Market Conditions Are Clearly Favoring Buyers: NAR
Some housing bubble news from Wall Street and Washington. “Existing home sales posted their sharpest drop in 18 years in March, a real estate group said Tuesday, as the latest reading on the troubled housing sector came in much weaker than economists had forecast. Sales slowed to an annual pace of 6.12 million homes in March, according to the National Association of Realtors, down 8.4 percent from the 6.68 million rate in February. It was the biggest one-month drop since January 1989.”
The Associated Press. “The fall in sales in March…dashed hopes that housing was beginning to mount a recovery after last year’s big slump. David Lereah, chief economist at the Realtors, said that the troubles in mortgage lending were also playing a significant part in depressing sales.”
“‘The negative impact of subprime is considerable,’ Lereah said. ‘I expect sales to be sluggish in April, May and June.’”
“There was weakness in every part of the country in March. Sales fell by 10.9 percent in the Midwest. They were down 9.1 percent in the West, 8.2 percent in the Northeast and 6.2 percent in the South.”
“NAR President Pat Vredevoogd Combs, and vice president of Coldwell Banker-AJS-Schmidt, said market conditions are clearly favoring buyers. ‘It’s a good time to buy, in part, because home buyers are not pressured to make quick decisions,’ Combs said. ‘We’re in a window of low interest rates with a plentiful supply homes on the market and flat prices in most areas. First-time buyers now have more power to negotiate with sellers for help on downpayment or closing costs.’”
From Bloomberg. “The supply of homes for sale decreased 1.6 percent to 3.745 million last month. At the current sales rate, that represents a 7.3 months’ supply, the highest since October, compared with 6.8 months’ worth at the end of February.”
“Last year, 6.48 million previously-owned homes were sold, the third-highest on record.”
“Another industry report earlier today showed a measure of home values in 20 metropolitan areas, the S&P/Case-Shiller home- price index, declined 1 percent in February from a year earlier, the biggest price drop since the index started in 2001.”
“S&P/Case Shiller’s 10-city composite, which has a longer history, dropped 1.5 percent in the 12 months ended February, the most since October 1993.”
“In 20 metropolitan areas…thirteen cities showed a year-over-year decline in prices, led by a 7.8 percent drop in Detroit and a 5 percent decline in San Diego.”
“Housing markets including California, Florida and Arizona ‘are becoming tougher’ for sellers, said Donald Tomnitz, CEO of D.R. Horton Inc. the second-largest U.S. homebuilder. ‘We’re back to rock-bottom pricing in California,’ Tomnitz said on a conference call.”
“‘Home prices are exhibiting successive monthly declines,’ economist Robert Shiller said. He said the numbers indicate ‘a widespread downward trend’ that started at the end of 2006 and has extended into the beginning of this year.”
“When compared to January, the February sales figures show that 17 of 20 cities had price depreciation, S&P said.”
From Reuters. “Losses on risky subprime loans originated in 2006 may climb to 6 percent to 8 percent of the loan principal, higher than previous forecasts, according to Moody’s Investors Service.”
“‘Delinquencies and early defaults for mortgage loans originated in 2006 continue to trend higher than in previous years,’ the rating company said.”
“Bond investors who financed the U.S. housing boom are starting to pay the price for slumping home values and record delinquencies in subprime loans.”
“They will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world’s biggest bond fund. Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37 percent, according to Merrill Lynch & Co.”
“‘Bond investors will be the ones who will take the losses,’ not the banks, said Scott Simon, who oversees $250 billion in asset-backed securities at Pimco.”
“About two-thirds of mortgages get turned into bonds, up from 40 percent in 1990, when the market was $1.08 trillion and the country suffered its last real estate slump, according to data from the Federal Reserve and Fannie Mae in Washington.”
“About 13 percent of subprime mortgages made in 2006 were delinquent after 12 months, with 6.65 percent considered ’seriously delinquent,’ or more than 90 days late, Standard & Poor’s estimates.”
“‘Underwriter standards have gotten progressively more lenient,’ said Mark Tecotzky, chief investment officer at Ellington Management Group LLC, a $4 billion hedge fund that invests in mortgage bonds.”
“Bondholders are as much to blame as lenders, Federal Deposit Insurance Corp. Chairwoman Sheila Bair in Washington says. ‘We should hold the servicers’ and the investors’ feet to the fire on this,’ Bair said in testimony to the House Financial Services Committee last week. ‘We did not have good market discipline with investors buying all these mortgages.’”
“Subprime mortgage bond sales grew to $450 billion last year from $95 billion in 2001, according to a New York-based industry trade group. The amount of mortgage bonds outstanding increased 82 percent over that period.”
“Building materials maker USG Corp…signaled it would be hurt by the continued weakness in the housing market. ‘During the first quarter, housing construction activity was substantially below the strong levels experienced a year earlier, continuing a trend that began in the middle of 2006,’ said CEO William Foote.”
“The company said the downturn in new residential construction is likely to continue throughout 2007.”
“Consumer confidence in the U.S. declined to the lowest level in eight months in April, sapped by concerns about rising gasoline prices and a wave of mortgage defaults.”
“‘There was some further deterioration in plans to buy homes and appliances, which suggests the weakness in the housing sector is not going to go away,’ said economist Douglas Porter.”
“The share of Americans who plan to buy a home in the next six months fell to 2.7 percent, the lowest since November 2004, from 3.2 percent, the survey showed.”
“The housing slump is hurting sales at some retailers. Federated Department Stores Inc., owner of Macy’s, said March sales increased 2.3 percent, missing analysts’ estimates. The miss was ‘largely attributable to weakness in home- related merchandise categories,’ CEO Terry Lundgren said.”
“Myron Ullman, CEO of J.C. Penney Co., said the housing slowdown was affecting the chain’s sales of housing-related furnishings. ‘We have big-ticket furniture and window covering and those business are softer,’ Ullman said.”
“The crisis in the U.S. mortgage market has hurt U.S. auto sales this month, General Motors Corp. Vice Chairman Bob Lutz said. ‘The market as a whole has been a little weakish. That has come as a result of the housing market problems and the mortgage industry meltdown,’ Lutz told Reuters.”
“GM in March also said it expects results from finance company GMAC, in which it retains a 49-percent stake, to remain under pressure this year due to increased defaults in subprime mortgages or loans to borrowers with poor credit.”
“Spanish real estate and bank stocks tumbled on concern the country’s property boom is imploding.”
“‘This is the burst of the Spanish real-estate bubble,’ said Alberto Espelosin, a strategist at Zaragoza, Spain-based Ibercaja Gestion, which manages about $7 billion. ‘Banks are exposed and have risk.’”
“‘This is a warning sign for the real-estate market in general and for banks that are exposed to the sector, for the risks of increased provisions,’ said Emanuele Vizzini, who oversees about $1.2 billion at Investitori Sgr in Milan.”
“Between 1998 and the end of 2006, the amount that Spanish banks lent for real-estate activity rose ten-fold to 107 billion euros, according to the bank of Spain.”
“‘Everyone knows there is a bubble in the Spanish real- estate market,’ said Christophe Ochsner, an equity salesman at Venture Finanzas SA in Madrid. ‘The decline started with Astroc and it has contaminated the rest of the sector.’”
Since the US imports so many hard goods from around the world, why not import soft goods, like mortgage products from Japan?
“Mortgage Market In Japan Japan, being a developed country, has the second largest mortgage market among the selected Asian countries. Japan has a very low mortgage rate of 2.375%.”
http://www.economywatch.com/mortgage/japan.html
With 2.375% interest rates, Everyone can participate in the carry trade, And put the US mortgage market out of business.
That is the new trick. When the Yen appreciates against dollar, they will default again.
Hysterical. Add currency risk to real estate risk, with a currency that is certain to be weak for years to come.
The moneymakers will not let the carry trade unfold. This would cause a systemic risk to the entire world economy.
lol. You almost sound like greenspan / bernanke with your fancy words “systemic risk”.
“systemic”
I think you mean systemic risk to banking. I say let this completely unproductive sector of the economy die. We’ll all be better off in the end.
Apologies if this was posted elsewhere but it is great stuff so it needs to get further attention!
http://www.itulip.com/forums/showthread.php?t=1245
Awesome. Thanks for the link.
“Hysterical. Add currency risk to real estate risk.”
LMAO!
Do you mean borrow in yen for American mortgages at those rates? Not a bad idea, but borrowers would have to know they were borrowing in yen and would be exposed to currency risk. Considering 34% of borrowers don’t even know what kind of loan they have, this probably wouldn’t be that good an idea.
I bet if mortgage closings were video taped, it would show that most borrowers know exactly what type of mortgage they are getting.
I heard that some Japanese banks are planning to offer mortgages in the Netherlands, where rates are already very low compared to the US (currently 4.5-5% for 10-30 year fixed rate mortgage, maybe cheaper if you shop around). They wouldn’t try to enter this very competitive market if they can’t offer even lower rates. This sure is part of the carry trade (which was benefiting homeowners hugely already over the last 10-15 years, although indirectly).
We are approaching the “starbuckization” of mortgage products:
a) I’ll have a double-tall decaf no-foam soy cappucino, extra hot, please”
b) “I’ll have a 80% jumbo interest-only w/ 2 year adjustable along with a 5-year fixed balloon 2nd, demoninated in yen, please.”
sheesh! We finally bottomed - let’s all go and buy, buy, buy…
Sure, I will go buy.
I will ask for downpayment assistance. The amount will be determined by competing rental rates.
In my neck of the woods, that is a $250K downpayment assistance from the seller.
I know that won’t work, the sellers are still too delusional!
Spanish real market and banks that supported it collapsing suddenly….hmmmm….
Was it not some medium sized banks collapses in 1931 in Austria and Europe that started the massive bank collapses in America by 1932-3?
Make some popcorn…put on your seat belts…it is liable to be a bumpy ride down!
if the Spanish market really collapses it will probably crash the other EU housing markets, because speculators from all the EU bubble countries (UK, Ireland, Netherlands etc.) are heavily invested in Spanish real estate, with huge leverage, often using the home(s) in their own country as collateral. And many of these Spanish homes are probably used as collateral for mortgages on real estate in the newer bubble areas like the Balkan, Turkey, Eastern Europe, Dubai etc.
bring it on! but don’t count on it, because I have hear similar crash rumours many times over the last years …
” I have heard similar crash rumours many times over the last years….”
Every day belongs to the thief, but one day belongs to the owner - Old African proverb.
Just because you have heard many rumours doesn’t really matter. The thing to bear in mind is that they may become fact one day, as we are now bearing witness.
“‘Bond investors will be the ones who will take the losses,’ not the banks, said Scott Simon, who oversees $250 billion in asset-backed securities at Pimco.”
But who are the bondholders? The investment banks and the commercial banks insist that they’re fine, that they’ve shed their subprime portfolios, that they’ve sold off all those assets to someone else. But who is that someone else? I’ve heard anecdotal accounts that the “toxic waste” has been dumped on the Chinese, but I simply can’t believe that they’re the only ones who have bought it–what, NO sub-prime debts on the books of the investment banks, or the regional banks, or the hedge funds, or the pension funds, or the mutual funds?
Is any of this information public?
It’s regional banks holding the cr(*)(p that couldn’t be pawned (securitized) off on bondholders and bondholders at the bottom of the feeding chain (unsophisticated pensions getting sold the dregs by the investment banks) and hedge funds (some not all)
Here’s my list of who gets whacked
Regional Banks - up to 80% of them in CA, FL, AZ and up to 20-30% elsewhere. By this percentage I mean serious solvency issues
Unsavvy Pension Funds - think Orange County multiplied by 10. A 5 figure portfolio manager thinking he’s hot because he’s got large investment bankers numbers in his contact list only to find he’s been sold shi$%^t and his pension is the bagholder
Hedge Funds - only about 5-10% of these. They are pretty savvy but the bottomfeeders addicted to leveraged 8% returns like a ho on crack (can I say that?) will get hammered
Are taxpayers on the hook for guaranteeing those pension funds, in any way? If we’re talking public pensions, I assume this means we can expect tax hikes to make them solvent again? I am so paranoid about ending up paying for this it’s not even funny.
And the managers of these funds walk after causing a wreck.
Yes we’re on the hook. Maybe or maybe not on a Federal level. But for city and county pensions they have promised benefits and to pay them will require cuts in service or increase in taxes. It’s not the end of the world though. The great nation that is the US pays about 25% of its GDP in taxes. Soon we’ll be with the elite of Western Europe paying 35% - although by that time they’ll probably be paying 40-50%!
Who pays 25%? When you add up income tax on a 6 figure income (state and federal), plus property taxes, plus all the B.S. fees (business tax, registration of your rental units, inspection fees), not to mention inflated health insurance premiums to pay for the uninsured, we’re already a socialist republic, comrade.
This is nothing new, what’s the problem? One shilling for King Herod and two for the empire!! What you can’t pay? 1/3 of you land then and that donkey.
The serfs of yesteryear were only charged 10%. Perhaps we can lobby to become serfs again? Probably stuck being slaves I suppose.
“The great nation that is the US pays about 25% of its GDP in taxes. Soon we’ll be with the elite of Western Europe paying 35%”
We may soon be paying higher taxes, similar to Western Europe, but remember, in return for their taxes, Europeans get free health care, a generous pension, free higher education …. Not to mention by law they get in the neighborhood of 6-8 weeks of vacation per year (depending on the country). What do we get for our taxes here in the US?? $2 Billion per week or so goes down the sh%thole called Iraq with no end in sight ….
We may have a little problem. The total government expenditures by Federal state and local government total somewhere between 6 and 7 trillion dollars. This is somewhere between 40 and 50% of GDP. If you think we are any better off than the Europeans, I want some of what you are smoking. For the most part the average person pays a boatload in taxes and gets almost nothing in return. Oh wait a second, I just heard that greater than 50% of Americans receives money from the government so I’ll have to change that to the average private sector working American. Welcome to socialism, even though you didn’t see it coming….
I thought PGBC was raided a long time ago. (Steel)
Only private defined benifit plans are backed by the PGBC. This is a small percentage of plans. State and county plans ect and any kind of 401k’s are not PGBC backed.
wltf555, Another candidate for “who gets whacked” is, all the individuals who thought their “government bond [mutual] funds” consisted only of Treasuries, when in fact this phrase (”government bond fund”) is often used to describe an investment vehicle that includes a hefty amount of GSE bonds.
The bondholders will not always be the bagholders. The CDS market needs to be considered as well.
That is securitized too… with bonds that are also insured in CDS. Great way to distribute risk and offer lots of flavors of risk. It’s the same people buying. The only problem is when someone buys too much of one thing on too much leverage. Little vacuums form in the structure.
It’s like osteoporosis in the financial skeleton. As long as no single piece deteriorates too much, or there isn’t some traumatic event to stress the structure, everything appears healthy. BB has seen X-rays and says we’re tip-top. What to believe, right?
What percentage of home mortgages have been securitized as CDOs? I know that only 20% of commercial have been, but perhaps banks are more likely to hold onto commercial mortgages, as the LTV is usually much better for commercial loans.
“But who is that someone else?”
I heard that Japanese is part of that “someone else”.
Prediction: Liarreah will be canned by September.
he said sales were down due to a cold Feb.
Check out Bubble Meter for a response to his blaming the weather.
http://bubblemeter.blogspot.com/2007/04/march-existing-home-sales-down-realtors.html
Liarreah has been a great spokesmodel. At worst he’ll get a golden handshake. Do I like it? No. Do I accept it? Yes.
Got popcorn?
Neil
I agree with Neil. For quite a while, one person and another have been predicting the end of Liarrhoea (now spelled like diarr you know what). He’s still around because what the REIC is trying to promote is a sense of stability and security, don’t panic, etc., and because as Neil says, DL has been doing about the best for the REIC as anyone possibly could. DL expresses just enough uncertainty to cover his A. Note that he unambiguously expects sluggish sales in April, May and June. duh
“NAR Chief Economist David Lereah noted that most local
markets are demonstrating healthy economic activity and thus can absorb the
increases in foreclosures.
In fact, 2007 is expected to be the fourth highest year on record for
existing-home sales, according to NAR’s latest housing market outlook.
“Housing remains a great long-term investment,” Lereah said. “As home sales
moderate, overall home prices will be essentially flat this year. The good
news is that inventories remain well below the levels experienced during
the last housing downturn in the early 1990s, and supplies are close to
balance in many areas.”
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/04-24-2007/0004572577&EDATE=
Lereah, you dumb s–t. We are not THERE yet. Inventories will continue to rise, perhaps even double again. hehehehehehe
Has he/will he every be brought in front of Congress and questioned since our beloved politicos have decided to get involved in this?
from the CNN article:
Lereah: “weak sales are ‘masking improved fundamentals in the housing market.’”
LOL. Classic Jedi mind-trick. Ranks right up there with: “These aren’t the droids you’ve been looking for.” The dark side is strong with that one.
“NAR President Pat Vredevoogd Combs, and vice president of Coldwell Banker-AJS-Schmidt, said market conditions are clearly favoring buyers. ‘It’s a good time to buy, in part, because home buyers are not pressured to make quick decisions,’ Combs said.
My take?
1. It may be a good time to buy, but the buying public are not listening to you guys. Your ‘advice’ has become completely irrelevant to the conversation.
2. Not pressured? It is swinging far beyond ‘not pressured’. It’s closing in on a perverse delight at watching seller’s squirm.
3. Between the lines is a desperate plea: ‘For the love of God, somebody, somewhere buy a house!’
4. Lereah is toast.
Let’s institute a buyers’ boycott as a response. I love to see him beg us to buy.
Boycott? Naaa…
That implies getting on the sidelines. I’m so much more comfortable spectating.
answering emcee’s post (following).
Car shopping is getting better… but indicators are that this model year changeover will have the best deals since the 1990’s.
Got popcorn?
Neil
It’s underway! http://www.boycotthousing.com
It’s interesting, but this guy seems to think RE agents’ commission are the whole problem, or the root of the whole problem. I don’t think so. I think (for example) public employees have a vested interest in high property taxes, and lots of other stakeholders are against us too.
Bubble-gram:
It’s a good time to buy =
Motto usage by idiot
It’s a good time to (car) window shop.
‘We’re back to rock-bottom pricing in California,’ Tomnitz said on a conference call.”
See, you can buy a house after all.
I know I’m preachin’ to the choir, but only in his pea brain are we at rock-bottom.
BayQT~
All this “Buyers Market” rhetoric seems to be quite effective. I have friends and clients asking me almost daily if I’m ready to buy yet (since it’s now a “buyers market”). They some how equate availability with affordability. I laugh and tell the they aint seen nothin yet!
Right on! Just because Beyonce opens her mouth doesn’t mean you can kiss her.
I always encounter people who spew the same cliched rhetoric about housing:
“It makes sense to buy.”
“I’m sick of throwing away my money by renting.”
“Buying is a good investment.”
They say these things without a basic understand of the underlying factors that may or may not make those statements true.
Combs basically says, “it’s a good time to buy, because you don’t have to buy now.” Huh?
I think I know the answer to this but I’ll ask anyway. Has there ever been a documented case of a spokesperson for the Real Estate Industry stating that it currently isn’t a good time to buy a house? If, as I suspect, the answer is no, aren’t any statements/recommendations they make by definition completely worthless and self-serving?
I also had to laugh out loud at the use of the phrase “rock bottom prices”. I don’t think we’ll be anywhere near rock bottom unless prices drop to the inflation adjusted historical average which I think would be at least 50% below where they are now.
“quicksand prices” might be more appropriate.
Hey, it was cold in Tucson in January. (We even had snow.) But the weather warmed nicely in February. However, I don’t think that home sales have…
Still building like nuts in Tucson, though, being there in February….it is still crazy on construction in Green Valley, Tubac and parts south…but no one is buying….In Sauharita they have family housing tracts going up with bloody lakes built in the desert….
Madness…absolute madness….this going to end and end badly.
Burner, I hear you. And it’s not like I’m seeing crushes of potential buyers at central Tucson open houses.
Are these lakes that hold water year round or are they standard detention ponds. Where are they getting the water (possibly groundwater)? Water rights in AZ cost a fortune.
All year round lakes lined with concrete and edged with association halls and playgrounds. I saw at least a couple around a large family sub-division in Suaharita area north of Green Valley. Regularly when out there look and marvel at the construction in middle of desert.
It will be funny when the water and petroleum runs out out undershoot the demand curve these civilizations demand….
It will be funny when the water and petroleum runs out out undershoot the demand curve these civilizations demand….
Funny? I think not, it will in fact be quite tragic. In the next 50 years or so we certainly could be needing to grow our own food. Our young generation will live to tell quite an amazing story to future generations. Imagine going back to a waltons’ or little house on the praire lifestyle. Wouldn’t that be something.
Imagine going back to a waltons’ or little house on the praire lifestyle.”
Well at least you’d know where the food came from and what’s in it…
Hopefully they’ll have running water & toilets that flush inside the house!
Problem is, it’d be “Little house on the postage stamp”
Funny in an Oswald Spengler sort of way….all civilizations go into entropy and decline. United States is at present, so will China, etc.
There is not enough oil, raw materials, etc. for every Chinese to get a car and have an interstate highway system.
Yes, it is slowly coming undone and the best I can figure is a return to land and local economies. At least the empty Walmarts and Best Buys can be used to stockpile food and raw materials when the economy winds down.
It looks funny now…it won’t be in practice….wealth and all that has been built since WWII will be mostly gone because 6-10 dollar gasoline will make far flung suburbs untenable and even urban existence worse.
Think Victory Gardens on a national scale and that will be the main preoccupation in 2030!!
Speaking of natural resources, I’ve got one to add to this. Growing demand for oil from retiring baby boomers driving houses on wheels (RV’s) from coast to coast getting 8 or 9 mpg. Small player, but one to be considered in the rise of gas prices and depletion of oil. Furthermore, those rising gas prices will hurt distribution channels, as well. Think of a reversion to turn of the 20th century, when trains ran on steam (coal), and as stated before, the need to grow your own food, as it will be waaaaaay too costly to process centrally and distribute. Far flung?
slightly OT, but Txchk and all the other market guru’s, I am beggining to get over my fear of shorting the market, I suspect London will be next, who would be most impacted stockwise?
Be careful. I was short Fannie Mae (FNM) and got an e-mail yesterday from my broker that I needed to buy to cover by 1:30 CST today or they would for me. This was not a margin call. They can just do this when the are no longer able to borrow the shares for you. Also, you won’t be on the hook for paying out dividends on whatever you plan to short, as paying out dividends can reduce you overall profit. Good luck.
“‘The negative impact of subprime is considerable,’ Lereah said. ‘I expect sales to be sluggish in April, May and June.’”
and July, August, September, October, November, December…
wow, he didn’t call a new bottom!
Geez, the housing market must be even worst than anyone on this blog thought…………if lereah the clown even stopped calling bottoms!
He’s already called three bottoms. If he called another he would be the boy that cried wolf.
Calculated Risk even got in on ridiculing the bottom calling recently.
You know when that moderate housing bubble blog starts ridiculing bottom callers, the limits of believability have been stretched beyond recovery.
Now that the investor mortgage regulations are kicking in, sales have only one direction to go, down. Investor capitol has dried up, which causes new lender regulations. The supply of capitol will now go, only to the most worthy borrowers.
No No, not like that, like this 07, 08, 09,….
“‘The negative impact of subprime is considerable,’ Lereah said. ‘I expect sales to be sluggish in April, May and June.’”
WOW- it’s shocking to hear Lereah admit that the entire Spring Buying Season is toast. That may be the least cheerful quote I’ve ever heard from him. And the least dishonest!
Here’s what I don’t understand and if someone can explain it to me please do.
If a loan held by a bank goes into forclosure the bank suffers the losses untill they sell it again.
What happens when a mortgage sold off into the market goes into foreclosure? Who owns it at that point? Who decides what amount to try and sell the property at?
Mortgage Servicers
So I did some research on Mortgage Servicers and it appears that many of them are also mortgage lending companies. What this says to me is that the Mortgage Companies probabaly kept the best loans for themselves and then sold all the crappy ones on the market. But they probabaly retained the “serviceing” rights to mortgages they put on the market. This would allow Mortgage Companies to…
1. Continue to make a huge number of deals
2. Continue to service a huge number of deals. They probabaly make a ton of money on service fees and loan origination fees.
3. They put the crappy loans on the open market after they’ve made all the origination money and retained the right to recurring “service fee” money from the mortgage buyer and borrower.
Is any of this incorrect?
As far as I know, they came up with a formula where they packaged the really bad loans with a lot of better loans. Sort of like mixing sewage in your drinking water, but just a little bit, so it’s still “drinkable”. Problem is, now they can’t separate the bad loans out of the mixture. And the percentage that’s bad is increasing.
That sorta stuff is ‘assigned’ to the servicer. CR has more on that subject.
During the foreclosure, the home owner is the home owner, but they are forced to sell and the bank handles the sale. The banks and lenders get first shot at the proceeds. If the sale is less than the loans, the lenders can still go after the difference if this is a “judicial foreclosure.” In short sales (controlled by the original owner) the owner owes the IRS on anything forgiven by the lenders. Perhaps this also applies to foreclosures, but I am not sure on this point. So, a foreclosure does not really mean “going back to the bank” but it means that the bank is in charge of the selling process.
“‘The negative impact of subprime is considerable,’ Lereah said. ‘I expect sales to be sluggish in April, May and June.’”
2008.
2012.
I like jack’s answer (2012), and in fact I think AMJ’08 is a possible time for a dead-cat bounce, considering the structure of the ARM reset schedule. Although I guess the effect of that 2Q08 dip in ARM resets will probably be delayed and perhaps smeared out altogether.
DL has nowhere to run or hide:
http://www.youtube.com/watch?v=TMZiROlAD4s
This guy is a poster child of this crazy bubble with his ill-timed book and underwater property. His education was good for nothing. I start to believe he somewhat believed in what he said. He is either an idiot or a liar. Maybe some combination of both.
He is a cheerleader! If you ask a cheerleader who will win the game before it starts, it is always their team. If they are down by 14 at half time….they say we are just warming up, wait until the second half. They are now down by 28 and there is 2 minutes to go. What do you expect him to say? Go team go.
Never ask a cheerleader for advice.
Check out the Wikipedia entry for Lereah, it is pretty good.
This morning, Wikipedia said something like: “David Lereah is a paid shill for the National Association of Realtors (NAR).” Now, someone has already corrected it: “David Lereah is a paid consultant for the National Association of Realtors (NAR).”
While I liked the first expression, it doesn’t follow Wikipedia’s standards. Maybe “cheerleader” in the section “criticism” would be OK.
Wasn’t Bush on the cheerleading squad at Yale? Hmmm…..
Two headlines from CNN Money today…
“Home Sales - Worst Drop in 19 Years”
“Consumer Confidence at Nine Month Low”
Everybody here should know what this means by now… it means the stock market will probably hit a new record today !?!?!?!?!?
This stock market perplexes me to no end, all this bad news and the dow is up. Even CountryWide is posting slight gains. wtf is going on?
Pump-n-dump, they need more bagholders.
Again keep in mind that the stock market is rising against the US dollar but not necessarily against other currencies or whatever measure of “real” wealth you might want to choose.
Boy, never thought the USD would ever be considered a weak currency. We’re there!
Things are great on Wall Street and dead or dying on Main Street…this disconnect with reality will not last much longer…..I almost betch their is some secret short selling going on when the top has been reached and the roller coast goes down.
…trigger…who knows…bad profit warning from gilt edge company….80-100 dollar oil…..a sub-par nuclear device going off some place in a fit of war fever….a bad tourism season because few will be traveling…..a major retailer or company suddenly closing it doors with little warning….
…any of this could be a trigger….and more….
any of this could be a trigger….and more….
Bush getting Impeached …just dreaming.
a bad tourism season because few will be traveling…..a major retailer or company suddenly closing it doors with little warning….
These are the most likely triggers. Travel gets hit quick in a downturn. I also expect some retailer that was unknowingly depending on MEW to tank.
a bad tourism season because few will be traveling
LOL. How many times have I heard this only to try and go somewhere and find what? Lines of people thats what.
I was reading yesterday in the paper how great it was that the stock market had been up 20 of 21 sessions. Then the reporter stated that the last time that had happened was in 1927. It never occured to the reporter that less than two years later, the Great Depression started!
Add that one to the ever growing list of “Things That Haven’t Happened Since Just Before the Great Depression.”
Looks like the PPT got the helicopters in the air around 10:15 NY time. And they had some money left later to try to bring down gold. I’m a little dissapointed about the vertical $6 drop at noon NY time, I’d hoped for $30-$40. I’m ready to jump aboard. Oh well, patience….
Talking about the Plunge Protection Teams on hand to cover or obfuscate any stock market mayhem or news of it reaching the John Q. Public?
Possible answers for stock market:
1) “real” value of the stock market is down, but nominal value is up (in other words: our dollar is worth less/price inflatin)
2) too much money chasing too few goods. We have MASSIVE credit bubble. remember, the RE bubble was just one manifestation of a much larger credit bubble
3) Money leaving RE and going to equities. RE is dying, we all know this. some players are selling out of RE, but where to put the money? might as well be stocks.
if you look, you’ll see that:
-the dollar is near alltime lows vs the pound, the yen, the Euro, vs gold, and silver, versus almost anything
-almost all commodities are way up in price of late
-stock market up
-treasury yields are down (which means their price is up)
thus, I’ll bet the best answer is #1 and #2. We have too much money, chasing too few goods. Thus we have monetary inflation and secondary price inflation. This would explain the market.
Add a dash of “where to put my money after RE” and you have new highs.
We have too much money, chasing too few goods.
Too true, especially with stocks. Many blogs have reported that the number of shares available on the markets has been declining steadily due to buybacks and “private equity” deals. Same money, fewer shares… higher prices per share.
Canards Shifting Strategy?
http://wallstreetexaminer.com/blogs/winter/?p=701
(Sales slowed to an annual pace of 6.12 million homes in March, according to the National Association of Realtors, down 8.4 percent from the 6.68 million rate in February. It was the biggest one-month drop since January 1989.)
As I recall prices were flat in the NY area from 1987 to 1989, falling only with inflation. Only in 1990 did prices fall in nominal dollars, and only in 1991 was the decline significant. Affordability was restored in the mid-1990s, and sales finally turned upward.
I hope we don’t repeat those years of stagnation. I’m rooting for 10% down this year.
“Housing markets including California, Florida and Arizona ‘are becoming tougher’ for sellers, said Donald Tomnitz, CEO of D.R. Horton Inc. the second-largest U.S. homebuilder. ‘We’re back to rock-bottom pricing in California,’ Tomnitz said on a conference call.”
Nah…Keep digging deeper!
We’re bound to hit oil!
what markets are good
part of wy, oil shale area of co
much of LA
and that’s it folks
Sorry, Colorado’s oilshale areas (Grand Junction, etc.) are slowing down, esp. in the upper priced market (over 450k here). It’s hitting here, too.
Dear Lost in Utah,
I’m glad to hear your take on things. I’m a farmer tussling with a small city next to Grand Junction over a planned golf course/housing development. They want to take the bit in their teeth and plunge into the market. I counsel caution.
Lost in Utah, that’s actually nice to hear. Tad, what little town? Can’t discuss?
or china;-)
“rock-bottom pricing in California” - Hahaha! Rock bottom! Bwahahahahahahaha!
Back to rock-bottom pricing in CA? Not according to the HBB-ers, it isn’t!
Speaking of California, I’m a little confused by the fact that the Shiller index shows San Diego off only 5%. To hear my fellow blog posters tell it, repeat sales of same homes should be showing SD off 10%-20%. Repeat sales of same property is the basis of Shiller’s index, no? Who is wrong here?
I live in San Diego and I can show you all kinds of 50-100k losses. They’re not that hard to find. Also NOD’s and REO’s are starting to skyrocket.
I wouldn’t say that the sky is falling just yet. But I honestly believe that a number of homeowners have their heads deep in the sand.
Ditto, I can show you houses in my neighborhood (92123)with 50 to a 100k losses too. Keep in mind when a house goes back to the bank the 2nd is toast so most of the REOs come on the market listed with a 15 to 20% reduction.
There’s been a bit of a spring bounce here. Houses were really going down. Not much was selling but the houses that did sell were going for about $400K to $450K. Now they are selling for about $500k to $550K.
Seeing that here in No. County SD, coastal.
Houses in our neighborhood are flying off the shelf. Some had been sitting for many months.
Any ideas as to why???
I receive MLS listings from my zip code. There are some with massive drops (recently one that sold for $1.1M on 5/6/04, then $1.4M on 10/27/05. I was listed for $1.15M-$1.25M for a long time. It’s pending now.) and many with extensive ($100k++) remodelling that are listed for the sales price from 1-2 years ago.
The Case/Shiller Index is a 3 month floating average, currently consisting of December, January and February same-house sales data. Give it a month or two, and all your wishes will come true.
I might have missed it somewhere, but what is the YOY change for existing home sales? I’m guessing that number is far worse than the Month over month number.
It’s pretty staggering really that the biggest month to month decline in 18 years ocurred in the Spring… Look out below!
Nevermind. Just found it in the older thread: 11.3% YOY decline.
Wowsers!
Seasonally adjusted 6.92 million. So down 11.5% Year over Year.
Here you go:
http://www.realtor.org/press_room/news_releases/2006/marchehs06.html
NAR President Combs:
First-time buyers now have more power to negotiate with sellers for help on downpayment or closing costs.
Say what? I *hope* he’s not suggesting anything illegal, like not telling the lender about a cash-back deal.
You’ve got a point there. Having the seller pay closing costs is one thing. Having the seller pay a “downpayment” is another. If a house “sells” for $500K, with a $400K mortgage and $100K of “help” from the seller, isn’t that a sale for $400K — with 100% financing?
LOOK OUT!
Must of been a slip because sellers are not suppose to help with down payments .The sellers can take back a purchase money second trust deed however if the first trust deed lender approved it .
In fact , with a market this bad with the sub-prime market drying up on second TD’s the sellers can step in with taking back a second . The trick to seller second TD financing is that you have to have a solid appraisal otherwise is just one more con game with the first TD lender really being exposed to a higher risk than it looks like .
For instances if a seller sells a 500k house and takes back a 50k second TD for 10% of purchase price and the property is really worth 400k than the lender is still expose for more than 100% of the property value .
I expect the REIC to start playing games with seller financing soon . Again it goes back to the Lenders needing to spead a few dimes making sure the appraisal is sound .
spend not spead
isn’t pat a “she”?
nevermind…yes…it’s pat as in patricia. and her mug would be next to realtywhore in the dictionary….if it were only in the dictionary.
this is NOT a buyer’s market. prices have to come way down for that.
And that is what we are waiting for here in lalaland, although the plunge in sale numbers sure is a great start. Thanks for the happy start to my day, Ben!
But we’re back to rock-bottom prices in CA! D.R. Horton’s CEO just said so!
LA needs approximately a 50% haircut before we are back to 100-year fundamentals on prices.
Before the end of this plays out we may see a whole lot more of this Laguna Beach craziness with people in the REIC.
Buyers need to be re-educated on this most important subject; It’s The Price Stupid. No matter the interest rate, a home purchase should have some value, about half current prices. When 0% financing on cars was popular, people still shopped for price. Why not on houses? The REIC education is worthless.
“Why not on houses” - people en masse never had the illusion that they could drive just any car off the lot, do some cosmetic work, and “flip” it for a 30% profit. A few people are in the business of fixing up junker cars, but RE “investors” figured they were buying sure gains. I still hear it. Just yesterday some old ladies were telling me “Property” is the only store of value. Well, yeah, when currency inflates, property prices will keep up. In the case at hand, “property” inflation was way ahead of general inflation. Looks like our govt’s answer will be to let general inflation run faster and catch up … although they do their best to disguise it with phony exclusions from CPI calculations.
What about an education on how long housing cycles are? 7 years up, 7 years down, there abouts. Not too difficult to understand.
except in this case, 15 years up…
Some of you may have seen this one already but what the hey. DL is probably holding his head with Van Gogh like horror pleading for someone to send lawyers guns and money; the $h%5 has hit the fan:
http://www.youtube.com/watch?v=PwXMkfeH95k
Where is Uncle Al when you need him?
A rate cut with petro prices at these levels?
DL is probably holding his head with Van Gogh Munch like horror…
Missed that one. Gogh did the self-portrait with ear removed and Munch the Scream.
Darn it. Missed it again. Meant to strike Van Gogh
When do you guys expect to see house prices really start to fall? I’ve been following the market in Northern Virginia for several years waiting for the bubble to burst, now that it has started I’m still waiting for sellers to realize they can’t sell their houses for 2005 prices.
be patient and ye shall be rewarded handsomely
The 4th of July is the start date for the panic.
In Southern California it is worst…all sellers still think it is 2005…..
Not every one.
My landlord bought the condo that I rent in 2005 Aug for 465K — 4/2 in Newbury park , Venturad County ,ca
The condo next door , exact same specs, is listed now for 439. 26K less. Looks some are wiser. but not too wise, I think.
I’m thinking of offering 320K. he bought it for 116K in 1998 or so.
is that a wise move ?
SoCal prices never come down never never never i keep looking at dataquick every month and every single zip code prices up up up month over month year over year l.a. never comes down makes me so mad
Be of good cheer. My parents house in West L.A. dropped from 750,000 to 450,000 (unsolicited offers) in the early 1990s.
I was working one day in a lab and heard another guy screaming on the phone. “What’s wrong”, I said.
He replied, “My house just appraised for 50,000 less than when I bought it!”. This was the early 90’s also and his house was in the San Fernando Valley.
It’s on. Oh, it’s on.
200k max.
When you have no one living in the residence next to you.
Vacant, good-bye, I give up…….not even a tenant.
“When do you guys expect to see house prices really start to fall?”
I don’t. But I do expect a continued slow bleeding through at least 2011 and possibly lasting through 2020. It is the nature of a market which is fundamentally poised for equilibrium decline but is artificially propped up by the REIC, including government agencies with vested interests in crash prevention.
I hope you’re wrong; if you’re right I might as well quit renting and buy something. At this point I’m spending nearly $50k per year in rent, and if prices simply tread water and let inflation gradually catch up, I’ve lost money coming and going.
I have to hope that there is an “expectation of future gains” built into prices now, and that this will go away rather quickly once people settle into the idea of prices going nowhere. Given where we’ve been, “flat” equals “declining.”
My god, what are you renting? A palace?
I agree with others, there is a very real possibility that housing loses very little in nominal value. The prices may stay the same. The govt and PTB will inflate inflate inflate instead, thus the real price of the home will drop while it’s nominal value stays about the same, to maybe down 10-20%.
If we keep inflation at 5% per year for 10 years, and if housing doesn’t drop in nominal prices, then after 10 years housing has really lost approx 50% of value (yes I know it’s not really 5×10=50, but close enough)
Property “values” will drop by a combination of nominal price declines (mild to modest) and signifcant monetary inflation/price inflation (more significant)
Clouseau: unfortunately not a palace, more like a modest apartment in a slightly dicey neighborhood. This is NYC, it’s nuts.
Question is what would it cost you per month to buy the identical place? If it is meaningfully lower to rent than buy, then you probably win even if prices stay flat.
Question is if a house costs 600x rent value and 9x my income but someone is willing to lend me 100% purchase price, no payments for 1 year, but I know next year they will be making even better loans (no payments for THREE years) I’d be an idiot not to buy now.
> I know next year they will be making even better loans
… if “they” are still around and can sell your mortgage on the MBS market. That condition seems increasingly unlikely.
There’s no light at the end of the tunnel yet here in Seattle. The latest march 07 data released by nwmls show Eastside median price continue to increase, 10% yoy with $526k median price. Seattle is a very very special place. If this continue next year, i am just going to suck it in and buy a place.
I can’t believe what I’ve heard in the half dozen posts above. What the hell? I’m hearing a lot of people (many who’s names look fairly new to me) talking about “sucking it up and buying a place”. Why can’t you just friggin WAIT?! Is it that Need It Now mentality? I want to use so mamy profane words right now! Just stop that buy talk and WAIT, DAMN IT! It’s not going to happen over night! Is the purchase price only 3 times your income? No? Then WAAAAAIIIIIITTTTTTT!!!!!!!!!!!!!
stucco:
other than “it took 4 years to hit bottom” in the early ’90’s, i’m interested in knowing the basis of your hypothesis….
I have been wondering the same thing. Unless there are some exogenous factors (terrorism, higher interest rates, unemployment, recession, etc.) it does seem possible that housing could take a long slow waltz back to “affordability” levels. Markets can remain irrational for a long time. Large corrections are driven by psychological factors which may never get to critical mass. The longer the market “drifts” down, the more likely it is to keep drifting, instead of falling.
Keep in mind the current rate of change is “slow” only to people looking to buy affordable housing. For the overleveraged FB, the market is dropping way too fast. From 1990 to 1994 the Northern California market dropped 30-40%. Add in inflation and it was probably 40-50%. So far, in Northern California, real prices have dropped 20% since June 2005 (almost 2 years). With inflation, it is probably 25%. I see no signs we are even near the bottom, though the downward spiral has stalled for a few months.
The real point is this: hang out until 2009. You have nothing to lose continuing to rent. The cost is still 40-50% less than buying and you would have to be in a high tax bracket to get close to even. Furthermore, it is much more likely real estate will go down than up. So if you buy a $500,000 home (2005) for $400,000 today, and it is worth $320,000 in 2009, what have you gained? Nothing. If you exercise discipline and rent for $2000/mon, you have gained $24,000/year in lower costs and did not lose $25,000/year in value. So you gain $100,000 over two more years. Pretty simple.
The real answer - No one knows. There’s no science to this.
Many of us see the charts, see the 200-plus percent increases in house prices without clear driving factors but easy credit, and think it’ll be “sometime soon”.
Others think this is the new model for housing and will carry forward without much sinking.
One thing seems to be true - this process is slow. Reputable organizations (e.g. The Economist magazine) since 2003. Now, those who said lax lending was jacking prices up by forcing more and more new homeowners into the market are being at least somewhat vindicated as indicated by the subprime problems.
But… no one knows when or if prices will come down.
Know this though - no amount of cheerleading is going to let people buy who simply do not meet the profit-making criteria of the lenders. If it no longer becomes profitable to lend to subprime borrowers, that will undercut a significant component holding this market up.
My recommendation, FWIW, keep saving money, avoid debt, enjoy life. We are the ants. The grasshoppers have been dominating the scene for a long time now. Eventually, the ants’ day will come again.
I think
IMO the decline will start to really gather steam later this year, accelerate throughout 2008, and then slow down again in 2009 — at prices not seen in decades. However, various factors will lead to housing suffering a continued “slow bleed” for another decade.
Here’s the bottom line: Wait until 2009 to buy, and then get exactly what you want (and can easily afford) strictly as a place to live, nothing more. No expectation of appreciation *whatsoever*.
Realtors must be crying to the NAR to change their tune. They brainwashed a bunch of dopey home buyers in to believing home prices never fall, now they have to convince the same dopes to lower the prices of their over priced shacks.
“Sales slowed to an annual pace of 6.12 million homes in March, according to the National Association of Realtors, down 8.4 percent from the 6.68 million rate in February.”
Doesn’t the pace of home sales normally ramp up from February heading into the red-hot spring sales season? I guess the weather is not cooperating this year — especially the weather conditions in the lending market.
A sales volume drop of 560,000 units at $250,000 each multiplied by 6% = $8.4 billion in lost NAR member commissions. Bwahhahhaahah!
Let’s tighten that up using the median price of $217,000 produces lost NAR member commissions of $7.3 billion which is still good for a …Bwhahahahahhah!
What about foreclosure sales purchased by banks. Can they be factored out?
Does anyone know how to compare winter 06 weather to winter 07 weather nationally? The geographic distribution of the decline might lead one to think this is a different type storm.
Bubble Meter looked at the weather in the month of February
http://bubblemeter.blogspot.com
Ben, great post - it must be one of the biggest collections of significant negative housing news we’ve seen yet. There’ll be no more bounces, it’s straight down from here on out.
I’m just waiting patiently for the bust to keep rolling north to Canada.
Betamax: It will spread but not roll. Two separate markets, - there might be some buyers in Canada that need to sell property in US but not many. In Canada, you have to have 5% down, you have to pay down principle, you have to document your income, you cannot deduct mortgage payments from your income tax, hurricanes are quite rare (Hurricane Hazel). Still it will spread, the depression of the 1930s did spread from the US to Canada. The psychological shock will be transmitted electronically, a lot of people travel back and forth, I’m thinking the current depression in Detroit, Michigan is having an effect in Sarnia Ontario? Don’t know though.
Effect of the US dollar deflating vs the CA dollar will be felt first. I have been vacationing at the Stratford festival for years - usually buy my tickets in december, go at the height of the season, stay in town, drive from the US so I can do all my holiday shopping early and bring it back across the boarder.
This year? I still haven’t bought my tickets, will probably go for less time, go way after the height of the season, stay with friends out of town who said they would let me use their car to drive to my shows, and fly (using points) so I won’t do much shopping.
Canada used to be a cheap vacation - no more.
Add to that the passport requirement. People up here are concerned that the new law (plus the increased depreciating US Dollar) is going to impact the Canadians flocking to the US to shop. Although I believe many more Canadians hold passports versus US citizens.
I guess that means no more strip mall parking lots full of $100,000 BC RVs on the weekends.
Many more Canadians MUST hold passports than US citizens. Something like 80% (I think that was the number) of Canadians live within 200 miles of the US boarder and if they want to go someplace warm for part of the winter, they have to leave the country.
But why would the depreciating US dollar keep Canadians out of the US for shopping? Their currency goes further here than it did a year and a half ago.
The point of the discussion is that Canadians and Americans have never before required passports to visit each others’ countries. They are now required for air travel and USG wants to require them for land borders in 2008.
About 40% of adult Canadians hold passports, as opposed to 20% of Americans. One reason is that Canada has a much higher percentage of foreign-born citizens and they need passports to visit their home countries or the US.
The US RE bust is going to spread to Canada not because of direct linkage between the RE markets, but because of Canada’s dependence on exports linked to the US housing market and consumer spending. In particular, Canada’s bubble province, British Columbia, is heavily dependent on lumber exports to the US and US tourism.
A lot of Americans own vacation property in Canada, Nova Scotia, Quebec and Ontario, I don’t know about further west. They have two choices which would have opposite effects on property values: one choice would be to spend more time at their vacation properties; the other choice would be to sell their vacation properties to support themselves in the US of A. The first choice would increase property values in Canada and the second choice would decrease property values.
I’m thinking that safety and security will be the factor that determines their choice. They will go to where they feel safest.
“Bond investors who financed the U.S. housing boom are starting to pay the price for slumping home values and record delinquencies in subprime loans.”
Subprime-backed MBS investors = bagholders
Economist quotes from WSJ online:
Ugly is the simplest word for this report. The housing market is still in the tank and while every time we get a huge decline in sales we move closer to the bottom, it is hardly obvious when we will actually see that bottom. –Naroff Economic Advisors
* * *
Though lower sales were widely expected to offset the unexpected strength of earlier months, the breadth and depth of this decline leaves little doubt that the housing sector remains in the doldrums with a turnaround not yet on the horizon. –Nomura Economics Research
Note how finely crafted are the comments of NAR President Pat Vredevoogd Combs. He says in part:
We’re in a window of low interest rates with a plentiful supply homes on the market and flat prices in most areas.
So there’s that “flat prices” again. These guys will never admit the existence of declining prices. But given this, it is the next staement that kills me:
First-time buyers now have more power to negotiate with sellers for help on downpayment or closing costs.
So he won’t even admit the possibility of negotiating on the asking price! As if this is sacrosanct. But I’m not too annoyed because what to you expect from the NAR president, objectivity.
I do have a reason to expect that from journalist though, so I was a little annoyed today to read a MarketWatch article that was explicitly about strategies homeowners can use to try to prevent price declines. They mentioned the technique of offering to help on closing costs also, as well as the other usual incentives to avoid knocking something off the price. It is one thing to report that these things are going on, but advocating them is another thing; why should they automatically be on the side of the sellers and not the buyers?
I wouldn’t even object so much to an article giving advice to homeowners on keeping the price up, something that is generally good for the homeowners, if there were other articles giving good tips to buyers. But the articles on how to buy generally have advice like “don’t lowball.”
So there is clearly some bias in the media but it only annoys me a little because I know prices are heading down regardless of all of this. They really aren’t going to have any influence in the long run.
Of course, I meant to say:
But I’m not too annoyed because what do you expect from the NAR president, objectivity?
Wealth destruction is too painful a concept to grasp.
“don’t lowball” Gouging on the way up is perfectly o.k.
It drives me nuts how the realty machine spouts the mantras “the market favors buyer” or “the market favors sellers” - always presenting it in a positive light. Get this through your thick skulls realtors - right now THE MARKET FAVORS NO ONE.
It does not favor buyers, because prices are going down, and will continue going down for years to come. If you buy now, you will lose money unless you wait for *many years* to sell. After adjusting for inflation you would probably never make money on your house.
It does not favor sellers either, because it’s very hard to sell properties right now - see sales statistics that are dropping like crazy. Not only that but prices are still so high that realtor commissions are still out-of-whack compared to the service they provide, thus (if you use a realtor) sellers are paying more than they should to sell their house.
Thus the market favors no one right now.
Wrong. The market favors renters.
“Losses on risky subprime loans originated in 2006 may climb to 6 percent to 8 percent of the loan principal, higher than previous forecasts, according to Moody’s Investors Service.”
6 to 8 percent! Give me a break! The market has corrected more than that in price adjustment. When they trash a new house and foreclose, the losses are much more I am sure. How do they make this crap up?
Slightly OT - when will be a good time to buy a new car?
buy one year old used low miles from FB, once in a lifetime discounts
Agree with that. Do NOT buy a NEW car. Well, maybe a Honda or Toyota. And NEVER buy a USED car from a DEALER.
Next year when you see brand-name car dealerships closing. It’ll happen.
In case you are interested, SLO County took a beating in March.
ttp://centralcoasthousingbubble.blogspot.com/
I know that Countrywide lists all of their REO’s on its website, http://www.countrywide.com/purchase/f_reo.asp.
Does anyone know if Washington Mutual does the same?
I read a rather alarming story late last week (but I was in a hurry, didn’t note which site I saw it, now can’t find it LOL - if anyone else saw this, please post it)-
The thrust of the story was that when a Bank or Mortgage Co. re-po’s a FB who has defaulted and lost the property, the transfer of ownership back to the bank/mortgage co. is counted as a “home sale closing” in the stats, which makes the actual “home closings” of houses bought by actual buyers over-stated by a rising factor of what, 10-20%.
So a large fraction of “Sales” proudly pointed to by realtors and cheerleaders are not real Sales at all, just paper transfers of title to parties already involved with those properties. Not sure if the stats are counted in this way in all areas, but my guess is they would be.
I was wondering how “Sales” could be strong in the present market, this is probably one big reason - anybody got hard figures on this?
I also picked up something about foreclosures being counted as sales although not sure where I came across the article. Tantra over at Calculated Risk has made a number of excellent posts about the internal works of the mortgage industry maybe it was covered over there or in the comments.
Counting foreclosures as sales will really screw up the comparable sales figures YOY. One great thing is that although NAR reports the foreclosures as sale they don’t earn a commission on them!
“maybe it was covered over there or in the comments.”
Actually, it was mentioned on this blog in the comments - by me
I also pointed out how that could be propping up the sales price figures (medians) as the “sale” on the foreclosure was fully indexed at what the FB owed on it.
My understanding was that NAR did not include foreclosures in their sales, as they only looked at sales through MLS (so FSBO not included either), but that one or more of the private companies (DQ or RealtyTrac) do include foreclosures in sales statistics. Once the property is REO, then it typically goes back on MLS and its sale at that point would be counted as a sale by both NAR and the private companies. Again, this is just my understanding, I don’t have any evidence to back it up so please correct me if I’m wrong.
The thing that frosts me is that when lender forecloses on negam loan, foreclosure sales price (loan balance) will reflect year over year increase in price.
“The supply of homes for sale decreased 1.6 percent to 3.745 million last month. At the current sales rate, that represents a 7.3 months’ supply, the highest since October, compared with 6.8 months’ worth at the end of February.”
Is it just me or does the decrease in inventory seem like BS? Why would inventory (not months supply) go down from February to March? Intuitively I would think that inventory would increase MOM from Jan. through Aug., then decline MOM in the fall. I just can’t see why there would be fewer homes listed for sale in March than in February (especially since NAR is blaming bad March sales, in part, on the bad weather in February).
I’m not one for conspiracy theories, but I also don’t doubt that NAR is trying to “massage” their numbers as much as possible. In this case, they would need the inventory number to go down in order to keep the months supply number from shooting up in the face of declining sales, especially since even Joe Sixpack knows that a 6 months supply is supposedly “equilibrium” in the market. Also, the last time we saw national supplies at over 8 months was during the early ’90s, and the NAR does not want that comparison to be made.
Construction has slowed down here in Spain too and the economic news programs here tonight are full of the real-estate crash on the Spanish stock market today, as well as picking up the data that house prices have started to fall in the US.
In the last six months there has been a real turn around in the housing market. Many people say there is now a surplus of constructed houses/flats, constructors have stopped ordering building materials and some development projects are paralysed because they haven’t sold any of the plots.
I know from all the reading I’ve done here that now is definately not the time to buy. I have a different dilema. I am planning on building a house on some family land sometime soon and I have a good feeling building and labor costs are going to be driven by the housing slump. I’ve been thinking about waiting some more, but I’m wondering if any savings from building/labor costs would be offset by interest rate hikes. Any suggestions?
I, too, am thinking of building. Something small and very energy efficient on a large parcel of land. I’m thinking builders may start to dump stockpiled stuff (windows, etc.) that they bought in lots for houses they won’t build after all. I don’t see this happening yet where I am (Utah and Colo), but I think it will before long. I think labor will go down, also. I drove through a big subdivision near where I’m staying (well, big for here, 100 homes) and only 3 are sold, four more under construction. All the Mexican laborers looked bored, sort of half working, like they weren’t going to be there much longer…
“The share of Americans who plan to buy a home in the next six months fell to 2.7 percent, the lowest since November 2004, from 3.2 percent, the survey showed.”
Look, it’s another “it hasn’t been this bad since 200x” statement.
When will people realize that aside from your net worth evaporating in the 2001 stock market crash, 200x has been pretty damn good so far. People have had jobs, etc.
But for housing, “hasn’t been this bad since 2004″ is a ridiculous statement…2004 was a GREAT housing year, by any measure. The fact that we are already having prices fall and it’s only as “bad” as 2004 with respect to homebuyer sentiment tells me that we are early on in the fall of consumer confidence.
I wonder if NAR cooked the books? It’s extremely convenient that the sharpest drop in 18 years occurs just now that congress is considering a bailout. Wouldn’t take too much fidgeting with the February/March numbers to show an (unexpected!) increase in February and a large drop in March. Just shift 4% of the sales from March to February…..
Why are they all of a sudden reporting month to month numbers?
These articles are hilarious. Yes, there was a large drop.
But the drop only brought the sales numbers down to 2003 levels. And the market was pretty insane in 2003.
“There were sharp drops in sales in every region of the country last month as the annual sales pace slowed to the weakest level since June 2003, before the record sale and building boom that began that year.”
Bidding wars were common well before June 2003. Something very rare in average suburban real estate. The boom was well on before June 2003.
Those who make money on transactions are howling because they are making slightly less money. The market is still very, very robust.
This report seems to be market cheerleading along the lines of car dealers who are always claiming to have fire sales because of some inventory or other mock catastrophe.
A note regarding Lereah (pronounced “Luray”, like “Luray Caverns”) - he is the spokesman for a sales organization. Is it surprising to astute observers that he would be BS’ing? He’s in sales for cryin out loud - his job is to move product - nothing more, nothing less. He’s not a social worker.
Realtors have fooled a lot of people into thinking that they are social workers, but they are commissioned salespeople, nothing more, nothing less.
A car salesman told me a story about a woman having bought a car several months ago, coming back into the dealership because she wanted something with more power. Ultimately, she purchased a car from this salesguy that had a higher level of options, but the same sized engine.
The salesman was just baffled, as he was relating this story to me, about why she would do such a thing. I shrugged and said something like, “Wow, that’s pretty dumb.”
This idiotic woman thought the salesperson’s job was to be a consultant and put her in the right car. Wrong. Salesperson’s job is to make profit by selling her the most she will buy.
The salesperson’s job is to sell product. Not be a social worker. People just lose track of this, and it’s so very darkly amusing.
What is fascinating though is reporters who go to advocacy organizations for purportedly neutral, unbiased information.
When I see reports on the death penalty, I’ll see reporters interview prominent death penalty opponents; when I see reports on the housing industry, I’ll see reporters interview the spokesman for the primary sales organization in that industry; when I see reports on abortion, I’ll see reporters interview prominent pro-abortion rights supporters.
That is a really outrageous, because many people aren’t yet savvy enough to realize the true nature of the news business. And that isn’t to accurately describe a situation - it is to sell stories.
I hope the public wakes up about this sometime soon too.
no new posts?