Bits Bucket And Craigslist Finds For April 25, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Fraud! Now that’s just hard to believe, I thought it’s always a win,win no brainer here in the good old U.S.A.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aonxuz3OYwLg&refer=us
–
Bubbles and Fraud
Go together as
Horse and cart
The Fraud during the twin bubbles would be found to have cost American middle class $5-10Tr., most of which has concentrated at the top. Bubbles do enormous harm that only gets fully felt years after the bubbles have burst.
Jas
A whopping $1 billion in fraud is “estimated”??? Get real. In the same paragraph…”$276 billion of liar loans in 2006…..12.5% default rate so far…..” They will be lucky if the fraud loss is held to 10% of the loan amounts or …$27.6 billion!
1 billion, I remember reading somewhere about a scam in Temecula (nurses) which alone around one billion, anyone remember?
Yep, I remember that awhile back. Also remember several HBBers estimating many, many tens of $B in fraud.
Liar loans are discovered by Bloomberg!
“Borrowers and brokers commit fraud when they exaggerate the applicant’s income, qualifying the borrower for a home he otherwise couldn’t afford. Such fraud robbed lenders of an estimated $1 billion last year, according to data collected by the Washington-based Mortgage Bankers Association and the Federal Bureau of Investigation.”
The $1 billion figure seems like part of a disinformation campaign since obviously a $1 billion problem for the mortgage market is behind the comma so to speak. The implode-o-meter would not be at 62 and counting if fraud was only a paltry billion bucks for sub prime lenders.
These guys are so far behind the f—ing game they shouldn’t even be allowed to write columns. It’s embarrassing to look at the media in this country and what they have become. God we need another Mencken.
“It’s embarrassing to look at the media in this country and what they have become.”
I’d say it’s chilling what the media has become. Orwell’s 1984, two decades late, but finally here. Disinformation, propaganda, cheerleading, newspeak.
Well, I don’t think most of the “MSM” is that way, but certainly Faux, at least on most things.
However, I do believe, particularly in the business commentary and analysis (versus hard news reporting) that there is a consistent editorial bent or emphasis on news that’s ‘good for business’, whatever that is at any given instant. The same is true in terms of editorial decisions about what will be covered in the hard news. The WSJ is one of the more extreme (egregious?) examples of this dichotomy. That’s why the raw data is there for all to see - just not collected and presented pre-digested for the masses - on things like the sub-prime implosion. It’s not until the “bigger picture” is steam rolling over the masses that the media is forced to report on it. Moreover, once the “message” is steamrolling over the masses, news folks (the honest ones, not the cheerleaders) are pretty well insulated from attacks or “criticisms” that they are creating the news or the story, not reporting it.
“Well, I don’t think most of the “MSM” is that way, but certainly Faux, at least on most things.”
Yesterday, Dennis Kucinich announced articles of impeachment for Cheney. That’s big news, no matter what you think of politics. NBC Nightly News didn’t carry it. However, Jay Leno did, in his monologue.
You are spot on about the WSJ. I forget who said it, but I like the statement “Knowledge is power, that’s why you don’t get any.”
I have to disagree about the WSJ. While they didn’t exactly pound the table, I remember several op-eds by Shiller and they had many articles questioning if a bubble was at hand and about to burst, so much so, that they were the one place in the MSM that I felt I was getting real news about housing, especially throughout 2005. They even had a section (at least online) titled the Housing Bubble (or something like that) that was sounding regular warnings, but it curiously disappeared after the housing market was obviously softening, perhaps to not be blamed for “talking the market down.” The WSJ is a most trusted resource for me, and since I didn’t discover this blog until last fall, it was very helpful to me in coming to a decision to sell my house and trade down in August of 2005.
“You are spot on about the WSJ. I forget who said it, but I like the statement ‘Knowledge is power, that’s why you don’t get any.’”
Another point, at the risk of sounding like a shill for the WSJ. One of the best resources for basic financial knowledge for the average Joe IMO is the Getting Going column by Jonathan Clements. Basic, common sense advice on asset allocation, reducing costs and trading, tax efficiency, that are aligned with the views of John Bogle, et al, and not in the interests of the Wall Street crowd. They aren’t hostile to the Street, but they aren’t its captive agents either.
“Yesterday, Dennis Kucinich announced articles of impeachment for Cheney.”
This week’s issue of The Economist has a good piece regarding the neo-cons descent from power. It is also tough to find any mention of Israel in the press these days.
Johnfromia,
I agree the WSJ is really a pretty excellent source - the paper of record really - for all things financial. I suppose I meant their editorial disconnect on a number of other issues, mainly on the Editorial Board, rather than in the op-ed columns, is sometimes glaring: stuff on the front page, if you read between the lines and do your own analysis, completely contradicts the opinions.
What I really meant by “whatever that is at any given moment” is that quite often the policy objectives and analysis are extremely short-sighted. The cheerleading of Lereah is overt - he’s a paid shill - the commentary by people like Blanton at the Boston Globe (hammered on this blog) is not so overt. However, if the regular news analysts were to claim, “hey, this bubble is popping” when the signs were on the horizon (rather than actively squishing people), they’d likely get clobbered by the likes of Lereah for ‘causing the panic’. Isn’t that the age-old argument about bank panics and runs? If nobody tried to withdraw, those paper balances could just stay there and everything’d be hunky-dory?
Anyway, at least the underlying solid data is there - one just has to learn to think for themselves.
Wait a minute. Wasn’t Kucinich himself impeached when he was mayor of Cleveland? Certainly at least there was a big drive for it.
No doubt. I have to get my daily blog and column intake just to hold ground against the hurricane of bull$h!t coming out of the media and the market every day. It can be hard to stay with your convictions and not just give up.
Its embarrassing the biggest bubble-crash of all time gets almost no coverage. But if a comedian uses the n-word or makes fun of Asians its FRONT PAGE NEWS!
Last I checked it was legal to use bad words. Mortgage fraud is supposed to be illegal.
A billion in one county, maybe.
It is an interesting opposing news twist to the “poor victim” stories. Probably helps quiet the miserable calls for bailout of the buyers to have the media suggest many of them should be prosecuted.
Eventually reporting will catch up with the news, when it isn’t news anymore.
1 billion
sounds like Dr Evil’s ransom
1 trillion might be right
They can be processed quicker than standard loans and typically cost the borrower an extra quarter point on his mortgage.
I’m shocked. Shocked to find out that there is FRAUD going on in this establishment.
Your quarter point, sir.
Thank you.
There seems to be fraud going on in every establishment.
Let me give you one example from land use planning. To be legally legitimate, zoning rules have to apply equally to everyone based on a “well considered plan.” But exceptions (variances) are allowed to be made based on “unique site conditions.” Legally, there are seven findings required to grant a variance. Here in NYC, you know what the land use bar calls them?
The seven lies.
Can someone name a field where you can actually tell the truth?
Not teaching.
If I fail over 35% of my algebra students, I get in trouble. Doesn’t matter that 80% can’t do the work. Is there any wonder why we have tenth graders who can’t understand pos/neg integers, fractions, or even multiply well? The system (NOT the teachers!) pushes kids through no matter how poor their performance or preparation. Puke.
That’s so true. My dad was a high school math teacher. Spent his entire career at one school. When he was in his late 50s, he was being told he “had” to pass more kids. He replied, “But they’re not passing!” and was told that doesn’t matter.
He took early retirement because of it.
Can someone name a field where you can actually tell the truth?
mathematics.
Yeah?
Try being honest about other people’s research, and see if you can get a job at a top research university. There’s a lot of back-scratching, and I say that out of (former) experience.
“Can someone name a field where you can actually tell the truth?”
Mathematics — the field of choice for scientists in the former Soviet Union.
Book publisher (although no guarantee it will be sold by stores or purchased by anyone)
I can: programming. That’s one of the reasons I still like it after almost 40 years.
18174 CAMDENHURST DR, Gainesville, VA, MLS #PW6385158
List Price: $459K
Prior Sales:
05/06 $703,000
09/05 $563,000
06/05 $485,590
All names on the sales are of the same national origin. (Perhaps a coincidence, perhaps not).
So these “relatives” pulled out $218,000 grand in 11 months and now the property is foreclosed or a short sale for $244,000 less than the original purchase price 22 months ago.
I hope you are not suggesting fraud. Why New Century has computer programs in place to detect and prevent such things. I am sure they will buy this loan back if there is something wron………….they are what??? In bankruptcy court. How convenient….
I dont know what makes you so sure they are of the same national origin (same ‘region’ maybe). But yes looking at the house, even the current list price is too much. I still cant understand how somebody would pay 700K for that even with the psychology that was prevalent -
Yes, I should have said “regional” origin. And even that is complete speculation on my part.
The odd thing is that the price it sold for in the fall of 2005 should have represented something of a peak for the area. The 700K is out of nowhere.
…said Olland’s broker was fired for not following the firms
strict guidelines
Translation: Make sure your department secretary stocks
a full line of liquid typewriter.
–
Housing-Led Recession Watch
My prediction is (and has been) that the US economy would be found to have entered recession some time during Mar-May’07. The proximate cause would be Sub-Prime Mortgage Meltdown. Lot of economic data has been very weak, the stock market notwithstanding. The 2007Q1 earnings are yesterday’s news.
Any opinions, pro or con?
Jas
I had thought the US would be in a recession by the 1st quarter of 2007. I am amazed the wheels have not fallen off already although the engine does finally sound like its knocking and pinging.
“I am amazed the wheels have not fallen off already”
The wheels have fallen off, IMHO. This just hasn’t been confirmed by the lying, sack of sh*t media. The US economy has been looted. I can’t speak for other countries, but that’s what it seem like.
I have felt for years that business would no longer be able to pay workers less and yet have them buy more forever. One or the other will have to change. But it is unclear what form this will take — wage push inflation, an employment recession, or a profits recession.
The stock market seems to be assuming that labor income/materials will continue to take all the hits. I’m not sure that’s the case.
Inflation. It will also solve the housing cost problem.
I think you are right - the gov’t has always just inflated it’s way out of these messes -and then taxed the inflation based cap. gains to pay for it!
Much as this is disgusting, I am not sure what other options we have; the shock and pain of deflation ala the 1930s would be too brutal and ultimately more costly in lost economic activity than the costs of inflation. I have no real basis for saying that, just a gut feeling.
This is the real reason our savings rate is so lousy. If the gov’t is running big debt, it’s going to be an inflationary economy; you’re best bet, as a little guy, is to always piggy back the big guys.
Wages will lag, but will eventually have to inflate as well, and the long term bet (if you don’t have an exploding option ARM and can hang on long enough) is that your debt will become very cheap to service somewhere along that 30 year note. Of course, you pay all the interest with the most expensive dollars up front!
From several pieces I’ve read and heard, essentially all of our money supply is created from credit, with money printing just a small fraction of it all. The money supply has greatly increased because of all the credit for the last five years, and prices have followed. But foreclosures will decreased the money supply, and if people are “borrowed out” that will limit it further. If people and businesses can’t or don’t want to take credit any more, and are working to pay off thier debt or foreclosing it, that will shrink the money supply, and there is nothing that can really be done about it under our current system. Japan brought interest rates to 0% but even that didn’t stop a prolonged deflation. Congress could fire up the printing presses, but printed money is a small fraction of money out there they’d have to print a lot to make a difference, and it would just weaking the power of the banking industry whom they serve. Because we are entering a likely period of narrowed spending because we are credited out, the options are deflation or hyperinflation. If you are a FB or have a ton of debt, the better choice of course is hyperinflation. But if you are among the powerful financial elite that has congress in the bag, then slow deflation is the way to go.
That’s my take. I don’t really know what the powers that be are thinking however, and I’m keeping the range of possibilities open, and watching closely.
“I have felt for years that business would no longer be able to pay workers less and yet have them buy more forever.”
One of my favorite kitchen rants for at least 6-7 years now.
exacerbated by:
-astronomical cost of education to make one hirable,
-escalating costs of health,
-escalating needs for retirement
-reduced training to stay current. (Cheaper to just hire a new guy)
I used to think businesses were cutting their own throats until I realized they were just planning on shifting to a whole new consumer market once the American consumer was out of the picture.
who are they shifting to? I’ve been watching the Catepillar story with great interest (as a shareholder), but it seems to me that a collapse of the US consumer will also affect a lot of those developing markets. They’re merchantile economies and their growth is largely dependent on their insane export rates to the US. Chinese consumers are coming on fast, but will they really be ready to replace US consumers sufficiently to keep growing China (and keep growing the Chinese consumer) if we fall off a cliff? India seems somewhat further along with developing a consumer market.
Global corps have different business models for the 3rd world. Take shampoo. In the US you either buy some overpriced fru-fru brand at a salon, or buy a great big bottle of something generic at Sam’s club.
In the lower 3rd world, you sell shampoo in little catsup like containers (good for 1 shower) to the masses, and in bottles to the tiny middle class. Instead of selling $20,000+ cars to the middle class, you sell them tiny, frail, 40 hp cars for $4000 (think of a reliable Yugo).
IMO, the Globalists are conspiring to bring us down to a 3rd world standard of living (which gives them more power). This means that if you are a middle class college grad you can look forward to raising your family in a 600 sq foot apartment, and you and your spouse will have to share the $4000 car.
I also expect to see a strong push to integrate Canada, the US and Mexico economically (at first) and politically (later).
who are they shifting to?
I agree with your post Scott. I went into that origianally and than erased it cuz I know my posts tend to ramble.
I don’t think companies have made the switch at this point, only that that is an option. Aren’t most major corporations already developing markets over there? One tactic to grab market share is to be first!
The American consumer may be down and out before emerging market consumers are ready to fill the void. But I still think the plan is there. How could it not be? Business goes where the money is.
“The American consumer may be down and out before emerging market consumers are ready to fill the void. But I still think the plan is there. How could it not be? Business goes where the money is.”
No worries. Easy credit is available to bridge the temporary gap and grease the passing of the economic baton.
The “wheels falling off” are like the landing gear of an airplane not deploying. You can’t see that they’re not there. We may not know until we hammer down on the runway…
My bet is an “event” by June, but I’m just watching. These things do seem to drag on beyond expectation. I thought the big collapse was just over the horizon in the 70s and I’ve been scratching my head ever since wondering what keeps the beast running uphill.
My bet is an “event” by June,……….
Thats the “Black Swan” that I fear the most…It will come “Stealth”….There will be no time to react or position…Advance preperation for the “event” is your only protection IMO….
We already had the event. Subprime.
The whole CDO-MBS-Liar Loan crap is no longer a public secret.
That was the plane hitting the building, we haven’t had the collapse yet.
We already had the event. Subprime……
Noooooooo….That was seen well in advance….The event will be “Stealth”….
Jas:
about a year ago I felt that 1Q07 would be the first month of recession. But was clearly wrong. The economy chugged a little further than I thought.
the economy is clearly slowing, but not fast enough to put us into recession by May IMO. I now think we’ll be in recession (meaning true economic contraction) in 3Q07, but our data won’t show it until later.
There are a few things that are that will prolong our plunge into recession:
1) the weak dollar should help us with our exports, bolstering our economy some. the dollar is now near all time or at least long-time lows against almost everything. This should delay TRUE economic contraction.
2) inflations effects on GDP. GDP is theoretically inflation adjusted, but we’ve all seen what a joke our inflation numbers are from the Ministry of Truth. thus, they will understate inflation, which will overstate GDP, and thus obscure whether or or not we’re in recession. This should delay the reporting of the true economic contraction
Overall, obviously we’re already in a very slowing growth phase, soon to be turning negative. It will likely be REAL recession (i.e. economic contraction) in about a quarter (so 3Q07) but due to fudging of the numbers it will take longer for them to show “nominal” recession (i.e. decreased GDP) - maybe until 4Q07 or 1Q08 and it will be longer before this data is compiled and released by the powers that be (probably 2q or 3Q O8)
just check the real (shadowstats) statistics; US GDP is already in negative territory.
“the weak dollar should help us with our exports”
““I have felt for years that business would no longer be able to pay workers less and yet have them buy more forever.””
2nd statement means that 1st statement won’t help as much as most of us would hope.
“the weak dollar should help us with our exports”
..which is 81.19 as we speak. I keep hearing the pundits say it isn’t significant?? Anyway what do we export now ? Yes, HP,KFC,IBM,Haliburton all make more overseas so should see their bottom line go up. I think that is the overall disconnect. We the people are washing our way of life ebb away…Amero, here we come .
The highly unscientific neighborhood empty storefront indicator says that we’ve been in recession for the past year. At least here in San Francisco.
As good as the faciest econometric tools…IMHO. My other favorite is the Big Mac Index.
The Arizona Slim Restaurant and Home Improvement Store Traffic Index shows that an economic slowdown started last summer.
diemos;…..Is there a lot of empty store front retail in SF ??
I live in the Richmond District, and along Geary Blvd there are a number, yes, not overwhelming, but more than might be expected in a vibrant economy.
An indicator I use is the amount of time required to get on the Bay Bridge at rush hour. During the tech boom it could take 45 minutes to get on the bridge with all the streest of downtown SF gridlocked. Now most days there is little to no waiting. I have noticed similar easings in the south bay also.
David;….I like useing the “Car Count” indicator also….During the Dot com it was a friggen nightmare around here…It picked up again (Not like it was) in the last year or so…
In the Castro/Upper Market area there are a noticable number of store fronts that are empty and a lot that are under used (being provided for free to charities). There’s also been a spate of restaurant closings recently. It’s not 80’s detroit but its not vibrant either.
Good point diemos. Today the news also mentioned that places like Cheescake Factory have slowing sales. This is omething that we predicted here. Slowing retail, which is a lagging indicator IMHO. Look for commercial r.e. to crash next. As others have mentioned, those 4 and 5% cap rate investments won’t seem so smart in the near future. Here in Scottsdale, AZ, there is quite a bit of vacant older retail and much new stuff being built…someone’s getting ready to get screwed.
I have notice quite a few restaurants closing up and also some retailers going out of business that have been around a long time. To be expected in the Midwest, perhaps, but have really started to see more of this in the last 3 months or so.
Do you know how much money the Government is printing? Neither do I. They stopped reporting that figure. The Fed is keeping lots of liquidity in the market with a big money supply. Of, course this will keep the economy growing temporally and have long term disastrous consequences. Just like everything else our current Government does.
Heck of a job!
check shadowstats; M3 currently growing at 12% yoy.
The stock market sure likes that liquidity
the stock market sure likes those sneaky FED Open Market Operations; 35 billion just for today (is that a new record?).
Bernanke’s black helicopters are in full combat mode.
They’re blowing air into the balloon faster than it leaks out the holes. Problem is the holes keep getting bigger.
That’s pretty funny.
“…to have entered recession some time during Mar-May’07″
Last Fall I stuck my neck out and predicted the same — recession will subsequently be shown to have begun during the second quarter — to my family and friends. They’re one I can count on to be polite in their disbelief. I’m not in the business, just analyzed what I’ve read here and elsewhere on the Net, 6+ hrs/day, for most of the past couple of years. I read the bull thinking and the bear thinking and went with what seemed most logical. Seems like the term “bull” didn’t come from the name of the animal, but from what the animal leaves behind.
I noticed that on the msn site you can post questions you would like asked at the first democratic primary debate. Has anybody “gone there” with the bailout question ? I’m thinking the more people that ask the question the more of a chance it will be asked.
Danni
Let them do their bailouts. I have yet to see a bailout scenario that won’t hurt the housing market far more than it will help. One way or another we will have to pay for it. It might as well be publicly endorsed by these goons so that maybe some of them get blamed. Name me one senator blamed for the First Depression. It would be nice to have some names attached to the second one. They all deserve it as there has been no leadership in either chamber for years.
These fools think they can fix the leak in this boat by drilling another hole. Good luck with that.
The ONLY and cheapest form of a bailout that will work is to provide extra incentives to first time home buyers. People are standing on the sidelines watching the carnage. Why would you want to jump in now? It just doesn’t make sense.
If you fund/bailout the speculators you just prolong the crash. Which will make buyers even more dispondent than they already are.
Smoot? Hawley? Read a history book.
Major meltdown Tuesday in Spain. Just go to google news and search on |Spanish bubble|
Just back from a week in Spain…housing construction everywhere.
With this link you get to the main bubble forum in Spain.
Looks like they are getting in “overdrive” since a few days.
http://www.burbuja.info/inmobiliaria/forumdisplay.php?f=2
Any spanish speakers could give us some of the highlights….?
“Between 1998 and the end of 2006, the amount that Spanish banks lent for real-estate activity rose tenfold to 107 billion euros, according to the bank of Spain.
The average cost of a Spanish house was 2,736 euros per square meter at the end of last year, according to Sociedad de Tasacion, an adviser on Spanish real estate assets. That was up from 1,036 euros nine years earlier.”
http://www.bloomberg.com/apps/news?pid=20601085&sid=aHfaT56u7Mrw&refer=europe
I believe that most loans in Spain are floating-rate.
I believe that translates to about $400 per sq ft, e.g. $1M for a 2,500 sq. ft. place. Ouch. And Spain isn’t one of your wealthier European countries either. I would expect prices like that in Luxembourg maybe, not Spain.
$345 / sq ft.
.1262 is the multiplier from Euro/m2 => $/ft2
at current rates, at least. Maybe you were thinking more Octoberish
Eh? Try 1.365 -
http://tinyurl.com/y4w3yb
ptptptptpt…
(Though that does work out to be less than $400, but not by much)
Never mind - I didn’t realize until just now you were including both the money and size conversions into one.
(sulks off…)
yes, Spain is mostly using floating-rate loans.
the major problem seems to be with land prices; land has gotten so expensive (despite the fact that there is plenty of land, as usual …) that developers need huge loans before they can start building. Apparently rising costs for these loans (because of rising rates) are a big part of the problem; the whole Spanish ponzi scheme is starting to shake.
I read some comments from an industry analist who says that property funds in UK, Ireland, Spain and Netherlands are valued way to high, often far above book value of their (already seriously overvalued …) properties. The valuation of the funds assumes that prices will keep rising at a healthy pace for the indefinite future; quite a stretch.
Another interesting comment: people used to leave Ireland because of poverty; now they are leaving because of too much wealth that is pushing home prices so high that they become unaffordable for many. In the Netherlands ridiculous home prices are also the number one cause for increasing emigration numbers (and of course, this spreads the bubble to other countries). Immigrants to Netherlands don’t care, because they are often the ones who get the housing for free (even if they are illegal).
AMZN might hit $1 million per share today, the way it’s going. I hope this $52 price holds. I want some 2009 puts. I can wait this thing out. That is one manipulated stock but can they manipulate it this much for 20 more months? My money will say no.
Somebody asked about MDC yesterday. Beware of that. It has a 1.9% dividend and lower land holdings than most other HBs. If you are touching the HBs it seems that RYL and KBH are still better for long-term puts. Be careful. This is still a tough market to put. Goldilocks is doing cart-wheels in the grass.
Disclosure: I don’t own puts on either KBH, RYL or MDC currently.
Take a look a HOV, I have been short since late April 07. So far so good (and no dividend to pay!), but the value players may kite it back up again. Wise to have stop loss orders too. I am hoping another shoe will drop
I also like Beazer as a target, since they are more leveraged that most of the builders. Tried shorting last week, but Ameritrade could not find shares to borrow, puts may be the answer here.
free shipping !
amazon has no assets
As a book publisher, I can say Amazon is wonderful to work with. They make it really easy to advertise and sell books, no hassle. Places like Barnes and Noble and Baker and Taylor are a nightmare.
As an occasional book buyer, Amazon is wonderful. They have the no hassle mode perfected, IMHO. When times get hard, entertainment goes up, I expect Amazon to continue to do well. (Caveat: free advice is uaully worth what you pay for it.)
Unreal. UP 16% to $52 in pre-open trading per MarketWatch.
This comment was suppose to nest in NYCityBoy’s comment above.
If their income was twice expected, why not +100% ?
I know Russ Winter’s been following the truck toneage quite a bit, he might find this layoff notice interesting for truck trailers:
http://www.jsonline.com/story/index.aspx?id=596020
…”As a result, the conventional wisdom was that more people would put their attention to trailers in 2007. But that hasn’t materialized in orders,” Wahlin said. “As soon as tonnage increases, and as soon as trucking company profits improve a little bit, I think people will go back to buying trailers. It’s just a question of when.”…
Yep, even modern economics still have old-fashioned basics…
I’ve got a friend who has been in the trucking business for about 17 years, with large carriers. Says its the slowest he has ever seen it.
Sorry for the slowdown in trucking in other regions, bad news. My dad always said you could tell how the economy is by the number of big rigs on the highways. I have been on I-85 thru the Carolinas quite a bit this month and there have been more trucks than ever.
Dying mom fights lenders: Gov to seek help for family battling Ameriquest to keep house
Auto mechanic and Red Roof Inn clerk take out a $565,000 mortgage, refi multiple times to cover credit card debt for things like braces, home remodeling, tutors, fur coats and glamor shots, then get cancer and whine to the governer that all that debt should be forgiven. Think of the children!
I certainly feel bad for anyone with cancer but this story isn’t about cancer. It’s about compulsive debtors playing the role of victims.
http://tinyurl.com/33tgl4
He said he was never told he’d be penalized $10,000 for refinancing too early and that the interest rate would soar to 10 percent. He wonders why they were approved for a $565,000 mortgage when their combined annual income was less than $100,000.
A comment like this says it all. The jackass knows his family can’t afford the mortgage, but still goes along with it.
“they refinanced adjustable rate mortgages with Ameriquest every two years to pay off credit card debt, pay for their daughter’s braces, hire a tutor and build an in-law apartment.”
So, were they ever planning on paying back the money…private tutors and in-law apartments? Using the lenders’ money, they decided to join the upper class. And, they just kept running up theose credit cards… these people are just skeezy bottom-feeders.
Now that the refi scam won’t work, they’re going for the pity money.
Cancer is an equal opportunity nightmare that strikes decent, honest, ethical americans as well. i will save my sympathy for them.
The debt will be forgiven… when they die. The children don’t inherit the debt. One problem solved, kind of.
The paper has a picture with family photos splayed out…..couldn’t help but notice the mother had a very neat, professionally taken, “glam” shot of her in a fur….maybe it was a fake fur but one gets the feeling that this was not a couple into “budgeting” much.
Popcorn Alert!!!
“Apr. 25–The federal agency that regulates workplace safety said Tuesday that it plans to increase inspections of microwave popcorn plants where exposure to a butter-flavoring chemical has sickened hundreds of workers.”
For the record I always use “Grandma’s Best Practices” popcorn popping technique by popping in a light stainless steel pan with a heavy bottom approximately 2.5 inches deep and 10 inches utilizing a glass lid.
http://tinyurl.com/2exmpd
LOL - when you said “Popcorn Alert” I didn’t realize at first you meant literally! Too funny.
Ack!!!
Sounds like the dog-food debacle: one plant supplying everyone and that one plant contaminates the food.
I use a technique similar to yours, smaller pot, and always with olive oil.
Got non-chemically contaminated popcorn?
Neil
Reading is fundamental.
Try using Smart Balance instead of olive oil. It’s non-hydrogenated and quite tasty.
Cocconut oil for the win!
but MovieTheaterButter tastes oh so good…
No way. Olive oil burns at too low of a temp. You need to cook the corn in its own oil (corn oil). Then maybe use the olive oil on top of the popcorn with some parmesan and salt. I’ve been too lazy to use this old school popping method. But you guys have me salivating for some.
You folks are so arrogant!
Niel invented popcorn!
We are not worthy!
Here is a CNN Money poll on whether taxpayers should fund a bailout of sub-primer borrowers. It’s encouraging that the vast majority of people who have voted do not support a bail-out. I saw a similar poll on another financial site a few weeks ago and the results were also very similar.
http://money.cnn.com/POLLSERVER/results/31468.html
unfortunately, this is the wrong demographic.
i’d like to see what a Yahoo poll, or better yet, the AARP poll would be.
CNN/Money is read by slightly financially literate people. True, slightly financially literate people do vote, but they’re not the majority.
nobody votes like Senior Citizens, thus the AARP vote. If there is a Yahoo poll that would work well too!
But a Yahoo poll only targets the “people who know how to use computers” demographic. As we can see from last Nov’s elections, there’s a significant portion of voters that don’t fall into that demographic either.
“But a Yahoo poll only targets the “people who know how to use computers” demographic.”
Having a computer science background, and having been interneting since the early 1990s (when the only browser was Mosaic) I can assure you the average user has been significantly dumbed down over the last 15 years. For example, you could tell that most users were college-educated engineer types and more than ten percent of those seemed to be libertarians. Now probably less than one half of one percent of the average people on-line are libertarians. IMO, when one is principled and consistant in his stance on freedom, it is a good sign of intelligence.
Testify, Bill in Phoenix, testify! (Slim has been Internetting since 1995, and has seen the same trends that you have.)
The world is full of “@aol.com” email addresses, proving your point…
I will guarantee any poll taken would result in an overwhelming “No way!” as long as all the facts are given upfront (i.e. if it’s not spun around “poor victim” stories). My parents - who would fall into the AARP poll - are of the “No way!” camp.
From the WSJ
House Prices Slide as Property Glut Grows
Buyers Gain Bargaining Power
In Busy Spring Selling Season;
Auctions in Palm Springs
Tighter credit and a growing glut of properties are depressing an already weak U.S. housing market, wrecking the industry’s hopes for an early rebound.
Lenders, stung by a surge in defaults, have rediscovered the virtues of caution over the past few months, eliminating many of their no-money-down loan offerings. That tightening is “really starting to bite,” says Ed Mixon, a real-estate agent for Re/Max Real Estate Services in Monarch Beach, Calif.
Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment. A year ago, he says, she could easily have obtained a loan to cover 100% of the condo’s price.
Stricter lending standards will reduce demand for housing by 10% this year from where it would have been had credit remained loose, estimates Thomas Lawler, a housing economist in Vienna, Va. He expects housing prices, as measured by the national S&P/Case-Shiller index, to fall 7% in the fourth quarter of 2007 from the year-earlier level.
(Subscription required)
http://online.wsj.com/article/SB117745915366081228.html?mod=home_whats_news_us
Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment. A year ago, he says, she could easily have obtained a loan to cover 100% of the condo’s price.
Mr. Nixon just saved her sorry financial behind. As she waits that year (or two) she’ll probably still get a $300k unit, just a larger $300k unit.
Oh.. the sheep still happily go to the fleecing… Except now they’re being told to let their hair grow out a little more.
Got popcorn?
Neil
“… with a good job…current nest egg of $5,000…”
Excuse me, but I am a lowly teacher, and my wife is an admin assistant. We save more than that A MONTH.
I know you’re being sarcastic, but no teacher is ever “lowly”.
You guys need to give lessons…say, that’s an idea! Diligent savers teaching FB’s how to save money! Seminars for the “victims” of credit card debt! $99.00 for the day, plus donuts and coffee! Rent a room at the Holiday Inn! Bumper stickers….”I SAVE!”
But be sure to take cash.
LOL.
That reminded me of my father-in-law. He owed no one anything and couldn’t have cared less about a credit rating. His house was paid off by the early 1960s. No cash - no purchase. All meals, everything they bought, they paid cash. They had one credit card, that they used once a year, for emergencies. Living very modestly, they save a pretty good amount and he was able to provide my MIL a very comfortable nursing home stay after he passed away in the early ’90s. His example changed my wife’s and my thinking about money and debt, forever.
Wow — a 1.67% downpayment requirement (5,000 / 300,000).Those credit standards are really starting to strangle the buyers!
Omg where do you live? That’s about 75% of our take home.
Well , I want the down payment requirements to weed out some of the fraud . When a person has to save money to buy a home they are alot more careful about that purchase . I would really like the lenders to start requiring reserves for homebuyers also .I’m sick and tired of goofball fraud borrowers determining the value of property .As far as I’m concerned these sub-prime buyers are not “able buyers’ , therefore they are not a valid comp for a appraisal .
The foreclosure rate is amazing on these loans . Make laws now to stop the sub-prime fraud and let the market correct from the fake loan packages .
As a citizen of the United States of America , I have the right to have the deposits of this Nation protected under the regulations in lending .. No excuse for faulty lending and no excuse to continue it . I have a right to not have my property taxes/values inflated by false loan packages . Sub-prime has proven to be a crime infested world of fraud and they need to be booted out of the game . Bad apples can ruin the barrel of apples . I call apond the lawmakers to stop these crimes now and restore prudent lending practice to this Country .
I don’t want to hear another word about how the absence of sub-prime loans will crash the market . The market will crash anyway and to continue with this fraud lending will just delay the crash for a short time and produce more creepy loan packages that will fail .
You can’t replace one fraud loan package with another one by keeping sub-prime alive. Let the cards fall as they will with this sub-prime fall-out but don’t continue to allow the crimes and make these loans . Its not fair to anyone ,especially good hard working people who got priced out of the market or bank depositors who are expecting valid lending .
A “Seven Nation Army” couldn’t hold the depreciation back…
http://www.realestatejournal.com/columnists/private/20070424-private.html?rejcontent=mail
“March durable goods orders rose 3.4%, beating analyst projections. Key measure of business spending shows strong rebound. More soon.”
cnnmoney.com
Fly stocks, fly…
U.S. Durable Goods Orders Rose More Than Forecast (Update1)
By Joe Richter
April 25 (Bloomberg) — Orders for U.S. durable goods rose more than forecast in March, signaling business spending started to recover as the first quarter ended.
Orders for goods made to last several years increased 3.4 percent after a 2.4 percent gain in February that was larger than previously estimated, the Commerce Department said today in Washington. Orders excluding transportation equipment rose 1.5 percent after a 0.4 percent drop….
http://www.bloomberg.com/apps/news?pid=20601087&sid=araSvk6pt71s&refer=home
So, will the Fed raise rates, I wonder?
Nope. They’ll keep insisting that inflation is under control, in spite of what the cash register receipt from Sams Clubs says. Too bad Plasma TV’s aren’t a staple, we would actually have some deflation!
Real Estate
Housing’s Great Divide
By Peter Slatin
TheStreet.com Contributor
4/24/2007 5:02 PM EDT
URL: http://www.thestreet.com/newsanalysis/realestate/10352575.html
The housing market’s precipitous drop from February to March offers just another sign of turmoil beneath the only slightly bubbling surface of the national economy.
Sales of existing homes showed their largest month-to-month percentage decline in almost two decades and hit an annualized rate that marks a nearly four-year low.
The numbers indicate that earlier in the year, consumers pulled back sharply from homebuying activity, due to any one or combination of causes.
Start with alarm bells from the subprime-lending market, which not only may be spooking some buyers about the risks of mortgages in general, but may even be spooking some heretofore less-than-cautious lenders into more considered (”rigorous” may be too generous a word) underwriting standards.
Add in the weather, gas prices, war worries — why buy now? Even The New York Times, in a recent front-page story that had developers in Manhattan fuming, urged people to start renting.
Subprime-Free Affordability
There is, however, a basic consideration that lies at the heart of the pullback: price. Houses are just too expensive, and sellers still have largely unrealistic expectations about the value of their homes, expectations that may have had merit nine months ago but no longer do.
Remember, the professional and even semiprofessional investors and speculators who drove up new-home and condo-sales figures in recent years have not been nearly as active in the existing-home market, where sales in bulk are rare, meaning that buyers have been, for the most part, end-users — i.e., owner-occupiers.
And owner-occupiers worry about the relationship between price and value no matter what their income levels, which translates into a quest for affordability for those who do have an income level to take into consideration.
Affordability is, of course, the forgotten word in home pricing, and while its absence was partially mitigated for eager buyers by subprime products and other mortgage-aid vehicles that were created to offset rising home prices, it is now returning to the discussion. Those less interested in hearing it are, increasingly, sellers, some of whom thought of their home purchases in recent years first as investments and only secondarily as places to live.
This group is less likely to be willing to move down the pricing chain as they try to sell the homes they bought recently, while buyers who haven’t yet figured out that the time is right for waiting things out still know they can seek concessions rather than pay an asking price. For them, and for now, the negotiation about concessions or discounts has shifted from whether to ask to how much to ask for.
Then there are those buyers who have figured out that waiting could be its own reward. The March slide in pricing as well as volume indicates that sellers are trying to hold the line, but with relatively little success, and those who can are engaged in their own waiting game.
Momentum in this contest has shifted to the buyer, and it will be extremely important to watch how quickly buyers and sellers recognize this fundamental change in the housing dynamic. In other words, how low can sellers force buyers to go?
Basic Supply and Demand
There is another element that has fed the declining sales of existing homes: declining homebuyers. After all, even as sellers seek to unload suburban homes, there has also been a significant boost in the profile of downtown America as the place to be for aging baby boomers. Downtown areas everywhere continue to be sought after.
That means that baby boomers and empty-nesters who may have purchased urban condos in anticipation of selling their suburban homes are an especially important piece of the marketplace. First, they aren’t shopping for suburban homes. Second, they may not be able to sell their suburban homes at the prices they were counting on to help finance their urban lifestyles.
While that equation — or its failure — depends to a great extent on when in the cycle they bought their city and suburban homes, it is also clear that the volume of replacement buyers for aging baby boomers just isn’t there.
All this portends continued slowing of sales until the market finds a new equilibrium, that place where buyers and sellers can see eye to eye on value. A great deal will depend on how well and how long that center holds, although prices — and volume — could just as easily continue to slide long after they should have come to rest.
I continue to find the tone of the articles strange. They are taking what I see as modest declines from artificial highs and using alarment language to describe them. What will they say when real losses hit?
Yeah I get tired of it too. It goes down a little one month, and goes up the next, and everybody is reading all sorts of things into it, when it might be just things like randomness or range of error in the measurements.
For some reason the foreclosure count on foreclosure.com stalled all of the sudden, a couple of weeks ago. It had been going up at a steadily-increasing rate nationwide, then all of the sudden stopped:
Mid-Nov: 126,660
Mid-Dec: 129,512
Mid-Jan: 136,898
Mid-Feb: 147,035
Mid-Mar: 159,580
Mid-Apr: 177,699 (on 4/14)
Now: 177,260 (11 days later)
Odd. Anyone know why? They don’t tend to jump around much - even week-to-week it’s been a steady climb, then bang just stopped dead. Perhaps foreclosure.com ran out of disk space!
It must be bad weather. Mortgage companies take off when the sun is not out.
Since two weeks they’re all redirected to the ‘Mac and Mae’ bail out waiting room…
I noticed realtytrack foreclosure numbers also stopped ticking up for my area and have reported the same number of foreclosures for awhile now. Has someone stopped reporting the numbers to them, or have they been told to lay off?
All I know is - I smell a rat, in some form or another. My guess is that realtytrack and foreclosure.com get their listings from the same source.
FWIW - emailforeclosures.com has been continuing it’s upward pace as normal. They must get their listings from a different source - a source that hasn’t been cut off.
I pointed this out last week. Realtytrac was reporting REO’s for numerous states as being hardly nothing, but yet the Countrywide site alone reports more for just them than Realtytrac reports for a whole state. Do the math for your state, it’s rigged and nobody is really counting…
http://countrywide-foreclosures.blogspot.com/
22.1% drop in sales in Chicago area in March
http://www.chicagotribune.com/business/chi-0704240656apr25,0,5697910.story?coll=chi-business-hed
“Mortgage applications rebound
Five-week decline ends as activity climbs more than 3 percent, helped by a dip in interest rates, MBA’s weekly index says.”
http://money.cnn.com/2007/04/25/real_estate/mortgage_applications/index.htm?postversion=2007042509
I wonder how many of these were refinances?
Real Estate Classifieds: The Roof Caves In
by Erik Sass, Wednesday, Apr 25, 2007 8:00 AM ET
THESE DAYS, NEWSPAPER COMPANIES ARE running for shelter–but they’re not finding it in a traditional stronghold: real-estate classified ads.
Based on a deep drop in March home sales, according to figures from the National Association of Realtors, first reported by CNNMoney.com, newspapers are feeling the heat. In March, sales of existing homes fell 8.4%, compared to February, the steepest month-to-month drop in 18 years. On top of newspapers’ other woes, the reversal in a key classified category posting positive results in 2006 signals an acceleration of the medium’s already rapid decline.
Real-estate classifieds were, until recently, one of the few areas where newspapers were enjoying revenue growth. But beginning in the fourth quarter of 2006, they joined the automotive and job-recruitment categories in posting year-over-year losses. According to the Newspaper Association of America, overall real-estate classified revenue slipped 2.26%, down markedly from a 10.5% growth rate in the third quarter.
The March drop to an annualized rate of 6.12 million home sales exceeded even the pessimistic predictions of economists, who had forecast a 3.5% decline from February’s 6.68 million, ending at about 6.45 million. The largest one-month drop since January 1989, when the housing market decline heralded a widespread recession, the March malaise is sure to squeeze newspaper real classified listings, which deal almost entirely in existing homes.
According to analysts, the housing market slump is due to a tightening of standards from lenders, in particular heavier scrutiny of so-called “subprime” mortgages–riskier loans made to home buyers with problematic credit histories, which have suffered a growing default rate. Housing market insecurity is also evident in the latest figures released by the Conference Board on Tuesday, recording a sizeable drop in the consumer confidence index.
“With the housing slump deepening in spring–the traditional jump-start of the home-buying season–that means newspapers’ real-estate woes could continue for another year, contributing both to print classifieds decline and online growth slowing,” says Ken Doctor, a newspaper analyst with Outsell. He says it’s unlikely that the market will turn around–and advertising pick up–until spring of 2008.
During that period, Doctor forecasts more online competition as various sites struggle for a piece of a much-reduced pie. He thinks newspapers should look for real-estate sites like Zillow and Trulia to ramp up their Web sites, offering more interactivity and local data. That way, when the market’s back in force, he adds, newspaper sites and services will be ready.
However, the current problem is underlined by a decline in new home sales, which serve as a bellwether for existing home sales, as families sell their old houses. Big home builders are reporting more new homes remaining in inventory and markedly lower sales than last year. CNNMoney.com said D.R. Horton, the nation’s second-largest homebuilder, saw new home sales fell 37% in the first quarter of 2007, compared to 2006.
Although the NAA hasn’t released industry-wide numbers for the first quarter of 2007, individual companies, including Tribune, Gannett, and NYTCO, are all reporting weakness in real-estate listings. The industry-wide dip in fourth-quarter 2006 resembles the 1.8% in auto classifieds in fourth-quarter 2003, and the 16.9% drop in recruitment classifieds in first-quarter 2001. Both declines reversed a long period of healthy year-over-year growth–and were followed by long-term declines, which continue to the present day.
http://publications.mediapost.com
In a word: craigslist
Catherine, you took the word right outta my mouth!
Assuming the papers to which these analysts are referring typically carried a large number of RE agent advertising, I don’t see any connection between car ads and recruiting ads. The car seller (private or dealer) owns the car. The recruiter, generally, “owns” the job or is guaranteed a fee. But the RE company advertises with no guarantee that the ad will be paid for by anybody and they do not own the item being sold. It’s not likely that sellers will be guaranteeing to their agents that they will reimburse the cost of advertising, so I see the drop as a logical reduction of risk-exposure (re expenses) by agents who know that the ad is increasingly unlikely to generate a sale.
I have been following this blogger for about 1 1/2 years now. When I first started reading these articles about a possible housing bubble, everyone would laugh and say a bubble would never happen in their neck of the woods. As I fast forward today, the picture is very grim. The peole who once saw no end to their new found fortunes are now asking me for work or possible employment for the future. Anyone who thinks that the economy is chugging along at a good rate is sadly mistaken, I am seeing people who made six figure salaries looking real nervous . I think we are close to major recession (Q3) that will put many out of work and into foreclosure if they arent their already. I am even getting a little nervous myself for the simple fact if a recession hits everyone will feel it.
“I am even getting a little nervous myself for the simple fact if a recession hits everyone will feel it.”
If it gets very bad for me for 7 years, I will only consider it a much needed vacation from work!
“Anyone who thinks that the economy is chugging along at a good rate is sadly mistaken, …”
Are you including the Wall Street bulls, who just pushed the DJIA over 13K for the first time ever, in your assessment? (And why is the image of that carnival game where one uses a sledge hammer to ring a bell at the top of a pole popping into my brain at the moment?)
http://www.marketwatch.com/tools/marketsummary/
Could someone explain why a market index would engage in ‘fighting?’ This looks more like a parabolic bubble price blowout than a fight, at least to my untrained eye.
From marketwatch.com…
“Dow fighting for 13,000 level
Dow industrials top the 13,000 mark for the first time at the opening bell of Wednesday’s session. It was a mere 128 trading days ago that the 30-member blue-chip bellwether first claimed the 12,000 level.”
Yeah well it was a mere 2,900 days (almost 8 years) before now when it first hit the 11,000 level.
Not exactly stellar gains, especially when accounting for inflation.
FWIW, small caps did much better over that period.
“Foreclosures surge on mortgage woes
Filings were up 35 percent in the first quarter; Nevada leads the way.”
By Les Christie, CNNMoney.com staff writer
April 25 2007: 9:41 AM EDT
NEW YORK (CNNMoney.com) — Foreclosure filings climbed 27 percent in the first quarter compared with the fourth quarter of 2006 and 35 percent from a year earlier, according to a report released Wednesday by RealtyTrac, an online marketer of foreclosure properties.
http://money.cnn.com/2007/04/25/real_estate/forecosures_climb_fast/index.htm?postversion=2007042509
Maine Home Sales
Wednesday, April 25, 2007
By MARTIN CRUTSINGER
The Associated Press
WASHINGTON - Sales of existing homes plunged in March by the largest amount in nearly two decades, reflecting bad weather and increasing problems in the subprime mortgage market, a real estate trade group reported Tuesday.
The National Association of Realtors reported that sales fell by 8.4 percent in March, compared to February. It was the biggest one-month decline since a 12.6 percent plunge in January 1989, another period of recession conditions in the housing market.
It’s amazing how house prices shot through the roof these past 10 years, but not just houses many other hard assets. I don’t think houses will correct much because of rampant global money supply. In the 90’s people would talk in the billions now people talk in the trillions. So while the housing implosion knocks 10 or 15% off the price, there will be a wealthy investor to purchase it at a discount and rent it out. Like the stock market their will be many losers and a few winners. Countries like China are hording trillions in reserves which they want to spend before the dollar devalues too much. It is only a matter of time until inflation washes back onto our shores.
http://business.mainetoday.com/news/070425homesalesloc.html
“Anecdotally, area Realtors said March was a strong month.
Liz Fleury of Remax Heritage in Yarmouth said she doesn’t think the subprime problem is having a big impact in the Portland area. And the only weather-related issue she’s seen came this past Sunday, she said, when people were enjoying the nice weather rather than attending open houses.
So the national slump didn’t make much of an impact here, she asserted.
Jeff Flynn of Flynn & Co. in South Portland said his firm is up this year over last, for each of the months. And March was up in a month-to-month comparison over February, he said.
“I think that overall, things are up. There’s still a lot of buyers and the rates are quite good,” said Flynn. “We’ve been low on inventory over the past few months, but that’s starting to come in.”
The inventory in the Portland area never seems to change much - at least in the year or two I’ve been looking at it. I think a lot of owners are putting off listing waiting for rosier times. And the “outastatas” seem to keep flooding in without any let up.
“So while the housing implosion knocks 10 or 15% off the price, there will be a wealthy investor to purchase it at a discount and rent it out.”
And why would they want to do that unless they can make money at it? Are there enough “wealthy investors” willing to risk money to corner the rental market so they can drive up rents? At current rents I see no reason for anybody with money to want to invest in rental property…
Nice article about use of home equity:
http://usmarket.seekingalpha.com/article/33336?source=i_email&u=8613
good article,thanks
wow. I’m watching CNBC right now. They are talking about Housing.
The host is RIPPING the CEO of Coldwell-Banker real estate a new hole!
The CEO of CB of course said “now is a great time to buy, we’re at the end of our cycle”
The host (not the counterpoint person) says: “David, David, you’re crazy! Let’s say I have a 2004 GMC Yukon and I want to sell it for $100,000… but drop to $80,000. Would you buy it? Of course not! It’s way overvalued. And that’s the same as Real Estate!”
The host went on to talk about:
-demand stolen from the future
-decreased demand due to tighter lending from subprime implosion
-sky high inventory
-only being 2 years into a correction, with 7 year typical cycle.
-that he (the host) wouldn’t buy a house this year.
All I can say: WOW. First time I’ve seen that on CNBC
and this was the host, not the counterpoint person!
It didn’t go well for the Coldwell Banker RE guy.
Wow! Thanks for the play by play.
MSNBC put the video out:
http://www.cnbc.com/id/18308632
it seriously makes me ill to see realtors intentionally mislead people like that Coldwell Banker guy did.
When Coldwell said inventory was going to dry up down the road, he should have slapped him again with the foreclosures coming back on the market…
Who was the host?
It would have to have been Liz Claman. She’s the only on that show that even attempts to critically counter any spew from the cheerleader of the day….
Go to CNBC.com and it is the current video.
Fascinating analysis of the tightening on bank liquidity as opposed to the borrower liquidity.
Diana Olick.
What stage are we in now?
Still in denial, at least as indicated by MSM quotes of top U.S. economic leaders.
I don’t think we are two years into a correction though. The bubble ended December ‘05. Then all of ‘06 was a stall… maybe 5-10% rollbacks from taking flippers out of the equation, but still houses sold at near their bubble peak prices. We are *maybe* just now moving in to a true correction.
–
On Bull Marketing Entertainment Ticket (aka CNBC):
BREAKING NEWS (flash, flash, flash): TIME TO BUY REAL ESTATE
No question mark, of course.
Jas
Home sales post modest gain in March but pace is still significantly below last year
By Martin Crutsinger
ASSOCIATED PRESS
7:17 a.m. April 25, 2007
WASHINGTON – Sales of new homes rebounded slightly in March, helped by better weather, but the gain was not enough to offset big declines in the previous two months.
The Commerce Department reported Wednesday that new home sales rose 2.6 percent in March compared with February, when new home sales had plunged to the lowest level in nearly seven years. New homes were sold at a seasonally adjusted annual rate of 858,000 units in March.
Meanwhile, back at the rancho, privately-owned March housing starts ran at a 1.518 m seasonally adjusted annual rate = 660,000 annual rate of addition to the burgeoning new home inventory pyre. In other words, new home construction is still running 75% higher than new home demand, despite the construction recession already underway.
(CAUTION: PDF FILE)
http://www.census.gov/const/newresconst.pdf
The March improvement was just half what analysts had expected and still left the sales pace 23.5 percent lower than a year ago as the housing industry continues to go through a painful adjustment after an extended boom period.
The report on new home sales followed a report Tuesday that sales of existing homes, by far the larger part of the sales market, had fallen 8.4 percent in March, the biggest decline in 18 years.
http://www.signonsandiego.com/news/business/20070425-0717-economy.html
U.S. new home market may take until 2009 to rebound: S&P
Mon Apr 23, 2007 6:07PM EDT
Market View
(Home builder D.R. Horton earnings plunge 85 pct
CORRECTED-Horton cuts jobs and sees less risky loans
Horton cuts jobs and sees less risky loans
Home builder D.R. Horton earnings plunge 85 pct
UPDATE 2-US April home builder index sinks on subprime woes)
By Ilaina Jonas
NEW YORK (Reuters) - Recovery of the U.S. market for new homes could take another year if trouble in the adjustable-rate subprime mortgage market spreads to other types of residential lending, credit-rating agency Standard & Poor’s said on Monday.
“We do not expect to see a recovery for most rated home builders until 2008, under the best of circumstances,” the rating agency said in a research note. “In fact, a rebound could easily slide into 2009 if a subprime contagion spreads to the Alt-A and prime products.”
Rating agency Moody’s raised its forecast on Friday for losses on risky subprime loans originated in 2006 to between 6 percent and 8 percent of the loan principal. In March, Moody’s had forecast losses of 5.5 percent to 6 percent.
Moody’s said that given the increase in delinquencies and defaults, it believes there will likely be an increase in the use of loan modifications as an alternative to foreclosure sales.
So far, lending problems generally have been limited to the smaller subprime adjustable-rate mortgage subset of the subprime segment. Subprime borrowers are often people with weak credit histories.
Home builders originated about 70 percent of the loans used to buy their properties. Of that 70 percent, 5 percent to 20 percent were subprime. Third-party brokers accounted for the remaining 30 percent of mortgage originations.
http://www.reuters.com/article/bondsNews/idUSN2326950620070423?pageNumber=1
Bakersfield March 2007 numbers:
http://bakersfieldbubble.blogspot.com
If saving is so important, why doesn’t he declare a moratorium on the War on Savers? Negative national savings rates are not sustainable, anyway.
============================================================
More Business news
Fed Chairman Bernanke calls on young people to learn more about financial responsibility
By Jeannine Aversa
ASSOCIATED PRESS
8:10 a.m. April 25, 2007
WASHINGTON – It might be a hard sell to kids daydreaming about prom, summer vacation or hanging with friends, but Federal Reserve Chairman Ben Bernanke tried anyway: Take time to learn how to handle money.
“Although financial matters are probably not at the front of your minds today, the day will come when you will be responsible for managing your own or your family’s budget or when you find that you need to save to get the things you want – a college education, a new car or even your own home,” Bernanke said Wednesday in remarks to students at Woodrow Wilson Senior High School.
http://www.signonsandiego.com/news/business/20070425-0810-bernanke.html
April 24, 2007
“Is It Too Late to Get Out?”
Housing Bubble Boondoggle
By MIKE WHITNEY
Treasury Secretary Henry Paulson delivered an upbeat assessment of the slumping real estate market on Friday saying, “All the signs I look at” show “the housing market is at or near the bottom.”
Baloney.
Paulson added that the meltdown in subprime mortages was not a “serious problem. I think it’s going to be largely contained.”
Wrong again.
Paulson knows full well that the housing market is headed for a crash and probably won’t bounce back for the next 4 or 5 years. That’s why Congress is slapping together a bailout package that will keep struggling homeowners out of foreclosure. If defaults keep skyrocketing at the present rate they are liable to bring the whole economy down in a heap.
Last week, the Senate convened the Joint Economic Committee, chaired by Senator Charles Schumer. The committee’s job is to develop a strategy to keep delinquent subprime mortgage holders in their homes. It may look like the congress is looking out for the little guy, but that’s not the case. As Schumer noted, “The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act.”
Schumer’s right. The repercussions of millions of homeowners defaulting on their loans could be a major hit for Wall Street and the banking sector. That’s what Schumer is worried about—not the plight of over-leveraged homeowners.
http://www.counterpunch.org/whitney04242007.html
Thanks for sharing GS.
Anybody catch South Bay LA congregessman Ted Lieu’s proposal for FB’s?
He wants to use Cal state bonds to bail out FBs.
And its made it through one committee already.
Big story on NPR yesterday and below:
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2007/04/24/BUGC8PE0FA1.DTL&type=business
I think I’ll buy stocks in luxury goods manufacturers. Why should financially challenged people be denied the pleasure of driving Ferrari’s or Porsche? Why can’t everybody have caviar and champagne for lunch every day?
I’ve got my eyes on a Lear-Jet.
We need more state bonds to finance the lifestyle we all deserve, after all: other peoples money is free money.
This site is new to me, might be old hat to others, but yesterday someone asked about the prices for resale of the same house:
http://tinyurl.com/3cz3kg
Click on “April 24, Historical Values”, it opens a spreadsheet. They cover some of the major bubble areas until Feb. ‘07.
Shocking words on Realty Times:
http://realtytimes.com/rtcpages/20070425_noturnaround.htm
“‘No Signs Of Turnaround’ In Home Price Decline
by Broderick Perkins
There’s plenty of year left, but early predictions that the housing market would rebound in 2007 have so far fallen flat as more buyers bail and sellers wail.
Existing home sales appeared to roar in like a lion early this year, up 2.7 percent in January and then 3.4 percent in February, compared to 2006. But by spring, sales bleated a lamb-like retreat, shearing home prices in the process.”
“In the latest report, thirteen of 20 large metro areas revealed a declining price trend and composites of 10 and 20 metros both reveal declining price trends.”
No TV at home. Sitting in an airport under one. Every other commercial is for Gold investment. I no longer feel contrary. Must be time to sell.
exactly
A thought about a bailout. The mechanism for a massive taxpayer bailout is allready in place and comitted. Many many mortgages are gauranteed by the federeal government and government backed agencies, and by state agencies. Did you know there is a california housing authority that gives low income home buyers a subsidiezed loan. If the loan defaults, guess who is going to make the bank whole? There is also the FHA, loans for veterans, GNMA, FNMA, FMC, all backed by the federal government. If their loans have high default rates, guess who is going to cover their bondholders?
My point is that new taxpayer bailouts arent needed, taxpaters are all ready comitted to back up lots and lots of the existing loans.
Here is another scam. Inflation? What inflation?
http://biz.yahoo.com/brn/070425/20137.html?.v=1
Matt, I-bonds and COLAs on SSI and welfare payments are the reason the CPI must be manipulated downward. The nation simply cannot afford to report the real numbers. You’re better off ladderring a bunch of 6-month and 1-year CDs right now than going with any sort of long-term bond, and I-bonds are the worst.
You got it! I woudn’t touch any bonds. The point of the I-bond was to protect against inflation. Too bad for the folks who bought into it.
Economic Armageddon Is Coming
By Joel S. Hirschhorn
04/24/07 “ICH” — — Stop being a compliant consumer. Face the ugly truth. Don’t get fooled by the stock market. Accept the need for the mistreated middle class to become the revolutionary class. The British military establishment’s most prestigious think tank sees what too few over-consuming Americans are willing to anticipate. Unjustified and mounting economic inequality is planting the seeds for global economic conflict.
http://www.informationclearinghouse.info/article17587.htm
what is their track record of forecasting 28 years into the future? Did their guesses from 28 years ago come true?
http://biz.yahoo.com/prnews/070425/law082.html?.v=95
The stock market continues to skyrocket. What happened to the housing market bringing down the stock market? Maybe I should have kept my $$$ in the stock market.
BlackRock chief warns on leveraged loans
By Richard Beales and Chrystia Freeland in New York
Published: April 25 2007 22:07 | Last updated: April 25 2007 22:07
Lenders to highly indebted companies are making many of the same mistakes that undermined the US subprime mortgage market, suggesting that leveraged loans will become “tomorrow’s problem”, says the chief executive of BlackRock, the $1,000bn-plus fund management group.
The comments from Larry Fink highlight the rising debt levels, falling risk premiums and loosening standards in loans made to leveraged buy-out vehicles and other junk-rated groups.
“If I was the chairman of the Federal Reserve, I’d be paying more attention to that because, to me, this is going to be tomorrow’s problem,” Mr Fink said in an interview with the Financial Times. “Standards have deteriorated to levels that we never even dreamed that we would see.”
http://www.ft.com/cms/s/2604e61e-f369-11db-9845-000b5df10621.html
Is just me to notice that we are moving from one bubble to the next. when last stock market bubble burst, real estate bubble started now that real estate bubble is about to burst, stock market bubble starting again. it took 7 years for stocks to go from 11,000 to 12,000 and in just 7 months to go from 12,000 to 13,000!!
http://buildingfrenzy.smugmug.com/gallery/2725172#144585905
this is in and around carlsbad california. its still a building frenzy in sd
excellent charts.
http://www.financialsense.com/Market/wrapup.htm