Home Prices To Fall: NAR
Some housing bubble news from Wall Street and Washington. CNN Money, “Home prices are expected to finish down for the year, the National Association of Realtors said Tuesday, which would mark the first drop since the group started tracking values in 1968. According to Lawrence Yun, a senior economist for NAR, speculative investing in real estate, which contributed to abnormal price growth for several years, has all but disappeared in the present market.”
“‘Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time,’ Yun said.”
From Reuters. “The group, which has cut sales and price forecasts for several months in a row, to reflect deteriorating market conditions, said the median price for an existing home would slip 1.0 percent in 2007 to 219,800 this year. Last month, the group predicted a 0.7 percent price decline, its first nearly 40 years of record-keeping.”
From MarketWatch. “‘If it weren’t for a favorable economic backdrop, housing would probably have a hard landing,’ said Lawrence Yun, senior economist for the NAR. ‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.’”
“For nearly a decade, investors were rushing to real estate. Federal tax deductions and housing programs also fueled the boom.”
“Even established lenders of high-quality mortgages lost their compass and chased bad business as competition increased, said Angelo Mozilo, CEO of the largest U.S. mortgage lender, Countrywide Financial Corp.”
“Mozilo said he saw the industry’s long-established standards come unglued in the face of new competition. ‘I’ve been doing this for 54 years,’ Mozilo recently said. For many years, he said, ’standards never changed: verification of employment, verification of deposit, credit report.’”
“But then new players came in with aggressive lending policies. Names like Ameriquest, New Century, NovaStar Financial and Ownit Mortgage Solutions set a new, lowered standard, changing the rules of the game, Mozilo said.”
“‘Traditional lenders such as ourselves looked around and said, ‘Well, maybe there’s a (new) paradigm here. Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.”
“Bill Dallas, CEO of Ownit, the nation’s 20th-largest subprime lender in 2006, said he saw the handwriting on the wall in April 2005 after he overheard a rival account executive tell a customer how to get a better rate by committing occupancy or income fraud.”
“‘I just went, ‘We are hosed as an industry,’ Dallas said. ‘I told our guys, ‘We’re the problem.’”
“A former CEO at a failed subprime lender, who asked to remain anonymous as his company unwinds, said as long as Wall Street was willing to buy the risky loans and package them into securities, the market was going to create them.”
“‘You act very differently when you know somebody is willing to buy the loans,’ the executive said.”
The Washington Post. “Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!”
“‘You cut my [expletive] deal!’ she recalls one man yelling at her. ‘You can’t do that.’ Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said.”
“‘The stress in that place was ungodly. It was like selling your soul,’ said Hardiman, who worked for New Century in 2004 and 2005. ‘There was instant notification to everyone as soon as you rejected a loan. And you dreaded doing it because you paid for it. Two guys would come with a bat, and they were all [ticked] off because you cut their deals.’”
“The head of a large Wall Street bank’s mortgage group contended that his firm regularly lost out on New Century’s business because its due diligence process was stringent and it had been returning a high number of loans. New Century wanted the bank to ease its standards, and the issue became a source of friction between the companies.”
“‘The entire industry, over time, became more lax,’ he said, speaking on condition of anonymity because he was not authorized to talk about his company’s inner workings. ‘The more [loans] you accepted, the better relationship and the better price you would have. The name of the game was definitely volume.’”
“A veteran appraiser who worked in Pearl River, N.Y., said…he quickly discovered that the place was a pressure cooker. He said he often was encouraged ‘to make loans work.’ His boss generally supported him when he wanted to reject a questionable loan, he said. But other office managers ‘were all about the numbers just so they got their bonuses.”
“Still, the veteran appraiser didn’t blame them. ‘They were pressured to make loans, that’s how you do business,’ said the man. ‘They were trying to do more and more business. That’s essentially what Wall Street wanted.’”
The New York Times. “Ownit filed for bankruptcy protection late last year. Gone are the lavish parties, the extravagant trips and the executive salaries and sales commissions that routinely topped a million dollars.”
“What used to be a profitable partnership between subprime lenders and Wall Street banks has now degenerated into a cross-country blame game. Lenders in California say big investment banks encouraged and pushed them to make risky loans. On Wall Street, bank executives say mortgage lenders became sloppy and did not pay enough attention to fraud.”
“William D. Dallas, the founder and CEO of Ownit, acknowledges loosening lending standards but says he did so reluctantly and under pressure from his investors, particularly Merrill Lynch, which wanted more loans to package into lucrative securities.”
“He recalls being asked to make more ’stated income’ loans, in which lenders do not verify the information provided by borrowers and brokers with tax returns, pay stubs or other documentation. The message, he said, was simple: You are leaving money on the table, do more of them.”
“Mr. Dallas, who has been in the mortgage business for more than 25 years, said he disagreed, but complied. ‘If I can sell it at a profit,’ he said, ‘why would I not do it?’”
“In retrospect, it was exactly the wrong time to ease credit: interest rates were rising and home prices were cresting after a sharp four-year rally. Many in the industry also suspected that speculation and fraud were rampant in many hot real estate markets on the coasts and in the Southwest.”
The Associated Press. “Irwin Financial Corp. said Monday its first-quarter loss widened as its mortgage business felt the effects of the housing sector slump.”
“The company said it did not sell some loans on the market because the prices offered were too low after buyers became more risk averse amid increased defaults and a slump on the housing market.”
From Bloomberg. “U.S. homeowners entered the foreclosure process in April at more than double the rate of a year ago as tightening credit made it more difficult to refinance and a swelling supply of unsold homes made it tough to sell.”
“The number of homeowners in all three phases of foreclosure rose last month over the same period a year ago, according to Foreclosures.com. Those receiving their first notice of foreclosure from a bank climbed 127 percent, those with homes going up for sale by auction jumped 164 percent and those whose homes were repossessed by banks went up 40 percent.”
“According to Credit Suisse, 82 percent of subprime mortgages have an adjustable rate provision, meaning that payments start with low or ‘teaser’ rates and adjust to a higher rate after a set number of years.”
“The subprime mortgage industry rushed so many buyers into the housing market that it opened an ownership gap, pulling in people who likely would have bought a home only years later, and that gap will stall a recovery in the sector.”
“Besides favorable terms, many borrowers found low, low interest rates irresistible. Mortgage rates on 30-year loans set new records almost every week through early 2003.”
“‘That did pull housing demand from the future into the present,’ said David Seiders, chief economist with the National Association of Home Builders. ‘When all that demand supply pressure started to push prices up, the whole thing died under its own weight.’”
Just when you think it can’t get any more bizarre, from the ‘Frenzy’ article:
‘ Others in the industry were told to model themselves after Alec Baldwin’s hard-as-nails character in the movie ‘Glengarry Glen Ross.’ The 1992 film depicts desperate real estate salesmen trying to unload undesirable properties while the home office threatens their jobs.’
‘Thomas Marano, global head of mortgages and asset-backed securities at Bear Stearns Cos. Inc., said he never heard about any subprime lenders using ‘Glengarry Glen Ross’ for training.’
‘If I knew a company was doing that, I would cut them off,’ said Marano, whose company was the No. 1 U.S. underwriter of mortgage-backed securities in 2006.’
Welcome to the United States of Glengarry Glen Ross…
You see this watch? This watch cost more than you make in a year!
Beak out the brass balls
Break out the brass balls
Put that f’ng coffee down. Coffee is for closers!
That’s one of the funniest parts of the movie…
I haven’t seen the movie but please tell me Alex B’s character dies in a ditch at some point.
I think he practiced for this scene on his daughter.
Who am I??? Who AM I??? You came here tonight in a Hyundai. I came in an $80,000 BMW. THAT’S who I am.
Great movie, great actors chewing up the scenery.
Yeah, David Mamet is a great writer. Interesting that the movie came out in 1992 which would have been when the CA
real estate market was tanking the last time. I wonder if that was planned?
Thanks, I needed that laugh this morning.
Realtors are going to be more like Jack Lemmon’s character, a pathetic ball of sniveling human waste.
Funny, I was thinking about that movie the other day. God, how I despise real estate agents.
They probably despise you just as bad as you despise them. I particularly don’t care for buyers or sellers. Both are idiots.
Being despised by a realtor is like being despised by a child molester. I don’t give a damn what some POS thinks.
LOL as long as you understand the feelings mutual, you’ll go far
I just hope they come towards me with a baseball bat, as in the story commented on below.
“Go ahead, a$$hole, make my day”.
Whacking people with baseball bats seems more like ‘Capone’ than Glengarry Glen Ross.
My God, I just read that Washington Post story about the salesmen with the baseball bat. If I was that woman’s husband that salesman would have that bat planted up his ass till it came out his cranium. WTF?
lolol
get out of here!
“Here’s Johnny!” (me holding a freshly uprooted Joshua tree)
I was going to say, if someone came at me or someone I love with a baseball bat, they’d be carried out feet-first with a largeish hole in their chest. What’s their survivor’s defense? “Oh, they routinely terrorized the office with baseball bats.”
http://www.youtube.com/watch?v=IB6XEAllPiI
What to do the next time somebody threatens you with a baseball bat - The Warriors vs. The Baseball Furies (from the 1979 cult classic THE WARRIORS).
Clearview, agreed.
What is up with that woman? Use the camera part of your cell phone, record the threat, and hire a lawyer.Forget the year-end bonuses–you could make more in litigation.
Willing accomplices….
Exactly.
I just watched that scene again on Youtube this weekend. I can attest that is pretty close to reality in some places in the mortgage biz. Where I used to work, Always Be Closing was a sign hung up on the wall. Call the lead no fewer than 4 times (although not all in one day, how is that not stalking?). Sales meetings were something to be dreaded. With that type of high pressure atmosphere, it’s no surprise the mortgage industry is in the shape it’s in.
http://www.youtube.com/watch?v=TROhlThs9qY
“Account executive Mark Bomchill said he was given his role model soon after arriving at Ameriquest Mortgage. He was Jim Young, the sleazy salesman played by Ben Affleck in “Boiler Room,” a movie about a stock brokerage that scams investors by getting them to invest in fake companies.
Bomchill watched the movie as part of training at the Plymouth, Minnesota, branch….
LOL! The two most quoted Maven movies. I told you so….
If you went to a restaurant and asked the special of the day and they tried to sell you a cut of subprime beef, would most of the country be “ok” with it?
The answer is yes, because most restaurants serve subprime beef. What’s your point?
Are you sure it’s beef?
With it’s feed gluten based from China.
Yes, but they don’t advertise it as subprime like the mortgage industry does.
Third prize is you’re fired!
When will we ever learn that this glengarry glen, ‘burn baby burn’ bulls**t is just straight up, junkie/addict madness -the kind that incinerates companies, its customers, and a whole lot of innocent bysanders.
Unless houses are equipted with a rather large parachute (i.e. that rarity of rarities, the paid off house), soft landings are strictly wishful thinking…
The worm has turned, once again.
As if the wishful musings of an economist for NAR carried any weight. If Yun is really lucky, he will predict the year’s decline by Dec. 31st.
I really need to hear more about this beating on desks with baseball bats stuff. That was a common occurrence? Unreal.
No kidding. That’s intimidation ‘Al Capone’ style. Those guys should be behind bars for implicit threats of physical assault.
Indeed, and information of keen interest to anyone who was considering buying used office furniture at the bankruptcy auction.
would slip 1.0 percent in 2007 to 219,800 this year
already in the bag ,yo
Lawrence Yun is being disingenuous here.
Because of the various masking effects, any nominal decline in median price is IMHO past a “hard landing” and into crash territory.
I stand by the scale I posted last year, we just haven’t seen things play out yet.
-1% nominal is at least -4% real. Five years of that and you’re down about 18%. Ouch.
Yes, but more to the point nominal declines hurt where real declines don’t when you’re leveraged, because loan balances are in nominal dollars.
It’s true that inflation favors debtors in that they repay with inflated dollars. However, holding a deflating asset in an inflationary world is not the path to wealth.
Could you repost that scale?
Lending is a little like the stock market. When it feels like a sure thing, it’s not.
I agree. When things look too good to be true time to bail.Growth in the lending industry was simply unsustainable.
What will happen to the US economy when people run out of housing atm money?I think a lot of people are paying bills from their home still.Real estate has been the economy for the past 5 years.Will take some time for it to show up.
Lending has a few more clues — when it seems like a sure thing and it has integer multiples of the 10yr note in yield — its most certainly NOT.
Basically, what is generally known is not worth knowing from an investment standpoint.
That’s the correct answer to the incessant “why are the homebuilders stocks up/down today, doesn’t anyone read the news?” questions.
Right. Lots of people short a stock, so lots of others bid them up just to make the shorts buy back at a higher price.
If you’re playing the main stream media news, then someone else is playing you.
I believe it was Joe Kennedy who said he knew it was time to sell a stock when his shoe shine boy gave him a tip to buy it.
Or the Starbucks waiter in Leesburg that owned 5 condos.
(remember reading the article in 2005, but google hasn’t pulled it up).
I received a notice from a too big to fail Korporate Financial Brobdinagian in regards to precious metals they are holding for some of you…
hidden away towards the end of the notice was the following:
SIPC Insurance Not Applicable
“The Securities Investor Protection Corporation (”SIPC”) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals or other commodities”
Tax bite be damned, liberate your physical holdings from these clowns, NOW!
Wow - that’s an impressive bit of text. “If we don’t actually have the assets on hand that you paid for, too damn bad.”
That’s what safety deposit boxes are for.
p.s.:
For you Stephen Roach, a Gentleman I have a lot of respect for~
You ought to be ASHAMED of the company you keep.
The Housing market and REIC reminds me of another famous Jack Lemon movie now…”The China Syndrome”
MELTDOWN…Head for th Hills !
“‘Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time,’ Yun said.”
Hmmm. Think that’s why sales in so many markets are down double digits? How many people will be willing (or able) to pay these prices, carry these huge mortgage/taxes/maintenance costs, for a “modest” gain over the long term?
And how many FB’s are in homes they can even “afford” over the long term?
Put a fork in it.
The hell they are.
With all the NAR/RE shills crying bottom and how prices are going to start rising again people think ‘07 is just a short pause before another runup in prices.
I have friends in the SF still talking about how prices never go down in the Bay Area even as article after article is being written about falling prices in the Bay Area.
Heck the SF Chronicle ran a story about short sales/foreclosures at One Rincon Hill, the ‘must have’ RE development in SF, and the fact that offers on short sales are lost in the shuffle because of the increase in volume of foreclosure activity and the lack of staff to handle it.
from the article
http://sfgate.com/CGI-BIN/ARTICLE.CGI?FILE=/GATE/ARCHIVE/2007/05/04/CAROLLLOYD.DTL
“the increase in short sales has led to a problem. Many lenders are so busy that they don’t respond to short-sale offers.”
yes, in ‘bubbleproof’ SF the short sales volume is so high lenders are being overwhelmed with them.
Your link didn’t work, but are you sure those were short sales at One Rincon Hill, or just “a condo on Rincon Hill”.
I’m very interested, because as I posted about a month back, my best friend just became a FB by buying on the 47th floor of One Rincon Hill. It was “the last condo available” of course…
they fell for everything, hook line and sinker.
it also wouldn’t make sense to have a foreclosure at One Rincon Hill yet, because it isn’t yet built. (most people don’t have to pay on their mortgage until the building is built I would assume)
yes it was One Rincon Hill
http://www.socketsite.com/archives/2007/05/the_socketsite_scoop_on_that_rincon_hill_short_sale.html#comments
whooops I take that back … didn’t read close enough it was in the ‘Bridgeview’
“I have friends in the SF still talking about how prices never go down in the Bay Area even as article after article is being written about falling prices in the Bay Area.”
******
Your friends have fallen for the myth created and propagated by the local REIC cheerleaders.
What’s a decade between rising home prices?
See chart; the peak in 1990 was not exceeded until 2000 in San Francisco (and how long would it have been without dotcom funny money in the late 90’s?):
http://mysite.verizon.net/vodkajim/housingbubble/san_francisco.html
Or:
http://tinyurl.com/34lmyl
The dam has broken.
When NAR economists such as Yun and Lereah say that housing is in recession, it’s impossible to deny that this was a bubble. The fact that they are making public predictions of housing declines means they must know from their own private data that the market is much worse than publicly reported. I assume that the NAR people are always more positive than reality, so if even they are slightly negative on housing, it must truly be a disaster in waiting.
Right on. And all the links are about industry insiders coming clean on the dynamic. Brokers were pressured to make loans by Wall Street, and basically threw out any ethical standards. This attracted more and more sharks who were after the huge bucks.
The party is well and truly over, and it’s a bit like waking up at 3 AM after a good night out, and you already feel like sh-t, knowing it will be worse in the morning. Too late to avoid the thumping headache. Or as the Brits say - your mouth tastes like the bottom of a parrot’s cage.
At least some people (albeit anonymously) are now admitting that.
“The fact that they are making public predictions of housing declines means they must know from their own private data that the market is much worse than publicly reported”
Great observation STL.
If there was anyway of denying a significant decline in the future wouldn’t Yun have spun it somehow? Even saying things were “uncertain” would have bought them time and been sufficient to keep deeper scrutiny at bay.
The data they have must be horrendous and crystal clear for them to admit housing is in decline. Look for facts coming out that NAR couldn’t control to prove this point shortly.
“The fact that they are making public predictions of housing declines means they must know from their own private data that the market is much worse than publicly reported.”
Bingo. When they publicly say 1% decline, after telling us until very recently that “real estate always goes up,” we should assume the upward bias in their estimates remains, and shade our subjective estimates down to something more like 10% decline over the next year. (It is different where I live, as “all real estate is local,” but I see some condos going for 25% below what they sold for in 2005…)
It might also be worth meditating on the trajectory of some of these graphs (esp. the third one down, entitled “Home-Price Appreciation Slowing Sharply”…).
http://dallasfed.org/data/data/Housing-charts.pdf
Is it safe to conclude from these graphs that there are dissenting views in the Fed on the issue of whether subprime is “contained?”
There are some wicked scary numbers in there. 25% using piggyback loans. 35% using interest-only. 10% using negative amortization.
This is so huge… 2 million sub-prime my arse. That is jsut what is going to push prices down the first 10%. Then the rest of these people will realize they are now upside down and just walk away.
The threat “but you won’t be able to buy again” will become a joke once foreclosures starting hitting in the tens of millions. If we don’t sell to people that have had a foreclosure, then NO ONE will be able to buy all these empty homes.
Ugh… this is so ugly for the lenders.
The Bernanke Fed seems to think that they can just print their way out, but I am getting a hint that the Dallas Fed may have growing concerns that the liquidity blast may turn into the financial equivalent of a tornado that wipes out everything in its path…
http://news.nationalgeographic.com/news/2007/05/070508-tornado-kansas.html
Maybe someone has mentioned this already, but I think getting rid of Lereah and publicly talking about house price declines for the first time is the initial battle in the NAR’s campaign to shore up their credibility - before things get worse.
Otherwise, the organization would have lost all respect by the end of 2008, after the bigger gaps down and the onset of reset hell. They are going to need to have “some answers” at many different levels (Congressional hearings for one, eventually).
Some leaders on the inside or rank and file members have said “enough with the shenanigans”, it’s time to talk a little straighter with the public and press at large. One wonders if this will carry over to the national ad campaigns. Or with regard to the CAR’s “happy talk” and jingles that are all over the airwaves these days.
It’s a simple turn in strategy, really.
Too late. Anyone with a pulse will take a long time to forget the NAR’s role in the real estate crash.
Plausible deniability.
Push people to make as many high risk loans as possible. Once they’re making every legal laon possible, you push even more. I don’t care how you do it, just get more loans written.
Then, when it pops…. Oh, I didn’t know they were bending the rules or breaking the law or pushing “that” hard.
Please. Everyone knew what was going on!
The realtors knew they were putting people in houses they could not afford. The brokers knew. The appraisers knew, The lenders knew.
Get the cash while the getting is good, then get out and leave somone else behind to clean up the mess.
I’m sure the politicians pushing the FHA reform bill( AKA: “Here are the keys to the U.S. Treasury. Bankers, take what you need.”) will also claim they did not know that hundreds of billions of dollars in loss was a completely unforseen consequence of their changes.
Wait, I double negaived that…
try this.
“will also claim that hundreds of billions of dollars in loss was a completely unforseen consequence of their changes.”
As I have said before , I want to see the memo from Wall Street that said ,” Give us every fraudulent loan you can process and inflate the appraisals and increase the risk of the loans we buy “.
”But the new players came in with agressive lending policies.”
Oh now were calling massive lending fraud “agressive lending policies “.
“” You act very differently when you know somebody is willing to buy these loans, the executive said .”‘
You mean a criminal acts different when they know someone else is going to pick up the tab for their crimes.
The rules of the game where not changed as the quotes by these people in this article suggest .It’s simply that the ability to commit crimes of mortgage fraud by commissioned salespeople and their backers became easy in a easy money real estate mania where nobody was checking .
Salespeople bashing bats around if one did not approve a loan is more proof of how extensive the crime levels got on the loan origination levels of these liar loans . Wonder why no employees called the police or the FBI . Apparently employees knew that management in loan offices were not going to address the crimes because they wanted their bonus . Make the loan or you get the bat . Wow .
I think it would be really neat if people who say have a termianl cancer, but can still function, take it upon themselves to stalk and kill people like the managers with the baseball bat. Wouldn’t that be great. Decent people doing some worthwhile with their last moments on earth.
It’s all good in Dallas. This is from the Morning Snooze:
Credit-counseling firms that haven’t yet seen a surge of subprime mortgage holders seeking help expect that to change.
“We’re going to see a lot more folks come in the door from the subprime area because they will be seeking refuge,” said Howard Dvorkin, founder of Consolidated Credit Counseling Services. “They don’t have the cash. These folks thought they bought a house and it would keep going up, up, up, and they would be able to refinance in the future, but that’s not been the case.”
At Consumer Credit Counseling Service of Greater Dallas, counselors are seeing two groups of debt-ridden homeowners, said Gail Cunningham, vice president of business relations.
“The first one is who says, ‘My home is my largest investment, it’s my greatest asset, it is my best hope of building wealth, and I will do what it takes to make my mortgage payment,’ and they neglect other bills,” she said.
The second type is the first-time homeowner who got into a subprime mortgage.
“He lives off of credit. He charges his groceries, he charges his medicine, gas,” Ms. Cunningham said. “He’s of the mentality that he cannot risk his lines of credit being shut down because he knows he’s relying on credit to put food on the table tonight, so he’s sacrificing his mortgage payment.”
Thankfully, this type of debtor isn’t the norm.
“He lives off of credit. He charges his groceries, he charges his medicine, gas,” Ms. Cunningham said.
It’s amazing how many people live like this. There is a lot of discussion on this board about credit card debt. If you look at statistics, credit card debt isn’t just limited to the lower middle class (Joe six-pack trying to make it to payday or paying for car repairs). In fact, the greatest amount of debt is carried by households making more than $100K. These people should have sufficient income to cover the basics but choose instead to charge everything from clothes at Banana Republic to groceries at Whole Foods. And their only meaningful asset is their house which they keep tapping for equity.
When you are in this income bracket, shopping at BR and WF doesn’t seem like splurging, it just seems like…normal.
To this day I cannot understand why Whole Foods has not been brought up on sodomy charges.
I like Whole Foods. Can do without Banana Republic, though.
In Portland, OR they call it “Whole Paycheck”; after buying your groceries there you’ve got nothing left…practically.
In Portland, OR they call it “Whole Paycheck”
Here in CO, too.
because no one realizes the $100k of today only has the purchasing power of the $60k of not too long ago
agree
late 90s and early 2000s, I use to think (I was making bet 30-40k) wow, what do people making 100k do with all that money!!silly me.
once I started making 100k, I admit it was better but there was no wow factor, more taxes were being taken, gas –>up, house–> up up up up and UP.
but the way things are going soon that 30-40k will be good again assuming we get DEFLATION and can keep that job.
And, if you move into a bubble area to make the 100K or so, what you find is that you actually have more stress and that you really aren’t doing any better.
I’m guessing that most people who have trouble living on a six-figure salary were living as if they had that kind of paycheck long before they actually did. $100k is a LOT of money, but it doesn’t seem like it if it’s being nibbled away by credit card interest on bills wracked up a long time ago.
“We’re going to see a lot more folks come in the door from the subprime area…”
Txchick, what part of Dallas is considered the “subprime area?” LOL
Everything within the city limits.
Or you could be charging everything on CC for the cashback and paying them off every month.
I charge everything too - groceries, gas, you name it. Difference is I pay off the bill in total at the end of every month.
I used to do this but ended up going to cash. The frequent-flyer miles weren’t worth it. Plus, I hated being a month behind and having to deduct the credit card bill to get the true balance in my account. Now, I use the credit card only for expenses that are employer-reimbursed because it makes it easy to track.
BTW, a recent study confirmed that the typical shopper will spend approximately 10% more when using a credit card than when using cash. So, I figure the cash back thing vs. using real cash up-front is a wash. I’ll stick with the green.
The key is not to be a ‘typical’ shopper. I also put a lot of small stuff on credit cards and pay them off 100% of the time. I average about 3% back (or $500+ per year) in cash, awards, and gift cards. The convenience of not having to carry and manage cash/change, coupled with the rewards, is worth the possible unconscious increase in spending. And hey, even though I’m a hardcore saver, it’s fun to spend what I do spend.
Find a card with 5% cash back on gas–that’s not a kind of spending you’ll change on a whim. I’m worried my 3% restaurant card is leading to more eating out, but we enjoy that anyway… You can keep the air miles cards or anything with an annual fee though.
I didn’t mention this before, but another reason I prefer cash is privacy. I hate it that every small store I frequent seems to think that it is their right to my personal information. My phone number and address are none of their business. Furthermore, it disturbs me to no end that they turn around and sell that information along with my purchasing history to marketing firms, who will use it to create targeted advertising aimed at convincing me to spend more of my money on junk I don’t need. I’ll stick with cash, thank you. I don’t even use checks unless absolutely necessary.
redhead -
I try to limit my exposure to such things, too.
My thought is that if my information, opinions, or ideas as a consumer or otherwise is that valuable, then someone (company, organization, etc.) can pay me for it.
So I try to never give out anything like that for free.
Here is the link for the DMN story.
Oh, and I’m sure this doesn’t make the local whores very happy either.
Home sales fail to spring ahead
Pre-owned market appears destined to be slower than last year
08:23 AM CDT on Tuesday, May 8, 2007
By STEVE BROWN / The Dallas Morning News
stevebrown@dallasnews.com
The slowdown in North Texas home sales continued in April, with pre-owned home purchases down 6 percent from a year earlier.
Even more telling, April’s sales lagged March – at a time of year when home sales usually rise from month to month.
Real estate agents sold 7,254 pre-owned single-family homes last month, compared with 7,961 sales in March, according to data released Monday by the North Texas Real Estate Information System and Texas A&M University’s Real Estate Center.
Housing analysts who have been watching for the usual spring jump in home sales are getting discouraged with the statistics.
“At this point, it’s probably safe to say that 2007 will be down from 2006,” said Dr. James Gaines, an economist with Texas A&M’s Real Estate Center.
“I had been waffling on this statement, waiting to see what happens this spring during the busy season … the picture now appears to indicate a slower market than last year and prices will do well to simply maintain.”
Prices did pretty well in April, with the median price of North Texas homes rising 5 percent to $154,000.
But the overall hike in the median sales price may result more from slower sales of low-priced homes than from an increase in home values.
Tighter mortgage lending standards have made it tougher for some first-time buyers to get into the market.
At the end of April, almost 49,000 single-family homes were listed for sale in North Texas – up 10 percent from a year ago.
At current sales rates, that represents about a 7.5-month supply.
I need to pull out that email I sent to Steve Brown last year criticizing all his cheerleading RE articles. He replied that I was entitle to my opinion. I can’t wait until they finally get all these downtown condos built for no one to move in. And, to think, they’re getting ready to build a homeless center around the block from me, when if they hold off a year, they can just move them into a luxury condo tower in the middle of the Central Business District.
“Home prices are expected to finish down for the year, the National Association of Realtors said Tuesday, which would mark the first drop since the group started tracking values in 1968.”
The predicted drop is 1%. Last month, the NAR predicted a drop of .7%. Let’s see what they have to say in June.
Goes on to say … “‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later”
Prices recovering? In what universe. I suppose the thinking is that the real estate industry knows that for now, no one will budge much on the asking price side, so perhaps they can babboozle a few more victims into overpaying and keep sales up.
At the end of the day, no one wants to buy when they can’t see the bottom. And that’s what is behind all the stories with all these Realtors and economists calmly telling us about how “the market will dip slightly in 2007 and recover nicely in 2008″ or whatever. All they are trying to do is make sure that the average, ill-informed consumer can justify buying. Consumer to self: “oh, I can afford it if the market drops a few percent, real estate always goes up in the long run.” Wonder what the calculation would be if they suspected it might drop 20 to 30% over five years?
I’m guessing the marketing department got ahold of them.
Never use significant figures if you want to show stability. If you get in the habit of saying 0.7%, then you need to say 0.8%, and 0.9%. You’re better off just saying “approximately 1%”, and you can keep saying it until you can’t (0.6% to 1.4%).
The appearance of stability is their friend, I’m guessing it’ll be -1% until it becomes -2% toward the end of the year. Then again, I could be wrong. They’re not very bright.
TxChick,
Are you following the movement in CFC today? Both the underlying and the puts? Unreal. SEC better get on this one. Something fishy about CFC.
Actually, I was reading about the HK couple who made $8M on Dow Jones before the SEC caught them. This is so much like 1987 now, it’s incredible.
I just bailed on my Oct 35 CFC puts with a pretty good profit after the stock moved up $2. LOL. Thank goodness volatility went through the roof! What’s up with CFC?
Betting its more takeover talk with ML. I think Merrill might be in real trouble and this is all part of some cover-up scheme. All seems extremely fishy to me, especially with leather-face dumping shares like a man posessed.
Actually there was sevral articles rcently by Fleckenstein ,and others on the similarities of the 99′ tech top, Japan crash ,and 1927 mkts… All had eerily similar numbers. Just my gut, but sure seems like we have reach the top of the parabola…Now, change in direction ,and speed, but hey, I thought the top was last year…Anyway I’m out on the sidelines til?
The psychology today sure seems like that of a bubble top. But I think the epicenter is China this time. Compare China stocks 2005 - 2007 to U.S. stocks 1921 - 1929. The similarity is spooky (except in China it’s happening faster). I’ve seen China compared to 1987 as well, but to my eyes the 1929 Dow comparison is a better fit. Don’t forget what that when China dropped 9% in February, the whole world tanked with it. There’s some scary leverage operating out there.
http://finance.yahoo.com/q/bc?s=000001.SS&t=my&l=on&z=m&q=l&c=
http://www.stock-market-crash.net/1929.htm
‘“The first one is who says, ‘My home is my largest investment, it’s my greatest asset, it is my best hope of building wealth,’
And as a nation, we’re FAR, FAR more upside down than most are willing to even think about.
“‘Traditional lenders such as ourselves looked around and said, ‘Well, maybe there’s a (new) paradigm here. Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.”
What idiot would think it’s safe to loan people hundreds of thousands of dollars without documentation or verification of income? I am not paying for thier idiocy.
It’s easy to do when it’s not your money.
And it’s not even the person who’s making the investment decision’s money.
If the pension fund advisor can make a bet based on some sound logic, like loans made to people with a FICO score of x have a default rate of y%, and this tranche is AAA rated based on that assumption, you can invest the pension’s money and keep your job.
Now that Fitch has changed their tune to say that FICO scores aren’t great indicators for default rates on exotic loans, or complex lending situations (first and second DOTs), guess what? The game is up. The advisor needs to heed that information when making investment decisions for the pension if they don’t want to get fired.
As liquidity dries up, the Fitch FICO default data for exotic loans looks worse and worse, tightening credit even further.
I think that this Fitch announcement a few weeks ago was critical to stopping the purchase of these stupid loans (and thus stopping their issuance). It’s a vicious cycle…
I heard that you don’t even need a social security number to apply for these no doc loans as well.
“Lawrence Yun, senior economist for the NAR. ‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.”
Is (Scary) Larry Yun the new David L.?
So, this morning on CNBC they were saying that the Dow’s current run is the strongest since 1939…. And yet, no talk of that having any larger implications…
I seem to recall that 1937 run not ending all that well a couple years later.
Reminds me of a stroy they pushing a couple weeks ago about how we’ve so sucessfully tamed the economy. Gone are the big surges and big recessions of the 60s, 70s…..
How can they talk about economic stabiility without mentionsing the 85% drop in the NASDAQ a 6 years ago. They 100%+ jump in home prices in so many areas ver the last few years.
Tamed the market my arse….
And now were seeing all this insider trading on mergers and such. Do the insiders see it is all coming down, and trying one last big shot at getting a chunk of the pie before it all goes sour?
It would be nice if we had a list of NAR predictions that we could compare to actual results. What was their prediction at this time last year? The year before? I’m sure that in May 2005, they were not predicting a drop for 2007.
‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.’
Aren’t these the same people who who claimed there was no bubble up until a month or two ago…. they’re all snake-oil-dealers if you ask me.
“In retrospect, it was exactly the wrong time to ease credit: interest rates were rising and home prices were cresting after a sharp four-year rally. Many in the industry also suspected that speculation and fraud were rampant in many hot real estate markets on the coasts and in the Southwest.”
Ya think?
He might want to visit a priest/iman/guru to work out a plan to have a chance for a decent eternity.
Decline into 2009!
Got popcorn?
Neil
How about this one from Reuters.
“Last month, the group predicted a 0.7 percent price decline, its first nearly 40 years of record-keeping.”
This is strange, I didn’t understand that “never have declined” really only covered 40 years. Thanks Reuters, for sharing this little nugget of critical info at the exact point when prices begin to decline.
Every time I see that tagline I have this vision of the Colisseum, with a bunch of bulls charging around Pamplona style, trampling FB’s underfoot but getting picked off by the matadors one by one.
And a bunch of bears sitting up in the bleachers with caps and shades on, watching the action and passing the popcorn around…
Ashland, Oregon:
I checked Zillow yesterday for recent sales here, and found two sales that caught my attention:
670 Siskiyou Blvd, Ashland, OR 97520 4 beds, 2.0 baths, 2,163 sq ft
Sale History:
04/20/2007: $539,000
08/26/2005: $614,000
06/29/1995: $282,000
And:
91 Nursery St, Ashland, OR 97520 3 beds, 2.0 baths, 1,112 sq ft
Sale History
04/20/2007: $415,000
01/24/2006: $468,000
05/14/2004: $300,000
Could be these were foreclosures, but in any event, it’s pretty interesting to see sellers take these kinds of losses here in Ashland already.
Ashland,
I saw the house on Nursery Street when I visited Ashland last October. It took months and months to sell, and I couldn’t figure out why they just didn’t drop the price. Now I know. They were underwater as it was.
It’s been mentioned on this blog before, that the “wishing prices” of today are largely strapped to the FB’s of yesterday.
““‘If it weren’t for a favorable economic backdrop, housing would probably have a hard landing,’ said Lawrence Yun, senior economist for the NAR. ‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.’”
Looks like Yun is being groomed to replace Liarrah.
Sales grow in the 2nd half of the year?
That would be a new trend…
Decline into 2009!
Got popcorn?
Neil
“Home prices are expected to finish down for the year, the National Association of Realtors said Tuesday”
And in other news today, Hell has officially frozen over. Pictures at eleven.
“‘If it weren’t for a favorable economic backdrop, housing would probably have a hard landing,’ said Lawrence Yun”
Give it time, Larry, give it time.
I’m still waiting to hear how the Alliance Bancorp story plays out:
http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=120856&whichpage=1
If Alt-A lenders are starting to get their wharehouse lines pulled, that means (IMHO) that a whole new phase of the credit contraction is starting.
This country is corrupt to the bone.
There’s a reason all those depression survivors were famous for keeping money under the mattress. You couldn’t trust the banks or the brokers - we may have achieved that same point again. Once the big financial institutions lose the confidence of the public and are seen as the criminals they are, the game is up for a generation.
TXchick - Yet in Austin the frenzy continues - not sure if the music has stopped here. When do you think it the slowdown will hit Austin? (I keep hearing folks say “it’s different here” etc. etc. and there is a big influx of folks to Austin which lends some demographic support).
I doubt anyone local is saying that unless they’re trying to sell to these morons from out of state.
I’m wondering about that too. A lot of our market is tied to an influx of people from California and lately, investors cashing out in Florida and Arizona. With these markets drying up, maybe it’ll slow down here as well.
The big thing is the downtown condos. I am not sure what we are going to do with all these empty buildings after the bust. Maybe UT student housing???
I’m wondering about that too. A lot of our market is tied to an influx of people from California and lately, investors cashing out in Florida and Arizona. With these markets drying up, maybe it’ll slow down here as well.
The big thing is the downtown condos. I am not sure what we are going to do with all these empty buildings after the bust. Maybe UT student housing???
looking at the inventory on the data tracker site for Austin, it has gone from 6,800 to over 9,000 in the past three weeks, which is higher than it was at all last year.
My best friend, a musician from Austin, was visiting here last weekend. Sold his farm near Nashville at the top of the market and has been happily renting since. Says everyone in his family has been pressuring him to buy a house right now, so he won’t be “homeless”! I said this was insane and he should keep renting until the market bottomed. (Thanks to you all for all the good stats I was able to cite!) I think I convinced him. I hope I did.
“Living productive reasoned lives of principle is for losers”
(paraphrasing GGR)
Not.
Ben I think this post is a classic, with realtors, appraisers, tax effects, lenders, builders, etc all capitulaing and Wall Street in denial. Stick a fork in the toast, it’s done.
“‘You cut my [expletive] deal!’ she recalls one man yelling at her. ‘You can’t do that.’ Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said.”
“‘The stress in that place was ungodly. It was like selling your soul,’ said Hardiman, who worked for New Century in 2004 and 2005. ‘There was instant notification to everyone as soon as you rejected a loan. And you dreaded doing it because you paid for it. Two guys would come with a bat, and they were all [ticked] off because you cut their deals.’”
I’ll guarantee the credibility of that story.
How low is an L/O?
I remember a ditty from my days as a frat pledge.
An L/O is so low that when he hangs his feet over the edge of a piece of toilet paper they don’t even touch the ground!!!!!!!!!!
“The company said it did not sell some loans on the market because the prices offered were too low after buyers became more risk averse amid increased defaults and a slump on the housing market.”
This is why the boom is over, and it’s not coming back next year or the year after that or the year after…
“‘Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time,’ Yun said.”
But I thought that houses always appreciated at double digit rates, and were basically ATMs for buying toys like Hummers, boats and jumbo flat screen TV’s!!
http://www.azstarnet.com/business/181635
“Home builder’s license suspended”
“A Tucson company that styled itself as a luxury homebuilder is no longer allowed to build houses because the state has suspended its contractor’s license.”
“After the home buyer filed a complaint, an inspector looked at the house and issued a corrective work order, requiring the company to perform repair on deficiencies including cracked stucco and doors that wouldn’t close correctly. Sonoran Insights made some repairs but violated a rule that requires builders to “perform work in a professional and workmanlike manner,” according to an administrative law judge’s decision.”
“A subcontractor claims Sonoran Insights owes hundred of thousands of dollars to around 20 subcontractors.”
“People who listened to us last year to be run over by bus” said the NAR.
To which David liar-yeah the cheap econimist for the NAR added “Those who bought my book last year and the year before are idiots, and I have a new book out now which is what I am saying and unless you buy that you’re a fool also”
Cool.
Cow_tipping.
Cow tipping:
http://en.wikipedia.org/wiki/Cow-tipping
When I was younger, my cousin and I tried to catch a year-old heifer. I could out run it but the heifer was ahead of me and we both were on a narrow path through a swamp. I was not going to try to tackle it because it weighed 500 lbs. Cows are tough!
Off topic, but developers want to build in Los Angeles the highest residential building west of Chicago:
http://www.latimes.com/business/la-fi-tower8may08,1,5382045.story?coll=la-headlines-business&ctrack=1&cset=true
“At 76 stories, the taller of two planned towers would dramatically alter the city’s skyline and rival in height the U.S. Bank office skyscraper. The project, named Park Fifth, also calls for a 14-story five-star hotel. It will front on the park, as does the historic Biltmore Hotel catty-cornered to the planned development.
The project joins several other massive downtown developments planned from Staples Center to Bunker Hill. The two blue-green glass condo towers would rise above the hotel, with the shorter tower reaching 43 stories.
“This is the first time in 30 years that all the stars have lined up” enough to start building Park Fifth, said Los Angeles developer David Houk, who began acquiring the land in the 1970s.”
…
“”People wonder if this is the right time” to announce a large housing development, said economist Jack Kyser of the Los Angeles County Economic Development Corp. “Downtown is overbuilt and some other projects are grinding to a halt.”
But the housing market could be thriving again by 2010, he said, and the Park Fifth gamble could pay off. A project of that size — 732 condos and 218 hotel rooms — “would pull the center of gravity downtown a little farther to the east” and boost the appeal of the blocks around long-suffering Pershing Square, Kyser said.”
And in earthquake land!
Once and for all: steel buildings do VERY WELL in earthquakes. Very, very, very well. Stone and brick crumble.
I’m not saying that it will fall. But boy oh boy, will you ever feel that quake, especially near the top.
But hi rises can fall in quakes. I know that a few 20 storey towers in Mexico City (Swedish built) fell down during the 1985 quake.
I’m glad you mentioned that, haven’t you noticed all the frenzy buyers are in the riskiest place to live… for example california the earthquake land and florida the hurricane and alligator place.
You guys will love this one!
http://tkcollier.wordpress.com/2006/05/04/powerball-winner-losing-home-in-auction/
most of those lottery winners end up in some kind of misery
it is the lottery curse. but this guy is a total schmuck
I saw him on TV a couple of weeks ago and thought that he was such an ass talking about all the crap he had in his house (ninja swords!).
That looks like a mug shot.
http://www.azcentral.com/business/articles/0507cr-garage0507-ON.html
The story is about a mall deciding not to build a parking garage, but contains this tidbit of info that we are NOT getting from Main Stream Media in stories directly about real estate.
‘ “We were looking at the possibility of developing residences as part of (the garage,) and the townhome and condo residential market has certainly slowed down in the past several months,” said Westcor executive Garrett Newland.’
Analyze this:
http://www.sddt.com/Finance/graphs/2b5aec197675c6e60c026af6ffc.png
Remember how DataQuest’s chief data analyst said that he couldn’t see anything alarming in the San Diego foreclosure/trustee-deed numbers? Well we’re now at an all-time high for April ‘07: 604, beating the 589 trustee deeds in July ‘96. And this time the peak is not just a bit of noise on the graph, if I may say so as a non-chief-data-analyst…..
PS: Just to recap, trustee deeds are people actually losing their home, not just notices of default or pre-foreclosure.
That is a tsunami of trustee deeds — there is nothing qualitatively or quantitatively comparable in the data going back to 1982, and the wave is still accelerating to the upside, nowhere near its crest…
What is the status of these homes? Are they generally vacant? And are they in the MLS, or just sitting empty waiting for some squatter to set up his meth lab operation?
Yep. Scary thing:
Previous peak SD prices: 1990
Previous peak SD trustee deeds: 1996
Current peak SD prices: 2006
Current peak SD trustee deeds: ???
At the same rates - SD’s still 5 years away from the peak of foreclosures, and the record’s already been broken!
Ouch.
I think the same’s true generally everywhere - there’s so much talk about the high rates of foreclosures now - however most people don’t realize that they ain’t seen nothin’ yet.
Thanks for reinforcing my point, which is that we have already passed the previous peak SD trustee deeds only one year after the price peak. This is exactly what I meant by “qualitatively different”, as last time there was a six-year lag between the price peak and the trustee-deed peak, and we are nowhere near the latter after having already broken the previous record in one year’s time.
Since these defaults are driven by people simply not able to afford their mortgage (no matter what their employment status), I think we could see the peak hit faster than 5-years.
Before, it is my understanding that ARMs were less of issues, but continuing difficulty in the job market was a more significant issue.
It ain’t going to be pretty, and I think it’s going to get REALLY ugly, REALLY fast this time. You only need to go as far as the Credit Suisse chart to see why. We have just now begun to see foreclosures that stem from the ARMs adjusting in 2007 (it takes time from the default to the foreclosure).
Sorry for replying to my own comment, but I think we’ll have a true sense as to how ugly this is going to get approximately 90-120 days following the “subprime implosion week” in early March. This marked the end for borrowers who needed to replace one subprime loan with another in order to stay in their house.
Happy 4th of July everyone…
Holy cow, look at the slope on that thing. It could nose over quite a bit and *still* be climbing at the same rate as all the previous major changed in the graph. Notice how the trough before it is extra deep, just like a tsunami…
And just like a tsunami, many revelers out on the beach don’t notice the water which has already receded from the shore line…
Hey Mozilo,
Did not hear a peep out of you when all this craiziness was in full rage. 3 years ago.
Lots of credibility lost in this mania.
Hey mozillo…
you sure gotta pretty tan.
Ned, out.
“2009 Housing Hell”
Burn baby burn
“Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!”
OMG, this is insanity. Reminds me of the scene from Clear and Present Danger where that Columbian drug cartel guy was swinging around a baseball bat, killing the other drug guy because he thought that guy was a snitch, right before he, the drug cartel guy, took a bullet himself.
And this “service” economy is supposed to be superior to manufacturing? We’re hosed if this is they only kind of jobs we’re going to have left.
I don’t recall anyone saying it was superior, but maybe I wasn’t paying attention. Seems to me mfg was just the payoff/sacrifice to China so that they could help us run a big deficit without significant inflation and allow the rich to make money as quickly as possible. Then when the little guy screams bloody murder you just shrug and say “that’s economics, what can anybody do?”.
I have this dream that we can crash this thing in an orderly enough fashion (think unpowered helicopter auto-rotation) to take advantage of the cheap dollar and start making stuff again. If it crashes too fast we’ll starve before we can get production up and running…
then there’s the generation it’ll take to re-educate a public that’s been lead to believe silicone and a good tan is good job training
Yes, lainvestorgirl ,lets call these loan offices the crime scenes that they were .
lol
“‘Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time,’ Yun said.”
Did the NAR omit a zero in their forecasted price decline (s/b -10%, not -1%)? And if so, why would I want to buy a $1m home today if I could get it for $100K less next year?
Must be some takeover rumors on CFC. It’s up over $2.00. Last I looked open volume of options today is over 60,000 puts and 23,000 calls. Seems to be a disagreement about which way this one is going. Anyone here or read anything about this? Other home builders and lenders also turned up today, after starting down.
look at cfc forclosures list. then look at the homes listed for sale. they are cutting prices on them but not enough. in michigan there are houses listed for under $10,000.
“According to Lawrence Yun, a senior economist for NAR, speculative investing in real estate, which contributed to abnormal price growth for several years, has all but disappeared in the present market.”
Yun is just not looking under the right rock. He notices the disappearance of speculators from the demand pool, but fails to see how many speculators are represented in the burgeoning used home for-sale inventory. As of last night, 88% of the homes for sale in my zip code (Rancho Bernardo W 92127) were built between 1998-2007. How else do you explain so many virtually-new homes dumped on the market other than speculators cashing out in droves?
P.S. The speculators could disappear more quickly if they would drop their list prices to market value. If they hold out for what they personally think the homes are worth, they may accidently price out the buyers forever.
Good that they found someone to pick up where DL left:
“‘If it weren’t for a favorable economic backdrop, housing would probably have a hard landing,’ said Lawrence Yun, senior economist for the NAR. ‘As it is, we see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.’”
OK, let’s check the “favorable economic backdrop” with Shadow Government Statistics:
M3 is now running at 13% (I thought I heard heard helecopters the last few days): http://www.shadowstats.com/imgs/sgs-m3.gif
Monthly Commentary: April 2007
May. 7, 2007
April Payroll Contraction Appears to Have Been Masked / M3 Growth Surges to 9-11 Liquefaction Levels and Worse / Mounting Inflationary Recession Has Hobbled Fed / Intensifying Dollar Sell-Off and Gold Boom Loom / Knees would be knocking audibly in the credit markets, if the Fed still reported M3 growth. Annual growth (SGS Ongoing M3 series) accelerated sharply in April to 12.9%, from 11.7% in March. The last time annual M3 growth approached 13%, the Fed was liquefying the financial system in the wake of the 9-11 terrorist attacks. Before that, the year was 1981 and official annual CPI inflation was running about 10%. If 10% inflation sounds familiar, that is roughly the level of annual CPI inflation that would be reported today using the CPI methodologies of 1980. Exacerbating the financial catastrophe that slowly is unfolding for the U.S. markets, the economy is in a deepening recession and the U.S. dollar has begun suffering nascent selling pressures. In terms of monthly averages, gold already is at an all-time high, and the trade-weighted dollar is at an all-time low. Out of touch with reality, the Dow Jones Industrial Average keeps bouncing to new highs.
http://www.shadowstats.com/cgi-bin/sgs/archives
That one headline says it all and proves beyond doubt that we were right all along, and “they” were wrong. Nah nah nah.
Seriously though, if I told someone a couple of years ago (when I first found this blog) that the NAR would one day predict a nationwide home price drop, they would have had me locked up in an institution. And now that day has finally come. Too bad its a bittersweet victory, knowing that this stupid RE bubble will crater the entire economy with it soon. I’m sure the perma-bulls, who were dead wrong about the RE bubble, will now try to say that a housing crater won’t torpedo the whole economy. They were wrong then and they’re wrong now.
“William D. Dallas, the founder and CEO of Ownit, acknowledges loosening lending standards but says he did so reluctantly and under pressure from his investors,”
LOL. and that would be Mr B. Franklin and Ulysses S. Grant?
“Mr. Dallas, who has been in the mortgage business for more than 25 years, said he disagreed, but complied. ‘If I can sell it at a profit,’ he said, ‘why would I not do it?’”
Mr. Dallas’s next career: drug dealer.
‘Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time.’
Reminds me of the party line on stocks in late 2000. “Stocks are a good investment for the long run, but you can’t expect the past level of gains to continue.” The dot.coms went down in March 2000. The S&P 500, I think, peaked in November. So you had six months in denial about the broader market.
When did subprime hit the wall?
So is Larry Yun the new mouth piece now?
What is the difference between WallStreet and COPs. Change a few words one is legal and the other is illegal.
“Mr. Dallas, who has been in the mortgage (drug) business for more than 25 years, said he disagreed, but complied. ‘If I can sell it (drugs) at a profit,’ he said, ‘why would I not do it?’” (as heard from many in prison for selling drugs)
“In retrospect, it was exactly the wrong time to ease (drug laws) credit: drug rates were rising and (cocane) home prices were cresting after a sharp four-year rally. Many in the (drug) industry also suspected that speculation and fraud (armature druggies) were rampant in many hot markets on the coasts and in the Southwest.”
Sounds like we need Don Johnson and Tubbs back. Miami Vice Real-estate.
I guess mortgage is the new drug on the street.
http://biz.yahoo.com/ap/070508/risky_mortgages_congress.html?.v=7
“With the number of foreclosures nationally jumping 47 percent in March from a year ago, lawmakers are weighing whether new lending rules are needed”
“Rep. Carolyn Maloney, D-N.Y., the subcommittee’s chairwoman, did not say whether legislation is needed, but suggested that it could be necessary”
Here is an idea. Make it 100% clear that cash-back at closing, or any other deal with results in the buyer receiving value other than that clearly spelled out in the purchase contract, is illegal and gets you sent to jail for a long time.
This “cash-back-at-closing” is what created the incentive to push appraisers to inflate. It created the comps and market direction that allowed those inflated appraisals to continue. It created the market momentum that turned everyone into real estate tycoons. It created the proft motive and velocity that caused lenders to take such huge risks.
Something so stupid as “cash-back-at-closing” is the root cause of a trillion dollar disaster.
The Washington Post. “Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!”
“‘You cut my [expletive] deal!’ she recalls one man yelling at her. ‘You can’t do that.’ Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said.”
If I was her, I would have come to work with a hidden camera when the effing jerkoff came by, then look forward to my early retirement and watching that piece of sh!t go to jail. Jack-off cigar smoking, suspender wearing BMW lovin’ mother-effer.
My prediction for tommorow Fed’s coments.
“The housing bubble well contained-nobody will escape!”
They will no sooner make a comment like that than the NAR will predict real estate price declines.
Wait… the NAR just did predict real estate price declines!
Subprime mortgage lending: A cross-country blame game
By Vikas Bajaj
Published: May 8, 2007
AGOURA HILLS, California: Visitors to the offices of Ownit Mortgage Solutions here are met with an unmanned reception desk and three dying potted plants that appear to have gone months without water.
How appropriate.
Ownit filed for bankruptcy protection late last year; several companies that specialized in loans to people with weak, or subprime, credit have followed it into bankruptcy as the once-thriving business has withered. Gone are the lavish parties, the extravagant trips and the executive salaries and sales commissions that routinely topped a million dollars.
Lenders like New Century Financial and Ownit, many of them based in Southern California cities like Agoura Hills, have cut an estimated 12,000 mortgage jobs in the state since the start of 2006, according to MortgageDaily.com, a trade publication. Nationally, 16,000 jobs have been lost.
What used to be a profitable partnership between subprime lenders and Wall Street banks has degenerated into a cross-country blame game. Lenders in California say big investment banks encouraged and pushed them to make risky loans. On Wall Street, bank executives say mortgage lenders became sloppy and did not pay enough attention to fraud.
http://www.iht.com/articles/2007/05/08/business/subprime.4-48013.php
“A former CEO at a failed subprime lender, who asked to remain anonymous as his company unwinds, said as long as Wall Street was willing to buy the risky loans and package them into securities, the market was going to create them.”
Now that Wall Street won’t touch subprime loans with a ten-foot pole, certain members of Congress want to force-feed subprime loans to the U.S. taxpayer through their sneaky FHA bailout proposal that they are rushing to pass while they think nobody is paying attention. Why isn’t the MSM all over this? Whatever happened to the U.S. press corps?
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Countrywide Jumps on Renewed Speculation of Buyout (Update4)
By Elizabeth Hester and Jeff Kearns
May 8 (Bloomberg) — Shares of Countrywide Financial Corp. climbed 7.2 percent, the biggest gain in the Standard & Poor’s 500 Index, on speculation the largest U.S. mortgage lender may be the target of a takeover or leveraged buyout.
Countrywide gained $2.77 to $41.28 by 4 p.m. in New York Stock Exchange composite trading, and sold for as much as $42.19. The shares also were boosted by renewed talk in Congress about aiding subprime mortgage holders who face foreclosure, said Chris Jacobson, senior options strategist at Susquehanna Financial Group in Bala Cynwyd, Pennsylvania.
“It’s a combination of those factors, of LBO chatter and the talk of the government helping subprime,” Jacobson said. “Within that context, we’re seeing buyers trying to capitalize on the movement in the stock.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqS5cyaoP2YE&refer=home
“Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!”
Any guys in here remember Ajax in THE WARRIORS? (A highly plausable, multi-ethnic gang in NYC, circa late 70s). In one scene, when a gang called the Baseball Furies [decked out as demented major league baseball players] corners Ajax in a park and one steps up to him, twirling his bat theatrically, Ajax snarls: “I’ll shove that bat up your a** and turn you into a popsicle.” Our mousey little loan-denier should’ve done the same thing.
http://www.youtube.com/watch?v=IB6XEAllPiI
Here it is - what to do the next time someone threatens you with a baseball bat: The Warriors vs. the Baseball Furies, from the 1979 cult classic THE WARRIORS.
NAR is a bunch of liars. I am seeing home appraisals coming in far shorter than 10 or 20% off. Even if they come in close to PMV the bank will decline the appraisal or adjust the value downward.
Isnt it amazing how for months all of were stating the obvious about the housing market. Now NAR, “gosh gee golly” what a surprise.