count me out. There’s not much of a choice differential between a monopoly (government SS) and an oligopoly (Wall Street SS).
SS privatization will be very similar to the Medicare drug plan, just as you have described it, santacruzsux. A nightmare of complicated products and in the end, the sheeple will be the losers.
Wrong question. The correct question is
“Are you for or against SS?”
LOL! In this day and age asking that question is akin to the old joke: “Yes or no Mr. Robinson, have you stopped beating your wife?”
So the answer to you question is situationally dependent upon what form SS takes. Do I like the present form? Not particularly, as the road to hell is paved with good intentions.
check this out.
http://seattle.craigslist.org/est/rfs/309493526.html
when we stopped by 2 months ago when it was first listed. It was asking for $889K. About a few days ago, it dropped to $869K. And yesterday’s morning, there’s a fine note of additional 10K buyer bonus. By yesterday’s evening, the panic seller is willing to take 819K. This is up in the Issaquah Highlands where they overbuilt with zero lot homes.
That area is a hideous eyesore.
So a home is considered “luxury” because it has airconditioning?
My, how standards have changed…
So a home is considered “luxury” because it has airconditioning?
Usage of the word “luxury” in describing something for sale is nothing more than an excuse to set a high asking price.
Potential buyers with their heads screwed on straight will make their own appraisals and tailor their actions accordingly.
I paid too much to have air conditioning retrofitted to my nearly new car before I shipped it from Seattle to Texas. You could use air conditioning in your home in Seattle about 2 weeks of the year.
No one I knew had it in home or apartment (offices did). We just opened the windows and sat near a fan, or went to the movies or out to dinner if it happened to hit 80 deg F that day.
We just left that area. I am incredulous that anyone could even remotely conceive of asking 800K for one of those
unitshouses. They’re really more like glorified “townhouses”. I think the developers assumed that thousands of Microsoft droids would want to live there in a sort of artificial droid community, but MS never expanded into the area to the extent that was originally planned.what do you estimate were the prices, say 3 years ago?
It says MUST BUY, now I don’t know what to do. Whenever they have CAPS ON, I feel compelled to do exactly as they command. Someone please stop me! mean, STOP ME!
“The Realtors noted the problems in the subprime mortgage market had led it to cut its sales forecast.”
The Realtors noted there was a problem with Gravity. Apparently when things go up they sometimes do come down. Who woulda thought?
Sorry, can’t feel sorry for the dude who put his entire $300k nest egg into a mortgage bank. Who didn’t see this coming 2 years ago? Ever heard of diversification?
What was the quote? Something like this:
“You need to be less concerned about the return on your funds than on the return of your funds.”
I think this guys just too embarrassed tp talk about the “beans” he bought down at the fair…..magic beans.
“Wells and SunTrust reduced mortgages requiring little money down or proof of income, he said. ‘We’ll see whether they moved fast enough.’”
HAHAHAHAHAHA.
in previuos thread, I just discussed my friends who got an Alt A loan for 95% CLTV on an $800,000 home with low documentation of income.
this is tightening? Jeez, I’d hate to see what qualified last year. Probably a no-doc 400% mortgage to a baked potato?
It’s truly amazing how much the landscape has changed. Over at the broker forums, everyone except the old timers is incredulous at these MINUTE tightenings of standards. Wait until things really go back to the old school lending rules in another year or two.
Yeah, but it won’t be nearly as much funn to laugh at the monkeys on those forums because the dumbest of ‘em will have starved to death, and moved on to something else.
Funk says the Wall Street firms were greedy too, yet didn’t pay a price for it.”
Share the wealth…share the pain?
Bugs…eh, I don’t think so
Daffy…That’s dessssssspicable!
Marvin the Martain: Oh…that makes me sooooo MAD!
Finally we are starting to hear from MBS investors ! The whole mortgage ponzi scheme is starting to unravel. It gets worse and worse every week. Wall Street isn’t shocked anymore, they are still in denial. What we need is a couple bank failures. That will get their attention.
NAR says -0.7% ? That is hardly measurable ! Give me a break. It will be more like at least 10% before the years is done. The NAR has always been way behind the curve in forecasting things. It must have taken a lot of “discussion” for them to arrive at that number. I though real estate always goes up ?
The fact that they agreed to put a negative sign in front of 0.7% is huge.
You keep forgetting that the real price decline is masked when medians are quoted. Joe Buyer feels comfortable buying a $400K house. What the statistics don’t tell you is that in 2005 it was a $500K or maybe even a $600K house.
Median, shmedian. How do we get the MSM to focus on the real decline?
I hope your “you” is generic, Bill. Stucco has not forgotten the fact you are bringing up. He is just glad NAR can admit prices are in SOME sense falling. How we get MSM focused on real decline: I don’t know if “we” can do anything about it, but the market will. In the meantime, publicize Case-Shiller index which is based on resales of same properties.
“The fact that they put a minus sign in front of the 0.7 is huge”
Yes, it is. And let us not forget that the NAR has given us consistently over -the -top rosey prognostocations for the market for over a year now. Consistently, every single month for over a year running. It is ALWAYS MUCH worse than they admit. So who knows what that -0.7 really means.
Didn’t Coast Bank (in Florida) already fail? Or is it in the process of failing?
It hasn’t failed yet. Its probably about to.
The rate of price declines Always Goes Up. Or at least it will for the next couple of years.
“‘We don’t know how it’s going to play out,’ Mezger said. ‘You hear the doom-and-gloomers saying there will be 2 million foreclosures and the buyers going away. We don’t think it will be anywhere near like that, but in the short-run, it will have an effect on things.’”
Is Mark Zandi, chief economist of Moody’s Economy.com, a doom-and-gloomer?
From the WSJ (section D, Digging out of Delinquency):
“Mark Zandi… expects mortgage delinquencies will peak at about 3.5% in mid-2008.”
…
In a sign that more borrowers are having trouble getting back on track, the number of mortgages in default climbed to 1.16 million on an annualized basis in the first quarter, from 900,000 last year. Lenders report defaults to credit bureaus when they begin the foreclosure process. Some borrowers refinance, go on a repayment plan or sell their home before the foreclosure process is completed.
Refinancing will not be an option against a backdrop of falling prices for most buyers who bought homes they cannot afford.
“‘They got their money out before the little people.’”
I think there is an Enron lying in here somewhere.
My sentiments exactly, ‘Dee.
enron is in washington….GSE’s
Understatement. Enron was a bounced check compared to this.
‘We want to people to be able to stay in their homes with mortgage terms they understand and can handle,’ [Lereah]
You mean unlike the last five years, when you were touting “innovative” financing schemes people didn’t understand and couldn’t handle? Remember those?
David Lereah’s name will soon be mentioned in the same context as Jeff Skilling’s and Ken Lay’s.
I hope so. If that doesn’t happen, we should followup and invest in the next industry he starts pumping. He has a knack… first dotcoms, then housing…
“It’s too nice to rent” I hope this jackass gets foreclosed
https://image.minyanville.com/assets/FCK/File/04_11_07%20orlando%20home%20prices.mht
My husband and I went to look at a rental last week. The ad was promising, great neighborgood, price, and the house sat on 1/2 acre of land. Should have known it was too good to be true. When we went inside though, totally different story. Nasty disgusting carpet and linoleum, broken blinds everywhere, broken fences, broken light fixtures, the inside hadn’t been repainted, and the worst was the disgusting Master shower that hadn’t been cleaned. The realtor showing us the house said the he usually only “sells houses” and was doing this as a favor. When we asked about repairs he was very noncommital and would say, “it’s just a rental”. What!?! Just because I want to rent instead of buy doesn’t mean I’m scum of the earth that wants to live in a trashed disgusting house. The house had great bones and with some TLC would have been a great place to live. Needless to say, we passed.
I hope this jackass gets foreclosed
Well, part of the URL is “FCK” so there’s hope……
Page 1 of today’s NY Times:
“A Word of Advice During a Housing Slump: Rent”
http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html
And the article has the best Rent vs Buy calculator thingy ever created — it’s really fabulous.
“A Word of Advice During a Housing Slump: Rent”
The best part is, the article is the most emailed one from NYT website today. Definitely not good for the spring bounce.
It was inevitable. Once the idea of rapid appreciation goes away, people look at fundamentals again. After we’ve had 6 months, or a year, or longer of falling values, there’s no stopping it.
trade:
“the subprime mortgage space has caught a quick bid on chatter that Sen Chuck Schumer is preparing a bailout package/bill.”
Who is Chuck planning to bail out? And who will pay?
lol, “hundreds of millions of dollars” to be administed by nonprofit groups. Let’s call it Katrina II
I’ll wager CRL is there with its multi tentacled hand out. The nthey can arrange new loans for the borrowers they screwed.
So does ’ssshrubery (my apologies to Monty Pythoners everywhere) stand on top of a never occupied house, in the middle of a devolpment of them and make a brave speech, that somebody else wrote, to make us “feel” good about the housing market?
Ugh, Schumer. If there’s a camera around, there’s a good chance that Schumer is just around the corner.
You can say the same for virtually any member of Bush & Co. So, what is your point?
It has long been said that the most dangerous place in Washington DC is between Chuck Schumer and a camera.
Pulte Homes just broke below its 52 week LOW, as of 10:20 Pacifi Time. Have been holding PHM puts since June, 2006 waiting for this day. Looking to make some real good returns
I’m just straight short on it. I was worried last month when the stock was +5% from my short sell price. Now i’m happier than a gopher in soft dirt, down 15% for a nice fat profit. Now I just have to figure out how far down I can ride it.
All the way to $0?
wonder how much stock DL bought in 1999 when he was writing his eric book GO BROKE NOW !!!!!!!!
“The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold this year. A month ago it had been projecting a 1.2 percent increase.”
Neil, you’re gonna need to make a popcorn run.
munch munch munch
Now… let’s think about this. Joe six-pack does no research. None. He just drinks his beer and invests.
Now, there are ones like a coworker who has aquired multiple properties. He cash flows via his option-ARMs, but needs equity appreciation to make a long term profit. Starts talking to me… thinks of “cashing out” one property in Palmdale! (ugh…)
Another coworker is doing the same thing. Mostly in Torrance (bad areas… cheap flips). He’s proud about how he is cash flowing all properties and has pulled all down to 80% LTV. WTF?
I’m sure this is pretty common if I know two people doing it.
While not quite Casey Jones material, they certainly qualify for Club Casey.
Now prices are dropping. When do they need to refinance again? I do not think they will be able to. Also, I do not think they’ll maintain 100% occupancy as they do now. Not at today’s rents. Also, they have yet to have a bum tenant. Hmmm… I think that will change too.
Hence why I think 2008 will have a spectacular downslope. 2007? Eh… still introducing people to the concept that RE goes down. But its accelerating. Credit is tightening. Still loose credit by historical standards… That won’t be true by Fall. By then will have slightly tight credit. By 2008 it will be tight credit. Everything short of a blood test and anal probe to apply for a mortgage and down payment requirements will be… high. In 2008 cash out financing will be a thing of the past (for most people, not all.)
Got popcorn?
Neil
1994 investor loan standards: 70% LTV on purchase, 65% LTV on refi if pulling any cash out.
Late 2006 investor loan standards: The last 25 investor deals I pulled stats on: 21 were 100% 80/20 deals with cash back builder incentives of at least 10%.
Neil is correct. There will be a huge awakening when all these “investors” realize they are hosed for the next 10-years.
Hi Neil. I think you must need more than popcorn in the morning to give you the strength to go to work. Yesterday you described co-workers who haven’t bothered to save for retirement. Today you describe flipper co-workers. Are you the only normal person in your office? Where in the world do you work? How do you stay so cheerful? Or is this just typical in southern California?
“Jeffrey Mezger said. ‘…there will come a day when it gets better, because the underlying demographics in job growth are there.’”
You want to talk about demographics huh? How about many of the 80 million baby boomers who need cash in retirement and will need to sell? This selling will be a 20 year process!
Selling houses, stocks, bonds, anything else they can to cover rising food, energy and health care costs.
Mauldin (of Millenium Wave) states that due to boomer retirees overwhelming the population, those that serve them will be in greater demand and therefore command a greater share of retirees assets in return. Soooo, they’ll have to cash out even more than they expect.
http://tinyurl.com/2tl76j
Great link on buying vs. renting. From the NY Times, no less.
The conclusion for my situation was that prices would need to fall by about 35% in my neighborhood for it to make sense for me to buy, even if I assume home prices are going to appreciate 3% per year for the next 30 years, AND rents are going up 5% per year for the next 30 years.
A great tool for people who are not all that financially inclined but are thinking of buying as opposed to renting.
Wait a second. I distinctly remember that there was a nationwide y-o-y decline in house prices in July of 2006, then in August of 2006, and then in a whole lot of months after that. I remember this! There was recently an article (damn it, I don’t actually KEEP these things) talking about how prices have gone down 3 months out of the last 6 or something like that.
Am I just crazy? Am I missing something? It seems like every time these guys come out with a negative number, it’s the “first” one. Can somebody please explain this to me?
-Big V
The stat they’re talking about I think is the median price of all homes sold in the year.
Hey Austin,
OT, but read about “fractional reserve” lending:
http://www.itulip.com/forums/showthread.php?t=292&highlight=reserve+requirement
They’re talking full-year, 12-months averaged data declines now.
In reality the market peaked in 2005, but because higher-end homes kept selling and lower-end homes sold less, the median of homes that sold went up for a while. The NAR is now saying even that will fall.
this NAR quote for the year 2007. Price on Jan1 vs Price on Dec 31st. Not YOY. I think
No, I think it’s YoY, it’s just that it’s YoY for all of 2007, not YoY for a single month.
from Minyanville’s ever-funny Depew:
1. Real Estate Woes Contained to Congress
According to an article on Bloomberg this morning, it appears the housing woes are going to be successfully contained to Congress… which will then ensure the woes are magnified and ultimately spread out evenly to infect all areas of our lives.
Although it has yet to get much play in the media for what it really means, an important housing-related article was on Bloomberg this morning.
U.S. lawmakers want to stem the rising number of mortgage delinquencies (good for votes) by targeting investors who finance mortgage lending through mortgage backed securities.
Bloomberg says the top Republican and Democrat (God help us when bipartisanship rears its ugly head) want to write new laws making investors who buy mortgage bonds liable for deceptive or bad loans.
That all sounds well and good on the surface; place the burden for bad loans on the investors who are responsible for facilitating the lending practices in the first place.
And check out this vote-winning sound bite:
- “More money was being lent than should have been lent,” said Committee Chairman Barney Frank (D- MA), who added that growth in the market for mortgage bonds “provided liquidity without responsibility.”
Ho ho ho! “Liquidity without responsibility!”
That’s a real kick in the crotch coming from a congressman of either party.
2. But Congress Woes Spreading to All Areas of American Life
So, while Congress is busy “containing housing woes,” we’we’ll tell you what this rush to legislate really means.
It means that ultimately Congress is going to “save” the current crop of “homeowners” from themselves by raising the cost of borrowing for everybody else.
Mortgages are going to be far more difficult to obtain for everyone.
And because the new laws are going to make it far more risky for investors to facilitate lenders through mortgage-backed securities, the existing pool of money available for mortgages will be reduced, which will also raise the costs to subsequent mortgage borrowers.
The irony is that in the long run the greatest beneficiary of these new laws won’t be either homeowners or mortgage borrowers, but the government-sponsored enterprises, Fannie Mae and Freddie Mac.
See, by the time Congress realizes that the net result of the legislation is a full blown mortgage availability crisis it will be time for lawmakers to step back in and expand the role of the GSE’s.
Honestly, you can’t make this stuff up!
Fascism, of the financial persuasion…
Just showed it’s hand~
Disagree. Banks used to care who they lent money too because the loans were the assets they had on their books and if they lent badly, they would lose. Now banks don’t keep the loans and don’t have any exposure beyond 3-6 months (length loans has to perform so they aren’t forced to take it back from the securitizer).
So Congress is considering making sure that the ultimate holders of the loans do the same thing that the banks used to do - good idea. You would think that the securitizers would have already done it, but they haven’t.
All this does is put lending right back where it started. The securitizers will probably go back to what worked in the past - borrowers need a downpayment, a job history, a salary that looks like it can support the payments for the life of the loan, limited pre-existing obligations and a good credit score to get a loan. Responsible people will be able to get good loans. Other people won’t be able to buy houses.
And because the securitizers can diversify their portfolios geographically (your hometown credit union never could), they will be able to absorb a little more risk - not a lot, a little.
Sounds good to me. Just don’t provide cash to the FB’s who bought more than they could afford. Fixing lending practices going forward is a great idea.
Just like real estate doesn’t always go up, borrowing standards don’t always go down.
fed’ flunky says “additional firming may be needed”
lol, my husband says the same thing! oops
puts all in the black already!
puts all in the black already!
It was disgusting to watch CFC and friends keep going up. I think the coast is now clear for buying May & June puts. Time to commit some more greenbacks to the game.
I’m just not interested in those lenders. I like the indices, reits, utilities and other things, but it’s all good if it goes down, right?
Oh, SPY is on my list every time, but I like the ‘implode’ potential of the likes of AHM, LEND, HRB and yes CFC (though a longer shot). More expensive, but also more profitable once the dam breaks. I’m new to option trading, so I don’t yet have the breadth and depth to work more than the weak lenders and indices yet. Being a part=timer, I don’t have the time & resources to study multiple sectors. Heck, I work in semiconductor industry but have no preparation to trade in that sector.
The semiconductor sector is one of the best trading vehicles around. Very volatile. You should use your inside knowledge to make money on it. I know others in that business who do.
Buy house. It risk free.
Buy house debt. It also risk free.
Buy id.
Finance id.
Refinance id.
Refinance id.
Id invincible, right?
worst case scenario?
Death.
Everything else, not so bad.
there should be a separate daily thread for Lereah comments so we don’t have to wade through so much repetition every day
Ben- how about:
Bits Bucket and Craigslist Finds Thread
David Lereah NAR Soundoff Thread
brad,
Are you the resident thread killjoy?
David Liar lied
again
today
stay tuned
One is reminded of the old SNL bit “Generalisimo Francisco Franco is STILL dead.”
“When Buck Meyer thinks about the $300,000 he lost after he bought a subprime mortgage lender’s bonds, he doesn’t hesitate to denounce financial titans Bear Stearns Cos., Credit Suisse Group, JPMorgan Chase & Co. and Morgan Stanley.”
“Like the thousands of people who snapped up American Business Financial Services Inc.’s notes yielding 10 times the going rate on Treasury bills”
——————————–
I don’t feel sorry for this guy. Treasuries are the RISK FREE rate of return. The % return is a photograph (worth a thousand words) of the risk. I have a suspicion it’s in the fine print of the bond he bought. NFI stockholders also had a can’t lose deal with a 17% dividend until the stock crashed.
““Q: What has happened to the mortgage lending process that created these problems?”
“A: ‘What I found, like I found in the savings and loan industry, is there are those out there that are going to do what they possibly can to bring in the business.”
I wonder how Inspector General for the Department of Housing and Urban Development Kenneth Donohue found this out, might it have been the constant TV ads, the Radio ads, the Print ads, the Billboards, the Internet ads, the telemarketers constant calling that clued him in on the fact the savings and loan industry was out there doing whatever they possibly can to bring in business even offering obviously unsustainable teaser interest rates.
Inspector Clouseau would have figured it out sooner.
Inspector Clouseau would have figured it out sooner
Hey, I did!!!!!
(that is why I chose this moniker a few years ago… I love Clouseau, he’s a bumbling idiot and even he could have seen this coming)
HIC
“Borrowers Need To Understand Worse-Case Scenarios”
Thats the funny thing about all this - we are no where near a worst case scenario ! As a matter of fact, the US economy and every other world economy has been on fire ! Jobs are good, unemployment is low, interest rates are low, liquidity was everywhere. Not a care in the world.
If people are defaulting on their mortgages now, what is going to happen when things get tough ? Like when people are unemployed, interest rates climb to combat inflation, consumer spending drops, gasoline goes to $4 a gallon and housing prices are 25% lower than where they are now. What is a $500K house worth then ? Maybe $200K ?
I like how everyone stays in denial. The sub prime damage is contained. RE never falls. The banks are too big to fail. The government will bail out Fannie and Freddie.
For the last few months CNBC (Cheerleading Newscasters Broadcasting Crap) have been saying that we are going to get a rate cut every time a piece of negative news came out. Well, the minutes just released seem to say the Fed is pretty focused on inflation and as a matter of fact, a rate cut wasn’t even mentioned ! Talk about Wall Street being wrong !
These are very interesting times.
Id never fails.
“If people are defaulting on their mortgages now, what is going to happen when things get tough ? Like when people are unemployed, interest rates climb to combat inflation, consumer spending drops, gasoline goes to $4 a gallon and housing prices are 25% lower than where they are now. What is a $500K house worth then ? Maybe $200K ?”
What’s going to happen is that people will have to learn to garden or even farm on a small scale. They are going to have to go back to playing monopoly with the family at night becasue they won’t be able to afford the electricity and the cable connection to power their plasma tv. Cars will be sold for scrap metal because you can’t buy $6 a gallon gas when you are making minimum wage.
I really believe, if things tumble completely out of control, we could be looking at a full blown depression. When you dig into our economy you find that it’s all built on debt and foreign investment. Production of goods has moved overseas. We are even net importers of food now. We spend a trillion dollars a year that we don’t have on the military. We are running forward on sheer inertia at this point.
The basic laws of economics have not been revoked. We WILL have an economic downturn. It’s long overdue. And, like you said Tweedle-dee, how in the world will we weather it?
Depressions (there have been 6 in US history) are the equivalent of an economic forest fire. They destroy the nonsense and debt. The stong will survive. As sad as it seems the severe economic contraction that is due will revitalize the nation and its people. Massive pain and massive gain.
What will be the result of a full blown depression? Destruction of debt, destruction of inefficient technologies, and a lean and mean population. The journey will be terrible. Good times and sanity will return after this storm. It is just a big cycle, folks.
“What will be the result of a full blown depression? Destruction of debt, destruction of inefficient technologies, and a lean and mean population.”
The MEAN part of the population could be scary. Load your shotguns.
‘A: ‘What I found, like I found in the savings and loan industry, is there are those out there that are going to do what they possibly can to bring in the business.”’
I think the comparisons to the S&L disaster will become more and more prevalent as the meltdown really intensifies. Based on what I saw when working for a very large lender, I believe this goes FAR beyond subprime. There will be a huge govt bailout and one or more of the GSEs will become insolvent.
Think like a Rothchild-1/3 in stocks, 1/3 in RE, 1/3 in art. We will all have an opportunity to pick up RE at a bargain in another year.
Somewhat OT, but tomorrow may bring glad tidings…
“MILWAUKEE, March 27 /PRNewswire-FirstCall/ — MGIC Investment “Corporation (NYSE: MTG) will hold a conference call, on Thursday, April 12, 2007, at 10 a.m. Eastern Time to allow securities analysts and shareholders the opportunity to hear Management discuss the Company’s results for the quarter ended March 31, 2007. Financial results for the quarter will be released before the market opens on April 12, 2007.”
“To attend the webcast, go to http://www.mgic.com, click on the “Investor” button, then click the “News Releases” button, proceed to “Webcasts/Presentations,” and select “Audio Archives.” The call will be broadcast live over the internet, and replays will be available on the web following the call.”
“About MGIC Investment Corporation
MGIC (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, is the nation’s leading provider of private mortgage insurance coverage with $176.5 billion primary insurance in force covering 1.3 million mortgages as of December 31, 2006. MGIC serves approximately 5,000 lenders with locations across the country and in Puerto Rico, helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality.”