Plentiful Inventory And Motivated Sellers
Some housing bubble news from Wall Street and Washington. The AP, “Existing home sales rose at an annual rate of 6.4 million units last quarter, down 6.6 percent from a year ago, the National Association of Realtors said Tuesday. The national median existing single-family home price was $212,300, down 1.8 percent from a year ago when the median price was $216,100.”
“State existing home sales in the first quarter generally are below a year ago but more states are improving than reported in the fourth quarter of 2006, and home prices in most areas show that conditions are favoring buyers, according to the latest quarterly survey by the NAR.”
“‘Essentially, we see that the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction, with a modest gain from the fourth quarter. Conditions changed fairly rapidly during the boom, but we need more patience now to see a slow, gradual recovery, which should start in the second half of this year,’ said Lawrence Yun, NAR senior economist.”
“NAR President Pat V. Combs said a flattening in home prices is encouraging.”
“‘It appears the worst of the price correction is behind us,’ she said. ‘More stable home prices and declining mortgage interest rates are increasing buying power, which should encourage potential buyers who’ve been on the sidelines. Plentiful inventory and motivated sellers in many areas mean there are many opportunities to buy a home, especially if you’re in it for the long haul.’”
“The National Association of Realtors, in partnership with the Center for Responsible Lending and NeighborWorks America, introduced a new brochure today at NAR’s 2007 Midyear Legislative Meetings & Trade Expo. ‘Learn How to Avoid Foreclosure and Keep Your Home’ is the fifth mortgage-related brochure in NAR’s consumer education series.”
“‘Foreclosures threaten the very communities that Realtors work to build,’ said NAR President Pat V. Combs. ‘Realtors care as much about keeping families in their homes as we do about helping them find the home of their dreams.’”
From Bloomberg. “HSBC Finance Corp., a division of HSBC Holdings Plc, said profit slumped 39 percent in the first quarter. The U.S. mortgage lender flagged loan defaults may rise.”
“Net income in the three months to March 31 fell to $541 million from $888 million last year, mainly as HSBC Finance had to almost double the provisions set aside for credit losses to $1.7 billion, the Illinois-based company said in a statement filed to the Securities and Exchange Commission today.”
“The ability of HSBC Finance’s customers to repay the mortgages could be affected this year as interest rates on the remainder of their loans rise, the company said.”
“‘Many adjustable rate loans are expected to require a significantly higher monthly payment following their first adjustment’ given that interest rates have risen in the past three years, the company said.”
“The Home Depot Inc., the world’s largest home improvement store chain, cited erratic weather and continued weakness in the housing market as it reported Tuesday a 29.5 percent drop in first-quarter profit.”
“‘While we expected a tough quarter, this was worse than we expected,’ CEO Frank Blake said in a conference call with analysts. He said the housing market continues to be a challenge, and erratic weather conditions across the United States negatively affected the company’s spring selling season.”
“Blake said Home Depot is not expecting any ‘near-term market improvement.’”
The Canadian Press. “Forestry company Tembec Inc says it will shut down its Kirkland Lake, Ont. engineered wood products mill for at least two months to cut inventories because of the slumping U.S. housing sector.”
“‘Demand for lumber is down sharply, driven primarily by the dramatic decline in the level of housing starts in the United States,’ said Dennis Rounsville, president of Tembec’s forest products group. ‘This decline in demand has resulted in both lower prices for lumber and reduced operating rates in sawmills across Eastern Canada.’”
The Prince George Citizen. “Tolko Industries reacted Monday to continuing poor lumber markets and other cost issues by announcing a series of temporary sawmill shutdowns at its Interior operations.”
“‘The decline in U.S. housing starts, which has resulted in depressed commodity pricing, coupled with a strengthening Canadian dollar and high transportation costs have forced us to make these difficult decisions,’ said Mike Harkies, general manager solid wood and kraft papers for Tolko.”
“Lumber prices, driven downward by slumping U.S. housing starts and an oversupply of existing unsold homes, have dropped below the $230 US level, significantly lower than the highs of $400 US reached in 2004 and 2005.”
“The price levels, coupled with the impact of a higher Canadian dollar compared to the U.S. currency, haven’t been seen since the early ’90s, said forest industry analyst Kevin Mason.”
“‘It is very ugly out there,’ said Mason.”
The Wall Street Journal. “Fortress Investment Group LLC, the first hedge-fund manager to go public in the U.S., on Tuesday reported a 52% drop in first-quarter net income.”
“Fortress bought subprime mortgages from Fremont General Corp. in March. Federal regulators had halted Fremont’s home-lending business earlier that month.”
From Reuters. “A wide swath of U.S. banks tightened lending standards for nontraditional and sub-prime home mortgages in recent months, while terms for commercial and industrial loans eased amid tough competition, the Federal Reserve said Monday.”
“The Fed, in its April survey of senior loan officers, said 45% of domestic banks polled reported a tightening of nontraditional residential mortgage standards. More than half the institutions originating sub-prime mortgages also tightened credit standards.”
From CNBC.com. “‘I think we have some more pain to endure this year and next,’ added Bob Walters, chief economist at Quicken Loans, referring to weak home sales and pricing. ‘Industry-wide, about 10% to 15% of individuals who could have gotten a loan four months ago can’t get one today.’”
“‘The housing market looked like it was ready to bottom until the problems in the subprime market began to surface,’ said Celia Chen, director of housing economics at Moody’s Economy.com. ‘Because of the timing, that will prolong the housing correction a little bit more. The risks remain on the downside for housing.’”
“Mortgages in foreclosure rose 62 percent in April and the number of Americans falling behind on home loans will climb this year as home prices fall and lending standards are tightened, RealtyTrac Inc. said.”
“There were 147,708 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio. ‘We expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007,’ CEO James Saccacio said.”
“In the first quarter, properties valued at $750,000 or more made up about 2.5 percent of all foreclosures, the highest since the first quarter of 2005.”
“‘It’s not just homes that are in poor areas or valued less going into foreclosure,” said Daren Blomquist, a spokesman for RealtyTrac. ‘The problem is widespread.’”
“Houses valued at less than $225,000 accounted for 56 percent of foreclosure filings last quarter, down from an average of about 65 percent during the two years RealtyTrac has collected the data.”
“A federal bailout is the wrong way to deal with a wave of foreclosures in the subprime mortgage market, the secretary of the Department of Housing and Urban Development said on Monday.”
“‘While I am sympathetic to the people who are in these tricky situations, I strongly disagree with the idea that a bailout is the answer,’ said Alphonso Jackson, top administrator for U.S. national housing policy.”
“‘In my mind, companies should not be rewarded for risky investments. The American taxpayer should not foot the bill for risky ventures,’ he said.”
He used to cheer Puffy house prices, now he raps to the beat of a rapidly deflating souffle…
“NAR President Pat V. Combs said a flattening in home prices is encouraging.”
I LOL’d at most of those NAR comments. Funny stuff.
“NAR President Pat V. Combs said a flattening in home prices is encouraging.”
Future Press Release from Pat V. Combs
“Just four months ago, it looked like we were on the road to
flattening home prices. Then the (insert excuse here) market blew up, and that has substantially inhibited (insert reason here). It was a monkey wrench that was thrown in; no one would have predicted it
(insert time period here) ago, no one.”
Pat V. Combs , former National Association of Realtors President
Somebody please take Pat Combs head out of the Kool-Aide punch bowl before she drowns.
“Foreclosures threaten the very communities that Realtors work to build,’ said NAR President Pat V. Combs. ‘Realtors care as much about keeping families in their homes as we do about helping them find the home of their dreams.” is one of the most disgusting statements I have heard come out of NAR, what a load of garbage.
The phrase “Delsusions of Granduer” comes to mind.
Whens the last time you saw a Realtor doing community service without turning it into a sales oppertunity ?
Maybe when this whole housing bubble pops, there will be a lot of realtors doing community service–not the feel-good community service, but the court-ordered kind!
Replace the gold blazer with an orange jumpsuit. That’s a fashion show I would go to watch.
For those of you wondering in California…
Caltrans workers:
White hats: overseers
Orange hats: hoi polloi marking time
“Maybe when this whole housing bubble pops, there will be a lot of realtors doing community service–not the feel-good community service, but the court-ordered kind!”
I thought they were into mosquito control?
I’ve seen Realtors doing community service at Habitat, and, get this, they focus on the work. Why? Well, let’s just say that they’re on a construction site, and it’s important to concentrate on the task at hand.
“Foreclosures threaten the very communities that Realtors work to build.”
Newsflash: Getting families to go into debt up to their eyeballs does nothing to build community. Who has time to volunteer at their local school or library? Who has neighborhood clean-up days? Everyone is working like hamsters on a treadmill to pay their ever-growing stack of bills.
This was about financial greed, pure and simple, to keep the economy out of recession after the dot.coms and 9/11. Americans fell for it. Time to take their medicine and pay the piper.
Bingo, Lisa! This is exactly my thinking, but even more extreme. By keeping the majority in debt up to their eyeballs and running on the debt treadmill, the gubmint can keep everyone in line. If you don’t even have time to volunteer, who is going to have time to ask the gubmint for a redress of grievances? Oh well, the rest are buys getting a latte grande or yapping on the cell phone. No wonder the country is in a state of rot. Too much debt and too much narcissism.
The realtors were working hard to keep the party going and they got the assistance of lenders that were willing to commit fraud with liar loans and hit the mark appraisals .Prime rate borrowers usually do their own shopping for loans ,but alot of those people overbought or were really speculator ,so they needed the assistance of the sub-prime slime .
The real estate agents /borrowers flocked to those slime lenders and I would not be surprised if they were giving them kickbacks .
You didn’t see the realtors rejecting these slime-ball lenders with their teaser rate time-bomb cr-p loans . Real Estate agents turned the customers over to these evil lenders that would cram them into easy to get loans by any means ,even fraud . They all had the same language , “Go on this loan , refinance later” ,”how can you lose real estate always goes up “. How could a realtor selling appreciation as a reason to go into debt turn their customers on to a honest good loan agent , (they might turn down the loan or God forbid cut the appraisal because it was inflated beyond reason , or cut the loan amount because the borrower was a speculator who would never live in the property .)
Make no mistake , a realtor knows it when their borrowers can’t really qualify under the real guidelines of the loans offered in the market-place . In a sane market realtors would only show borrowers property they could qualify for because it was a waste of realtors time to open a escrow ,just to get a turn down by a lender . The borrowers signed the fraudulent loan applications and agreed to sign because they agreed with the investment plan.
It got to the point that appreciation was the reason to buy real estate and the Realtors/lender chants of “you can’t afford not to buy ” was the grounds for cr-ap liar loans for the unqualified .” I got a lender that will get you in with no money down at a x payment , don’t worry you can always refinance ,”said the smiling realtor and lender .
I could not find a house in early 2004 because of the sub-prime borrowers buying up everything , while I could actually afford the payment and intended to owner occupy . Speculators keep buying the available listings so the houses would be gone before you could even look at them .People continued to get priced out of the market by this madness and old people had to sell because taxes and insurance priced them out of their homes (unless the were talked into a sub-prime loan to exist ).
The market run-up was really evil because it was based on a investment plan scheme called “flipping ” for tax free gains every 2 years or equity extraction based on real estate always goes up . My house is working hard to make me money . This was not a love affair with having a place to call your own , but rather a love affair with a property ladder investment plan sold to the sheep . No tax-payer bail-outs .
This will take some time. The house next door was sold to a flipper. There are still plenty of crazy folks out there to keep this crash from happening. In one year the head lines will be “How long will this decline last” after prices fall about 10% nation wide.
Yea, we all know that home prices will drop. If you’re a buyer save your pennies and make sure your credit is good.
Owning a home is only a good thing when property values are going up or staying moderately flat. (If you have a fixed rate mortgage)
In a declining market renting makes more sense.
after ? where haven’t prices fallen 10% from 5/05 peak ?
oil patch is it Willis
Seattle. We’re still drinking the kool-aid here. The inventory is growing faster than anywhere in the country, sales are slowing… yet prices keep going up. Defies logic, kind of like the Dow.
I’m holding off any statements about home prices until I’ve seen the OFHEO index for Q1. All the numbers quoted in the MSM are median prices, which make it problematic to actually say which way prices are going.
FWIW - OFHEO is a slow curve, showing prices nationwide still going up in Q4 ‘06, and and at fairly good pace - 1.9 QoQ (pace of 7.6% YoY) I think it’ll show prices being flat to slightly up actually in Q1 ‘07. The stats that they give have *lots* of momentum, for various reasons - probably #1 being that they only apply to FHA-qualified mortgages (under $450K or thereabouts) whereas much of the bubble has been above that price point (CA and much of FL).
However I think the reverse will also be true - once the OFHEO numbers start trending downward (probably in Q2 or Q3 of this year), they will be hard to reverse upward, and certainly won’t resume any kind of “recovery” the NAR hopes anytime soon (like within 2-3 years even in a best-NAR-case scenario).
There’s prices and there’s prices. All that really matter are the prices of homes that are sold and closed, per square foot. Hard to find in any aggregates. As posted yesterday, a fence sitter with $300K to spend likely will jump in and buy a bigger, nicer house at $300K than he would have two years ago. Virtually all potential housebuyers have a budget in mind and it is simple logic that they want the most for that money.
Can someone in Seattle say that a house of the same size, quality and quality-of-location is closing today for what its counterpart did a year ago?
Frankly, it’s not that homes are appreciating so much in Seattle , it’s just that the people there tend to give a lot of credence to the newspaper articles, etc. that report such nonsense. There are a few neighborhoods that have tripled in the past couple years (ie. 400K to over a million) and I think those sales skew the median mightily.
BUT, everyone I know who’s sold there in the past year and a half has had to come down in price by at least 50K to get the deal done. And yesterday I saw something I haven’t seen in years: a nice home in a desirable neighborhood for under 320 K on the MLS. That house would have been on the market for 550K at least just last year.
The times they are a - changing.
Friends just put their house on the market for last years price plus “appreciation”. The realtors they had to choose between gave them a 125K difference in asking price. They chose the one who said he could sell it for more. Can’t wait to see what it sells for.
Living here in Seattle too. I figure it’s only a matter of time: Prices are getting out of reach and the sub-prime/alt-A doors are slamming shut.
The Wall Street Journal. “Fortress Investment Group LLC, the first hedge-fund manager to go public in the U.S., on Tuesday reported a 52% drop in first-quarter net income.”
“Fortress bought subprime mortgages from Fremont General Corp. in March. Federal regulators had halted Fremont’s home-lending business earlier that month.”
un-freaking-believeable
You’d think they’d at least book ONE good quarter for the suckers before opening the trap door. Wonder if the class action folks will get after them.
I wonder if this will affect the supply of suckers for the rest of the hedgies. Hope they aren’t spending their paper wealth. But based on the continued inflated value of housing in NYC, perhaps they are!
You’re mistaken — hedgies don’t have paper wealth, they have 2% management fees and 20% profits interest paid in cash every year. Unlike private equity funds, there are no clawbacks, so all it takes is one good year for these guys to be set for life. That doesn’t even take into account the windfall of the public offering…
Let me see.
Private Equity
Buy companies that seem somewhat healthy. Load them up with debt and give yourself cash payments. Now turn on this sick company to an IPO in which you hold stock. Sell that stock. Wash, rinse, repeat.
Once you feel the tide turning and the debt will come home to roost, then you go Public. Pay yourselves bonuses, and hold stock in this company. Sell the stock and get the hell outta dodge before the cards start crumbling and the US economy goes to sh*t. Put the money in a swiss bank account and move to the Bahamas.
Bear Stearns is donig the same thing with EverQuest. (not to be confused with EverCrack, the game by Sony)
Ha, spent too many late nights feeding the addiction of “Evercrack” and WoW… had to quit cold-turkey else the wife was going to divorce me. Is it wrong that I just picked up LOTR? I think I won’t tell the wife about that little purchase.
Don’t play GuildWars then.. its crack squared if you like player vs. player
Don’t paint all Private Equity in the same brush. I’d call the above LBO funds, a subset of Private Equity.
There are plenty of Venture Funds and Real Estate Funds (also Private Equity) whose purpose is to provide risk capital to build stable businesses and assets, and not financially engineer stable companies to death while you pillage the company, as described above.
I take it you saw last month’s article on private equity in Vanity Fair?
Where is P’Cola Popper. We discussed this on Mother’s Day. FIG sold stock to friends and family at $15, then went out to the public at $35. The stock is sitting at $28 today. Fortress to the world, “I win, you lose”. TxChick is right, “un-freaking-believable”.
Once again, Ben’s readers would have heard it here first, as I mention FIG on the day of the IPO and what they had behind the stock (sub prime). They interviewed my son for a job running the asset pools. Sheesh.
Right here! Just stepped out to get some popcorn…yeah, no surprise on the FIG results—look for more of the same from the other hedgies and private equity guys that are going public.
Why not just call it FIB?
A FIB is what we call tourists from Illinois. LOL
Oh, I heard plenty of cynical comments that this IPO probably marked the top of the market - I didn’t but I’ll bet a year from now we’ll be able to say we could see the end from there.
“NEW YORK (MarketWatch) — Despite the residential housing slowdown, Wells Fargo & Co.’s backlog of new mortgage applications is up 19% this quarter, Chief Financial Officer Howard Atkins said Monday.
The increase reflects more refinancing of mortgages because long-term interest rates continue to be historically low and because rates on long-term loans are lower than short-term rates, he said at a conference in New York monitored by Webcast.
Atkins also said that in the bank’s core markets, primarily in California, home purchases continue to generate “decent volume.” The increase also may reflect slowly growing market share because mortgage brokers are directing more business to “strong providers” in the wake of a spate of bankruptcies from subprime mortgage originators. ”
—————————————————————–
So much for the predictions of trouble at Wells. It’s the best managed bank. Buffett increased our holdings in WFC significantly last year.
Wells eventually will have to unload some of this debt. They’re not as savvy and pennywise as they used to be.
Sounds like quite a few folks are gonna get Sacco & Vanzetti’d…
“There were 147,708 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio. ‘We expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007,’ CEO James Saccacio said.”
http://en.wikipedia.org/wiki/Sacco_and_Vanzetti
I heard the NAR eats it’s Yun…
“‘Essentially, we see that the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction, with a modest gain from the fourth quarter. Conditions changed fairly rapidly during the boom, but we need more patience now to see a slow, gradual recovery, which should start in the second half of this year,’ said Lawrence Yun, NAR senior economist.”
“‘Essentially, we see that the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction, with a modest gain from the fourth quarter. Conditions changed fairly rapidly during the boom, but we need more patience now to see a slow, gradual recovery, which should start in the second half of this year,’ said Lawrence Yun, NAR senior economist.”
I’m so glad we’ve hit bottom. I’m calling my realtor this morning. Thank God they replaced that gloom and doom David Learah with Lawrence Yun. He’s so much more positive. We better all get our real estate bargains before the prices take off this fall. I’d sure hate to miss another to buying opportunity. Isn’t it wonderful to have a group of professionals to guide us in our real estate purchasing decisions? I’d be lost without them. Bless their hearts!
you already missed the after super bowl bounce of 06
and 07
and
“HSBC Finance Corp., a division of HSBC Holdings Plc, said profit slumped 39 percent in the first quarter. The U.S. mortgage lender flagged loan defaults may rise.”
Orwellian Words for the day:
Profit Slumped=Loss
what bank will go untouched ?
even GE will take a hit-lots of MBS in the basement
Profit slump means less profit not a loss, it’s sorta like if you were in sales and you make less money than last year but you didn’t earn negative income, like Mr. Serin.
work ?
pimp out maybe
Realtors work to build,
Good, let the bank profits “slump.” Giving mortgages to people who couldn’t afford them is both financially stupid and morally wrong. Many poor people are not financially sophisticated. If they were, they wouldn’t be poor. And, even smart people may fail to learn (or be taught) finance.
Let HSBC eat these loans … maybe they will learn not to prey on people.
All that spin sent me back to the NAR spreadsheet. Here is the U.S. change over the past three quarters:
227.1 225.3 219.0 212.3
-1.8 -6.3 -6.7
-0.8% -2.8% -3.1%
It seems like the losses are increasing. Is this “stabilizing in a broad cyclical trough and moving in the right direction?” And this is before the subprime meltdown and foreclosure lift off. I expect it will be 3Q07 before we really have a sense of where we are. Can we expect “a slow, gradual recovery, which should start in the second half of this year” given that?
If we get a crash that restores pre-bubble affordability, without a credit crunch for conventional mortgages or a severe recession, we might get “a slow, gradual recovery” beginning some time next year.
Casagrand on San Diego:
April 2007: San Diego Housing Market: single family attached and detached homes; Sales for the month of April were a dismal 2324, a decline of 18% from April 2006 and 44% from 2005. This is the lowest April sales activity in the past 12 years. Pending sales in April of 2341 is an indicator that May sales will be about the same as April. If this holds May will be down about 25% from 2006 and down 40% from 2005. It is looking like the sales in 2007 will be around 25,000 for the year. Sales are down across all size ranges except for the over 3100 sq ft which has remained flat, which skews the average price calculations. The market below 1600 sq ft has seen the biggest declines, down about 40% from the peak. This has had the effect of breaking the sales chain and affecting sales of larger homes bringing the whole market down. If you are interested in more information on the housing market a good site to visit is http://www.californiahousingforecast.com .
The inventory at the end of April was 19,789, 8.5 months supply, up over 2600 homes from this time last year. If pattern holds, inventory will continue to increase until mid-summer and I expect to see inventory levels above last years 23,000. A sign of the difficulty selling homes is the level of expired, cancelled and withdrawn listings this year. Year to date we have had 13,818 listings in these categories versus 5,965 for this period last year and only 2,545 this time of 2005. The declining sales, increasing inventories, increasing foreclosures and increasing short sales will all combine to put more negative pressure on prices. We are seeing price declines from peak price periods in all size categories except for 2 size ranges. Also, as sales decline and inventories grow we are seeing the price spread from low to high get larger. I suspect this is an indicator that prime homes are fairing well while the others linger on the market and sell for lower prices. The average price in April was $636,000, up significantly. However, in 2005 with 40% more sales and lower inventory the average price was around $590,000. So again, I state tracking average price is like buying fools’ gold.
Since I do not have a crystal ball, I am not sure where this is all going but the trends are not good. Historically, real estate cycles run about 6 years from peak to trough and we are only about 2.5 years into this cycle. There is much pent up demand for housing but affordability issues will have to be resolve to bring buyers back into the market.
“Since I do not have a crystal ball, I am not sure where this is all going but the trends are not good. Historically, real estate cycles run about 6 years from peak to trough and we are only about 2.5 years into this cycle. There is much pent up demand for housing but affordability issues will have to be resolve to bring buyers back into the market.”
The last run up though lasted longer than 6 years (juiced by free money starting in 2001). I think the slide downward could last longer than 6 years.
San Diego recent home buyers are “toast”. Sold my house in 2005 with taxes of $3,300 a year in 2005. New buyer that bought my house now pays over $7,500 for taxes in 2006. Crazy! Over $600.00 per month to live in the “fine city of San Diego” ? What a joke. No more playing around as now San Diego needs every dime they can get on taxes to fund their pension funds, etc and other costs to keep the city going. It will be a cold day in hell until the Enron city books are “open ” to the public. Renters have it good as well as older home buyers but anyone who bought in the last couple of years is toast and not sleeping very well now.
‘ but affordability issues will have to be resolve to bring buyers back into the market. ‘
- The nation can no longer use California’s ‘Mexi-math’ to qualify buyers. These folks can fool themselves for a while, but eventually 1 + 1 = 2. The only thing that they have left will be to watch “Pimp My Ride” on MTV>
Bagdad Bob’s ministry of information is nothing compared to the NAR’s Media PR campaign.
Oh lookie there, we hit another bottom!
Just wait until Learah the clown gets out from under the thumb of the NAR. He’s is going to be the biggest Bear on housing you ever saw. You have to admit it, that NAR whore sold it big time when he was the chief economic”Propagandist”
Now we have Yun the NAR’s new Bit$h putting out the same garbage….
Geez…………
First all we saw was subprime in these stories… now it’s the “dangers” of foreclosures… when I start seeing affordability mentioned as much i’ll start paying more attention to prices.
“The National Association of Realtors, in partnership with the Center for Responsible Lending and NeighborWorks America, introduced a new brochure today at NAR’s 2007 Midyear Legislative Meetings & Trade Expo. ‘Learn How to Avoid Foreclosure and Keep Your Home’ is the fifth mortgage-related brochure in NAR’s consumer education series.”
If I had designed this brochure, you’d open it up and find one word in big red letters: RENT!
Ce-Celia,
You’re breaking our confidence, daily…
“‘The housing market looked like it was ready to bottom until the problems in the subprime market began to surface,’ said Celia Chen, director of housing economics at Moody’s Economy.com. ‘Because of the timing, that will prolong the housing correction a little bit more. The risks remain on the downside for housing.’”
The NAR says prices are forming a stable bottom, and hence it must be so.
“The national median existing single-family home price was $212,300, down 1.8 percent from a year ago when the median price was $216,100.”
More lies here too.There is no way in hell we are only down 1.8% in price.They sure can cook the books over there.
“NAR President Pat V. Combs said a flattening in home prices is encouraging.”
“‘It appears the worst of the price correction is behind us,’ she said.
So, the price correction was for them to just “flatten”, Mrs Combs? Soome one check to see if DL has his hand up her ass.
Here is another sob story
http://www.news-press.com/apps/pbcs.dll/article?AID=/20070513/RE/70513003/1075
Read how they took money out for medical bills and for a pool.
Nuff said!!!!
“We originally bought in December of ’03. We got married July 4, 2004, and on July 7, my husband was in a car accident. In August 2005, we took an equity loan on the house to pay for my husband’s medical bill and ended up taking equity out of the house to put a pool in,” said Cathy Comerota.
Why did they have to take out money to pay medical bills? Didn’t they have auto and health insurance? Or did they go bare on both to make the monthly nut?
The numbers are interesting too. Most not homestead. 1 mobile home. That person must have missed the subprime, no doc loan opportunity or they would be in the figures for homes or condos.
According to this article, Countrywide’s expanding to pick up sub-prime market share and introducing new product, including reverse mortgages and 50 year sub-prime mortgages. This means a 30 year old buying a house might die before the house’s paid off.
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/14/AR2007051400432.html
Okay, that’s it! I am starting the anti-buying PR campaign with a slogan of “Just say no” to housing! 50 FREGGIN’ YRS. OF SUB-PRIME. Crapola. This is sickening. Yes, dear, we just signed on for 50 years of neg am, i/o, option ARM and LEG at a 0% teaser for the first three months with an adjustable rate every month thereafter for 5 years. HOLY MOLY, Mozilo is disguting. Market share, my arse. This guy would steal candy from a baby if he had to. All I know is that everyone who is sane would just stop looking, let alone buying, this whole proverbial, pun-intended house of cards would finally collapse because of non-movement. Geez, when will the 60-yr. mortgage in this country, not Japan’s 100-yr. deal, start.
Extending your mortgage another 10 or 20 years is pretty much a joke. It only lowers your payment a few hundred dollars.
http://tinyurl.com/238wtz
I just checked in the mirror when I woke up this morning and I didn’t look any older than I did yesterday. I think my aging process must be stabilizing. I am going to live forever.
LOL,
I woke up today and thought my 2001 Dodge Caravan’s rust spots looked smaller too.
Everything is stabilizing including the dollar.
Only a temporary reprieve in both cases…
“A fool sees not the same tree that a wise man sees.”
Willian Blake
“‘While we expected a tough quarter, this was worse than we expected,’ CEO Frank Blake said in a conference call with analysts. He said the housing market continues to be a challenge, and erratic weather conditions across the United States negatively affected the company’s spring selling season.”
Weather, smeather! These fools will blame anything or anyone on the lack of selling. If you would just realize that for I’d say 99.765432% of the sane buying public, THE PRICES ARE TOO HIGH, IDIOT!
Even if you make 150K a year, not that I do, but if you did, 800K-1mil is waaaaaay too much to ask. Not only that, but the people here realize that there is no value at that price. Homes in South OC should not be more than 300K, except for the real grandiose with serious property. Of course, guys like this will never admit prices are insane, well, maybe Crazy Eddie would.
You’re right, but it’s even sadder.
Even if prices were to moderate substantially, there simply AREN’T ENOUGH BUYERS LEFT!
The national home ownership percentage jumped from its historic norm of 65% or so to 69%. This means that this housing boom consumed a large number of buyers that, under a normal market, would have saved and bought later.
This market is tapped out, and the finance doors are slamming shut on many of the relatively-fewer buyers that remain.
“The National Association of Realtors, in partnership with the Center for Responsible Lending and NeighborWorks America, introduced a new brochure today at NAR’s 2007 Midyear Legislative Meetings & Trade Expo. ‘Learn How to Avoid Foreclosure and Keep Your Home’ is the fifth mortgage-related brochure in NAR’s consumer education series.”
Step #1, don’t listen to a realtor, the NAR, or any of their economists. In fact, do the opposite of what they say.
Here is a perfect example…
“NAR President Pat V. Combs said a flattening in home prices is encouraging.”
“‘It appears the worst of the price correction is behind us,’ she said. ‘More stable home prices and declining mortgage interest rates are increasing buying power, which should encourage potential buyers who’ve been on the sidelines. Plentiful inventory and motivated sellers in many areas mean there are many opportunities to buy a home, especially if you’re in it for the long haul.’”
Here is how I trump it. Lending standards are tightening. With prices falling, people don’t want to buy a depreciating asset. The thought that prices only go up is what convinced most FB’s that you can never pay too much for a house. Rising gas prices, slowing construction, and job losses will make it hard for many people to afford their mortgage payments.
“HSBC Finance Corp., a division of HSBC Holdings Plc, said profit slumped 39 percent in the first quarter. The U.S. mortgage lender flagged loan defaults may rise.”
“Net income in the three months to March 31 fell to $541 million from $888 million last year, mainly as HSBC Finance had to almost double the provisions set aside for credit losses to $1.7 billion, the Illinois-based company said in a statement filed to the Securities and Exchange Commission today.”
Hmmm let me see. Pay the mortgage or buy food and gas? Oh hell, Inflation doesn’t care about food and gas. CPI looks look so lets hope the FED cuts interest rates (sarcasm off).
“HSBC Finance Corp., a division of HSBC Holdings Plc, said profit slumped 39 percent in the first quarter. The U.S. mortgage lender flagged loan defaults may rise.”
“Net income in the three months to March 31 fell to $541 million from $888 million last year, mainly as HSBC Finance had to almost double the provisions set aside for credit losses to $1.7 billion, the Illinois-based company said in a statement filed to the Securities and Exchange Commission today.”
Hmmm let me see. Pay the mortgage or buy food and gas? Oh hell, Inflation doesn’t care about food and gas. CPI looks good so lets hope the FED cuts interest rates (sarcasm off).
OT:Inflation.
Can someone explain to me why the market gets all excited when “core” inflation is moderate like in April? “Core” is defined as excluding energy and food. When these two components are included, inflation was quite high in April. Everyone needs food so backing this out doesn’t make sense. And energy is needed to do anything, you can’t even make tiddly-winks without some energy. I guess the new paradigm is people don’t need food and businesses don’t need energy any more to produce a product or service.
Why does the market always look at “core” inflation? I’m looking for a serious answer, not a Wall Street is just trying to deceive you answer.
I think the answer is as simple as the Fed looks at the “core” numbers when deciding whether to raise or lower interest rates. Since that number wasn’t too bad, they assume that Bernake will lower interest rates in response to the business slow down, which will cause that downturn to reverse.
I don’t agree, but I think that is the logic that is used.
Thanks for your answer but do you know why the Fed only looks at the Core number? There must be some economic reason why they pay more attention to that number.
One possible interpretation: They are looking for an excuse to respike the punchbowl and keep the party going which also provides cover against accusations that they are not controlling inflation. By stripping out the “volatile food and energy prices” from the CPI goods basket (whose volatility as of late only tends in the direction of higher prices), they have a rationale to support neutral to looser monetary policy.
By contrast, a focus on overall inflation (which recognized that everyone in the U.S. pretty much needs to eat and drive a car) would show inflation currently running at a rather alarming 4.8% annual rate, if the CPI was taken at face value.
The CPI is even higher when hedonic methods are not used….
ex-food and energy was started by Arthur Burns when he was Fed governor in the early 70’s. He considered food and energy “volatile,” but basically he wanted show Americans that inflation, ex-inflation was under control. Similar to today. It’s more complex than that, but that’s the simple answer…
We should have a weekend discussion, since this keeps going up, but “core inflation” is a bogus statistic. Food and energy may be volitile, but they have been moving more or less in one direction. So use a 12 or 24 month moving average rather than excluding them altogether.
Food, energy, housing — these are necessities. They are basing interest rates on the cost of luxuries.
House prices arent factored into CPI. Rents are.
bls can simply send price checkers out to the new homes areas and bingo- deflation
Yes, but if they had factored home prices into inflation numbers 5 years ago, the Fed would have begun tightening in 2002/3, and we’d never be in the mess we’re in.
Ah-Hah! There’s my answer. It’s due to their volatility. If that’s the case, then yes, it seems the Fed should use a 24 month moving average. I don’t see how they can exclude these basic life necessities unless somehow they believe that eventually they show up in the “core” inflation number.
I’ve also heard it argued that the Fed can’t influence food and (especially) energy prices, so they’re not relevant in setting rates. I think this is b.s. though — the Fed is always in theory influencing the value of dollars, so obviously they affect all prices measured in dollars, not just the less volatile prices.
They use core because there is an assumption that food and energy will come back down.
The fact that this assumption is wrong, and everyone knows it, is irrelivant. Gas goes up $1.50 in the spring, and comes back down $1.25 in the fall.
Besides, it is all imaginary anyway since they use a quality adjustment. Cars went up $1%. Oh, but the cars this year are 1.2% better than the cars last year, so cars are down .2%.
So, wages rise at rate of CPI, but our actually spending rises much faster since we’re buying “higher quality” cars. We do this through debt. We borrow the “quality adjustment”.
Anyone know if utilities are included in the CPI number?
If water and electricity are also not counted then really everything needed to live is dismissed by the CPI.
Food and energy is very volatile. Food and energy has always been exlcuded for these purposes for the same reason. Gas price can swing 15% in a month easily and you don’t want to make long term decisios based on short term swings like that, hence it’s left out.
Maybe if the FED included it, we wouldn’t have 15% swings because hedge funds would know that they FED will raise interest rates if they cause the cost of gasoline to skyrocket.
I am going to assume that is a sarcastic comment and you don’t really thing hedge funds make the price of gas go up or down.
Somewhat : ) I think a lot of it is attributed to them and the Goldman Sachs fund.
The price of Gasoline should be about 30-40% lower than it is now.
No it shouldn’t. The price of gas is what the consumer is willing to pay. If people are willing to pay $3 then that is the price it should be. Just like the price of a Starbucks cup of coffeee shouldn’t be $1 since someone is willing to pay $4 for it.
I bet you don’t keep that same attitude when it comes to medical care. Amazing that when it comes to things that keep us alive and in good health (food, medical, dental) the public wants it cheap and subsidized but with everything else let the free market reign!
Making month-to-month comparisons are not accurate anyways for decision making. If they included fuel and food, and used year over year and 12-month averages they would have more accurate estimation of what is really impacting the consumer.
That said, I don’t think the currently set up to measure consumer prices, and I think it’s done intentionally (no way gov’t PhD’s dont realize this).
“The remarkable thing about the consumer is not that he’s beginning to cave but his doughty tenacity in refusing to do so until now. It may just be that he’s feeling quite pinched. His real trouble is that he’s not, like Wall Street economists and Washington numbers contortionists, a core person. He doesn’t realize, poor soul, that runaway gasoline prices and escalating food prices don’t count because they’re not “core” prices. And just to clear up any confusion on his part, we feel duty-bound to inform him that the reason they’re not core prices is that they’re going up.” Alan Abelson of Barrons from Russ winter’ link on bits & buckets today
Yes, “core” inflation omits, energy (i.e., gas), food AND owner-occupied housing. The premise for the latter is that rental rates are the true indicator of ‘value’ of housing, and anything over that is just a premium paid by the owner for the privilege of painting their own wall the color they like and such. So basically, if you only bought items considered in the “core” inflation, you’d be hungry, renting, and unable to go anywhere except on foot or bicycle.
Another consideration is that limiting “core” inflation helps keep the lid on entitlement spending while defelcting political blowback from AARP and the like. Much of non-discretionary enetlement spending is indexed to the CPI for annual cost-of-living increases.
-Moose
The premise for the latter is that rental rates are the true indicator of ‘value’ of housing, and anything over that is just a premium paid by the owner for the privilege of painting their own wall the color they like and such
Rental rates ARE the true indicator of the value of housing. However I think the real reason why people have been willing to pay more than that is not intangibles like choosing your own color, but expectations of unearned future price gains. Well guess what, those expectations are going down the toilet.
Historically (i.e. pre-bubble), people have NOT been willing to pay more in payments to buy a house than to rent it. During the Great Depression payments for buying a house were only HALF what it cost to rent the same house. Those days may return sooner than we think.
“‘It appears the worst of the price correction is behind us,’ she said. ‘More stable home prices and declining mortgage interest rates are increasing buying power, which should encourage potential buyers who’ve been on the sidelines. Plentiful inventory and motivated sellers in many areas mean there are many opportunities to buy a home, especially if you’re in it for the long haul.’”
Is she talking about the WSJ report that San Diego homes sold at a recent auction on the range from 1/3 to 1/2 off 2005 peak prices? Because I don’t think most people are even aware that prices have fallen by this amount yet. We can’t get prices back up until well after most folks finally learn how far they have fallen…
haha, you can almost hear the pleading in her voice. “For the love of god…what else do you unmotivated buyers need to start buying again?” Well, for starters, way, way, way lower prices!
I have the cash, earnings, and the credit!
Still need the 50% haircut!
Wake me up when it happens……….
That’s all. Man, you are greedy!
Sarcasm off.
‘The Wall Street Journal. “Fortress Investment Group LLC, the first hedge-fund manager to go public in the U.S., on Tuesday reported a 52% drop in first-quarter net income.”’
One of the regulars here noted that it was a bad sign that Fortress was going public… Looks like they were on target.
“The Home Depot Inc., the world’s largest home improvement store chain, cited erratic weather and continued weakness in the housing market as it reported Tuesday a 29.5 percent drop in first-quarter profit.”
BWA HA HA!! Every day there is eratic weather somewhere in the country. Every quarter there is some freak storm somewhere. Every year there is a hot spell, a cold spell, a drought, a flood, you name it.
Blaming weather for missed earnings is so silly and yet the business media reports it as valid.
I completely agree with you. Yes, weather might have been bad in a few places, but I’m sure that is being offset by other markets. The funny thing is that weather was never mentioned when HD had record profits over the previous quarters–I believe housing strength was cited.
I completely agree with you. Yes, weather might have been bad in a few places, but I’m sure that is being offset by other markets. The funny thing is that weather was never mentioned when HD had record profits over the previous quarters–I believe housing strength was cited.
I’m curious how Lowe’s is doing. Ever since I heard about the Golden parachute that the last Home Depot CEO got, I have quit going there. I like Lowe’s better anyway. Anyone else doing the same?
I never get a good vive at Lowe’s. Maybe it’s because it is designed as “woman friendly” or whatever the term is to attract more women customers. I personally couldn’t care less what a CEO gets or doesn’t get from a company’s shareholders. As long as they provide me - the customer - with what I want, whether the CEO makes $100,000 or $100M is irrelevant.
I for one would rather corporations give their profits back to the stock holders rather than putting that much weath into the hands of one person (CEO) for a job . Maybe a reasonable bonus program for a CEO for increasing profits is warranted.I think stocks should pay more yearly yield to the stockholders . I’m sick of the stock market being a asset bubble instead of buying into a piece of a income-producing company with a chance for long term growth and income producing ability . To many games going on with the stock market .
http://www.voiceofsandiego.org/survival/
“SoCal Home Sales Hit 12-Year Low
Fewer homes sold in Southern California last month than in any April since 1995, DataQuick Information Systems reported today.
The 19,269 homes sold in L.A., Orange, Riverside, San Bernardino, San Diego and Ventura counties measured the lowest number since 15,303 sold in April 1995, which was the lowest rate on record since DataQuick started tracking real estate statistics in 1988.
The rate dropped 28.9 percent from the 27,114 homes sold in April 2006.
The sales losses were greatest in lower-cost neighborhoods, the La Jolla-based firm reported.
The median price across all six counties increased 6.1 percent from April 2006, reaching $505,000 last month.
San Diego County home sales, which numbered 3,436 last month, were down 13.5 percent from April 2006’s 3,974.
The overall median price dropped from $505,000 in April 2006 to $490,000 last month, a 3 percent decline.”
So the median is dropping, even with the low end sales tanking….? I guess San Diego IS ahead of the curve….
also the number of households is up by at least 12% since 95 so the drop in sales is even greater
“Fewer homes sold in Southern California last month than in any April since 1995,…”
OK, so the pace of sales has backtracked to a time during the last bust. How long will it take prices to follow suit?
“The Fed, in its April survey of senior loan officers, said 45% of domestic banks polled reported a tightening of nontraditional residential mortgage standards. More than half the institutions originating sub-prime mortgages also tightened credit standards.”
Among other things, the survey reported that mortgage loan demand was weak in the face of tightening credit standards. Both trends portend weakening home purchase demand and further price declines.
“A federal bailout is the wrong way to deal with a wave of foreclosures in the subprime mortgage market, the secretary of the Department of Housing and Urban Development said on Monday.”
“‘In my mind, companies should not be rewarded for risky investments. The American taxpayer should not foot the bill for risky ventures,’ he said.”
Comment by hwy50ina49dodge
2007-03-15 16:13:00
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
Add, as one blogger posted, the minority group of renters to this equation and there is the grassroots of “good-ole-fashioned” political outrage…want to win in 2008? Convert this conundrum into an asset…sh*t… I’m starting to think like Karl Rove.
I used to think a taxpayer/saver-funded federal bailout of FBs and toxic lenders was “in the bag” for the very same reason. Then it occurred to me that the sum of all renters (currently ~31%) + homeowners with no mortgage (34%) = 65%. Our odds may not be so bad after all.
Approval of Congress is scraping bottom — they might pay attention to voter concerns on this one. Wonder what the demographics are re percentage people in the 3 categories who vote: renters; free & clear or very-low-debt owners; and FBs.
And 20% of the mortgaged people with some equity won’t go for the bailout =65% + 20% =85 % Really you only got 15 to 20% of the voters who would want it + realtors and lenders and Wallstreet/bagholders = + 10 to 15% . Thats 35% max verses 65 % against it like you said . So they have to sneak a bailout on the people by calling it a different name .
And let not forget those people who lost their homes to adjustable mortgages in the past few years and had to lick their wounds, pick up the pieces and move forward WITHOUT government help or intervention. They are as pi$$ed about this idea as anyone. Perhaps more so.
Not only did they lose their home, now they’ve got to help somebody else whose in the same position they were in?
Their bad luck that when they had the same problem, it affected themselves only and not the whole financial arena. So no politicians gave a d*mn.
This reminds me of 9/11. For political reasons there were huge payoffs to those who lost loved ones in that incident. Why? How was it different from, eg. the Oklahoma bombing? Or the Columbine shootings? Or any innocent getting killed by a drunken driver? Or the Katrina victims?
Why does losing a loved one to a foreign terrorist necessitate a huge US government (ie, taxpayer) payoff but none of the above losses do?
I don’t think that’s the right equation. 34% of homeowners is 34% of 69%, or about 24% of the # of households. So there are “only” 58% who would be unwilling to fund this bailout.
Sorry, 24% plus 31% = 55%.
Wall Street Journal Online Article explaining why Baby Boomers should want immigrants in this country.
Why?
So they can get healthcare cheap and so they have someone to sell their houses too at inflated prices.
http://finance.yahoo.com/retirement/article/103024/good-life-of-boomers-tied-to-better-life-for-immigrants
Wanna know something? They’re right. Which is exactly the reason why Canada and Australia, the two countries most like the US economically and demographically, admit large numbers of legal immigrants.
Note “legal”. That means the governments picks and chooses the immigrants who are judged to be most beneficial to society, and integrates them into the tax-paying mainstream, rather than letting every Tom, Dick and Jose who sneaks across the border stay in the country and form an underclass.
Has this pile of garbage been posted already?
http://www.voiceofsandiego.org/articles/2007/05/15/cafesandiego/322london1051507.txt
Real estate adviser Gary London speaks up:
“The San Diego residential real estate market is showing some strain, but it is far from a disaster in the making. The media has been in a frenzy over the state of the market for some time, measuring every piece of housing sales, valuation, employment and demographic data known to man. As a real estate analyst, I am sympathetic with this approach, but I would offer some words of caution as the reader tries to figure things out for themselves:
…
Notices of trust deed sales and actual foreclosures are up. But don’t confuse a high statistical increase with a meaningful trend. Most people are not foreclosing.”
(That’s true, less than 50% are not foreclosing)
“Sub prime loans are a problem, heavily impacting first time buyers over the past several years, as well as lower household income buyers. The problem could get worse as many variable notes will adjust over the next nine months. But, here again, it would be wrong to assume the worse: many lenders are going to fix the problem before it gets out of hand by offering debt-instruments to many of the most impacted households.”
And so on and on and on….
Duh! Make that (That’s true, MORE than 50% are not foreclosing)
“many lenders are going to fix the problem before it gets out of hand by offering debt-instruments to many of the most impacted households.”
Do these lenders now have “magic-wands” to make all the debt disappear. The debt won’t be going anywhere, someone has to eat it, eventually. Sounds like another shell game to me.
“Notices of trust deed sales and actual foreclosures are up. But don’t confuse a high statistical increase with a meaningful trend. ”
No trend my azz…
http://www.sddt.com/Finance/EconomicIndicators.cfm
More brilliant observations today from the same guy:
http://www.voiceofsandiego.org/articles/2007/05/15/cafesandiego/321london2051507.txt
“Over the past 50 years the market has always increased in price, even on an inflation-adjusted basis. However, it doesn’t move consistently. Rather, there have been three recessionary cycles over my career, starting in the 1970s. They all were precipitated by different factors. They all lasted for different time periods. But eventually the market recovered. And when it did, it reached new heights.”
So here we have a new definition of “real estate always goes up”, you just have to wait through the period where it goes down….
And affordability is not an issue because, as we know, most people put 60% or more down:
“The problem with the various tests of housing affordability is that many, many people are able to place large down payments on their next home, thus keeping their mortgage payments within an acceptable range. And most do not flagrantly take out lines of credit on this equity and spend it on European vacations. They keep the equity for the move up.”
If you look back 50 years, there are two distict long cycles in housing prices. The peroid from about the end Korean War to the resession of 1973-75, home prices just rose at the rate of Inflation, even dropping a small amount in real terms by the end of the period. From 1975 there has been three bubbles, or as Gary London puts it,”resessionary cycles”. Clearly something changed in the market in the early 1970’s. So what makes real estate guys like London think that what has been going on since the 1970s is the perment trend, never to change. This could be the end of the “bubble” long cycle. Making Gary London’s “advise” not worth a whole lot.
Is it just me or does it amuse anyone else to see an ad like this on Craigslist?
http://dallas.craigslist.org/acc/331390286.html
It does look a little out of place, doesn’t it?
Scam alert.there are lots of scammers looking for money now that thier money has run dry.Got an email yesterday from a fake wells fargo site asking to update my account information or they would close my account.
Phishing. That’s pretty dodgy stuff.
“A federal bailout is the wrong way to deal with a wave of foreclosures in the subprime mortgage market, the secretary of the Department of Housing and Urban Development said on Monday.”
“‘While I am sympathetic to the people who are in these tricky situations, I strongly disagree with the idea that a bailout is the answer,’ said Alphonso Jackson, top administrator for U.S. national housing policy.”
“‘In my mind, companies should not be rewarded for risky investments. The American taxpayer should not foot the bill for risky ventures,’ he said.”
ALPHONSO JACKSON FOR PRESIDENT!
NO, read the whole article. He wants to do the FHA bailout instead of the direct bailout.
Here’s an Alfons, worthy of your consideration…
http://en.wikipedia.org/wiki/Alfons_Mucha
I like his stuff very mucha
Be sure you read the end of the article before you get too excited…
Ahh… didn’t see the part on page 2 about expanding FHA to “help” more subprime FBs. So, it was too good to be true.
Make the lenders that made the bum loans bail out their own FB’s if they want to put them on a restructured loan at their own expense . All the FB’s that are toast let them be toast .
Ahahahahah! This is even better!
http://dallas.craigslist.org/lgl/331378588.html
WASHINGTON (MarketWatch) — A growing glut of housing on the market helped moderate U.S. consumer price increases in April, raising hopes that the Federal Reserve can declare victory over inflation.
See HBB’s this entire thing was by design!!
“‘While I am sympathetic to the people who are in these tricky situations, I strongly disagree with the idea that a bailout is the answer,’ said Alphonso Jackson, top administrator for U.S. national housing policy.
‘In my mind, companies should not be rewarded for risky investments. The American taxpayer should not foot the bill for risky ventures,’ he said.”
I applaud Mr. Jackson’s leadership on this issue, and agree with his position, which stands in stark opposition to some recent proposals from legislators from the other side of the aisle. I hope this becomes a political litmus test issue as the prez-tial campaign heats up.
Oops — missed the last part of the article…
‘ “Most subprime loans remain viable and will not result in foreclosure,” he said, though Jackson added that there is room for the government to help in the current crisis.
Specifically, he endorsed reform of the Federal Housing Administration — a Depression-era program that insures low-income home buyers.
The FHA is set to help 60,000 subprime borrowers refinance their loans this year, Brian Montgomery, chief of the Federal Housing Administration, has told lawmakers, and quick passage of reform could mean helping 200,000 more.’
How can FHA reforms (including higher conformable lending units and lowering of downpayment requirements) take place w/o any help from the taxpayer? I guess it must involve smoke and mirrors?
conformable lending
unitslimitsWow. 200,000 (numbers of refinanciers) * 200,000 (average refinance) = 40,000,000,000. That’s 40 billion. And that’s just the start (remember, Social Security had a small start too).
The real crime is the lending instituions that will get to charge fees for the refinancing of this gov’t sponsored crap. This is complete socializing of the risk and the privization of profits. This is a morally reprehsible twisted version of socialism and capitalism.
I guess we are still conspiracy theorists for discussion pending legsilation?
reprehensible
“And that’s just the start…”
You have identified a key concern, which is that this current proposal may be merely intended as a test case which, if successful, could serve as the thin edge of the wedge.
And this will guarantee that the entire mess repeats itself in a few years, since these scams are financially rewarded by the government.
No, it is slight of hand. Read the whole article. He is against a direct bailout, while in favor of the “behind the scenes” bailout of opening up FHA and telling the banks to take what they need.
Alphonso Jackson for President. Simple as that.
I rescind that nomination. Should have read further. A**hat in a nice suit.
In all fairness there was one Republican that jumped on board the bailout train unfortunately (and lucky for him) his name escapes me.
His name is President Bush - he supports the FHA expansion noted in later in the article.
HEY!!!!!
Anyone read that full article on “No Fed Bailout” says head of HUD.
Check the second page.
‘Most subprime loans remain viable and will not result in foreclosure,” he said, though Jackson added that there is room for the government to help in the current crisis.
Specifically, he endorsed reform of the Federal Housing Administration — a Depression-era program that insures low-income home buyers.
The FHA is set to help 60,000 subprime borrowers refinance their loans this year, Brian Montgomery, chief of the Federal Housing Administration, has told lawmakers, and quick passage of reform could mean helping 200,000 more. ‘
WHAT THE HAIL!!!!
1) spews lie that only 20% of subprime will foreclose. BullShite.
2) This is still a federal bailout. We refi all the sub-prime to FHA so when they still crash and burn, the banks get repaid out of the U.S. Treasury.
ARGHHHH!!!! And it looked like he got it, until the second page, which few will read that far, when we see it is still politician double speak for “watch my slight-of-hand while I prepare to slam my wanker into your pooper”.
Your post closely resembles one I just sent…
I guess the taxpayer won’t have to pay for the higher insurance premiums as long as there is a money press available to handle the job?
Comrade, you are a conspiracy theorist. Our gov’t would never do such irresponsible things. I suggest consulting pg 10 of the propoganda manual, the FHA is self-funding, just like social security. Repeat, the FHA is self-funding. Feel better?
So, gov says CPI is under control. Stock market goes crazy thinking that we won’t get a rate increase…
WAIT!!!! Last week the talking heads said the market was rallying on rate cut hopes, now it is rallying on lower chance of a rise. WTF!!!!
Ignore that….
On hopes of a non-raise, suddenly the dollar is back at all time lows, in half a day, wiping out the slow gains the dollar had been making.
Since we import everything, low inflation will cause inflation. Everyone is raising interest rats except us, killing the dollar, pushing up the cost of imports…. Damned if they lie about inflation, damned if they don’t.
And… the dollar hits a new all-time low, and the dow gives back over half its gains for the day, while NASDAQ and S&P turn negative.
Hello people!!! A rate cut isn’t happening. A rate increase isn’t happening. The fed’s hands are tied, cought between falling dollar and economy headed to recession.
What is that I smell??? Could it be STAGFLATION?
I’m in L.A. Let me tell you about the real inflation!!! Those Fed numbers are pure fabrication. The bailout for Subprime loans rewards people’s greed.
Responsible savers get screwed. Is it any wonder that the US saves nothing!
“US saves nothing!”
Even less than that… (-1% in the 1st quarter; negative for eight straight quarters = 2 years, for the longest protracted period since the 1930s).
http://www.americanprogress.org/issues/2007/05/econ_snapshot.html
Dear Mr. Jones, you may want to note the rest of the FHA article which directly conflicts the earlier statement made by Alphonso Jackson:
“Most subprime loans remain viable and will not result in foreclosure,” he said, though Jackson added that there is room for the government to help in the current crisis.
Specifically, he endorsed reform of the Federal Housing Administration — a Depression-era program that insures low-income home buyers.
The FHA is set to help 60,000 subprime borrowers refinance their loans this year, Brian Montgomery, chief of the Federal Housing Administration, has told lawmakers, and quick passage of reform could mean helping 200,000 more.
You don’t have to call me mister, I work for a living.
I don’t run a politics blog, and never believe much these bureacrats say. But since your interested, here are some further points from Bloomberg via the Chicago Tribune:
‘The housing department’s own inspector general, consumer advocates and Congress’s non-partisan Government Accountability Office have all expressed concern about proposals to loosen requirements for FHA loans.’
‘Secretary Jackson is pushing a bill with some bad ideas,’ Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington, said Monday. ‘Allowing no down payment is a bad idea. People should have a real ownership interest in their property to avoid delinquencies and foreclosures.’
‘HUD Inspector General Kenneth Donohue said last month that the proposal could be susceptible to fraud. He declined to comment Monday.’
I still haven’t heard any talk about a reduction of principle, and my experince has been that people walk away from a loan if the asset is worth less than what is owed.
Interesting! It’s good to see some sort of reason. Thanks!
“I still haven’t heard any talk about a reduction of principle, and my experince has been that people walk away from a loan if the asset is worth less than what is owed.”
One potential effect of eliminating downpayment requirements on FHA loans (plus a few similar proposals yet to be announced) would be to ‘increase principle’ by enabling another generation of subprime buyers to purchase homes they cannot afford, thereby propping up the low-end prices which are currently sliding due the sudden absence of high-risk subprime lending. In the bullish paradigm, zero-down loans would accomplish this by resparking home price inflation thanks in part to the unannounced taxpayer-provided guarantee for high-risk behavior of subprime buyers with no skin in the game.
Eventually, the same problems we are currently seeing would resurface (esp. overbuilding, falling home prices and low income buyers facing foreclosure), but with sufficient current price stimulus, this might not happen until after 2008.
“…introduced a new brochure today at NAR’s 2007 Midyear Legislative Meetings & Trade Expo. ‘Learn How to Avoid Foreclosure and Keep Your Home’”
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A whole brochure?! Heck, they can publish ALL the necessary information on a fortune cookie paper.
“Don’t use suicide loans, and pay your damn mortgage, and taxes.”
“Houses valued at less than $225,000 accounted for 56 percent of foreclosure filings last quarter, down from an average of about 65 percent during the two years RealtyTrac has collected the data.”
No surprise there. The homes on this price range face a double-whammy: They are the ones most likely to have been purchased using high-risk subprime loans, and also the most likely to face a dearth of support for 2005 market values, given the subprime implosion plus surviving firms’ reversion to less insane subprime lending credit standards.
I think you miss the significance. If houses under $225K have gone from 65% to 56% of all foreclosures, that means that houses above median have gone from 35% to 44%.
Me thinks this is a result of the shift of foreclosures to higher value areas, like SoCal.
Good point, and one that I missed…
“Foreclosures threaten the very communities that Realtors work to build.”
Oppss… looks like a typo.
Let me fix this for them.
“Foreclosures threaten the very [inflated prices] that Realtors work to build [so that thier comissions will be much higher].”
Better?
Good fix Darrell. About 2 years ago, I read a post by a Seattle realtor on Craigslist who said she’d been saving every single document pertaining to her RE deals for the past several years as she fully expected to be subpoenad once RE crashed.
They knew the market was full of sh#t, who knew better than them? They were on the front lines of the mess.
USA Today reported that “Condo sales have propped up residential real estate in the nation’s capital this year.”
In fact, condos in DC have been ticing up for the past serval months:
http://dcbubble.blogspot.com/2007/05/usa-today-dc-condos-relative-bright.html
Existing home sales rose at an annual rate of 6.4 million units last quarter, down 6.6 percent from a year ago, the National Association of Realtors said Tuesday.
Am I the only one who thinks this statement is completely ABSURD? How can home sales RISE at annual whatever rate when they are actually DOWN from the levels of a year ago? Are these AP journalists THAT stupid?
“‘Many adjustable rate loans are expected to require a significantly higher monthly payment following their first adjustment’ given that interest rates have risen in the past three years, the company said.”
Isn’t that a bit of a red herring? Unless I misunderstood their terms, most of those ARMs would have adjusted higher regardless of a change in the prevailing interest rate, because their initial interest rate was a subsidized “teaser” rate designed to suck people into signing the loan papers.
Right , those toxic loans were designed to go up regardless .Interest rates could of stayed the same as they were in mid 2005 and the adjustable would of gone up enough to crack the unqualified liar loan borrowers back anyway . The only thing that could of saved the borrowers was real estate still going up every year . That’s how the property and loans were sold to these people . Appreciation will take care of your increases and you can always refinance once you build equity .
i have a issue with real estate and loans being sold based on unfair and bogus investment promises .
The only way you can get people to go on bad loans is to offer them a no money up front way to get into a sure bet investment game where they net more than the monthly price of the loan .Look at the huge chunk of this RE investment scheme the realtors and lenders where taking of the yearly profit pie by all this churning of homes and loans .
A federal bailout will undermine the market system. It will be the essence of printing money to create dollars to pay for the inflated prices of the bubble of the past few years. That value is illusory. It will stay illusory, but the dollars will be there to feed it. The value of those dollars will be less, eventually.
It would be quite inflationary I think, with the vast amount of dollars being pumped into the system to sustain the prices.
This is the way third world banana republics operate their finances.
“It would be quite inflationary I think, with the vast amount of dollars being pumped into the system to sustain the prices.”
Retirees on fixed monthly pensions = bagholders. I am a bit surprised the AARP has not stepped into the fray. Maybe they are missing it…
Actually alot of the older retired people own the house outright ,especially the people over 75 . I hear alot of the older crowd starting to bitch about inflation ,especially food and medical costs .
The older crowd did not like this low interest rate market for the last 8 years because alot of them depended on interest from CD’s for income .Many of the older people (80 or older) that I talk to think America is going down the tubes .
The older people from the depression era starting 1929 that I talk to have told me that everybody was broke during the depression and people traded goods alot . Everyone was in the same boat so in a way that was a comfort .These people are very thrifty and they don’t waste anything . I also notice that they take alot of pride in doing things themselves .
Many older retired people are not into risky investments, but some I know are into stocks and bonds MBS’s and the higher yield risks .
The people over 80 that I talk to still have their minds in tact ,(alot of them having seeing and hearing problems however ).
I am also surprised that AARP isn’t stepping into the fray .
I don’t think AARP is “missing it” at all. The point is that the great majority of their members are homeowners, don’t want to see house prices fall, and therefore think government efforts to prop up house prices are in their interest. They want to keep the crazy financing going so THEY, or their children, can sell their houses for big money.
Never mind that it can’t and won’t work and in the end will make them worse off. It’s perceptions that matter.
“Foreclosures threaten the very communities that realtors work to build”, said NAR President Pat Coombs.
Whoah Nellie… the NAR might want to steer clear of any claims that they were “working to build community” over the past 10 years. The abundance of evidence suggests that they were actively pursuing a “drive prices into the stratosphere and to heck with community or anything else” agenda.
There is too much evidence out there: actively encouraging bidding wars, showing people homes priced way beyond their means, steering clients to shady brokers, outright LYING about bidding wars to get the over-bidding party going, pressuring appraisers , lying about DOMs, scare tactics - buy now or be priced out forever, the constant lies about the market even as it began to soften they STILL attempted to squeze people into homes they couldn’t afford, and God knows what else.
A great case could be made for the realtors part in contributing to the foreclosure epidemic.
Good post . The REIC better not dare say they were just getting people into homes that otherwise they could not afford it by getting them sub-prime loans . Stupid jerks ,borrowers could not afford the sub-prime loans (unless you say one year ownership on a teaser rate running up neg. equity than going into foreclosure constitutes affordable home ownership) They REIC should of been advertising ,”One year ownership ,in the bag ,step right up .”