“The Housing Outlook Has Deteriorated”
Some housing bubble news from Wall Street and Washington. The Associated Press, “Construction of new homes posted a small gain in April but applications for building permits plunged by the largest amount in 17 years, a dramatic sign that the nation’s housing industry is still in a steep slump. Even with the improvement, housing construction is 25.9 percent lower than a year ago.”
“And in a worrisome sign for the future, builders cut their requests for new construction permits by 8.9 percent in April. That was the sharpest drop since a 24 percent fall in February 1990, another period when housing was going through a significant downturn.”
From CNN Money. “Home builder confidence fell for the third straight month in May and executives in the battered sector now believe they’ll have to wait until next year for even a sluggish recovery to begin, according to an industry survey released Tuesday.”
“The survey by the National Association of Home Builders saw the confidence index sink to 30 in May from 33 in April, matching the September reading that had been a 15-year low at that time.”
“The subindex measuring builders’ view of current market conditions fell to the lowest level since February 1991, while their view of the market six months from now and their perception of buyer demand both dropped to match the 15-year lows hit in late 2006.”
“‘The crisis in the subprime sector has infected other parts of the mortgage market as well as consumer psychology, and as a result the housing outlook has deteriorated,’ David Seiders, the builders’ chief economist, said in a statement.”
“‘We’re now projecting that home sales and housing production will not begin improving until late this year, and we’re expecting the early stages of the subsequent recovery to be quite sluggish,’ he added.”
From Bloomberg. “‘It’s going to take more time’ than previously expected to shake off the housing recession, Seiders said last month. Subprime woes are costing builders ‘a lot of sales and also increasing cancellations.’”
“‘The decline in homebuilder sentiment is largely due to fears of subprime mortgage fallout,’ said Michelle Meyer, an economist at Lehman Brothers. ‘We could see a decline in demand going forward.’”
“The NAHB/Wells Fargo index of sentiment fell to 30 this month from 33 in April, the Washington-based association said today. The reading matched the figure for last September, which was the lowest since February 1991. Readings below 50 means most respondents view conditions as poor.”
“The measure of single-family home sales declined to 31, the lowest since February 1991, from 33. The index of traffic of prospective buyers fell to 23 from 27. A gauge of sales expectations for the next six months declined to 41 from 44.”
“Builders are scaling back new projects to work off new-home inventories that in March equaled 7.8 months’ worth of sales, the second highest since March 1991.”
The Telegraph. “Spain’s foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust, despite membership of the eurozone.”
“Total reserves have now fallen by two thirds from €41.5bn in early 2002. Greece and Portugal have seen a similar drop.”
“‘The current account is completely out of control,’ said Alberto Mattelan, an economist at Inverseguros in Madrid.”
“‘We have the worst deficit in our history and worse than any other country in the western world. It has not yet become a ’street concern,’ but I can assure you that it is of great concern to us economists. This will turn bad over the next 18 months,’ he said.”
“‘Where this gets serious is if there is a property collapse in Spain and the banks get into trouble,’ said Prof Tim Congdon, an expert on monetary policy.”
“The first signs of a housing slump are emerging as the ECB raises interest rates, already up seven times to 3.75pc since December 2005. The shares of Valencia builder Astroc have fallen 77pc since February, setting off a sharp slide across the sector, with knock-on effects on banks with mortgage exposure.”
“The party is ending after a near tripling of house prices since 1995. In a report, Jamie Dannhauser from Lombard Street Research, said Madrid is now making matters worse with a new law to hit property speculators.”
“‘This screams of closing the stable door after the horse has bolted. House price growth has clearly peaked and is decelerating quickly,’ he said.”
From John Berry. “As 2006 began, the core consumer price index was rising at a 2.1 percent annual rate, and then it took off, peaking at 2.9 percent in September. By last month, the rate was back to 2.3 percent, the Labor Department reported yesterday.”
“Last year’s acceleration was due to a series of large monthly increases in rents and a separate part of the CPI called owner’s equivalent rent. Fed Chairman Ben S. Bernanke and many analysts said the sudden jump in both measures of rental costs occurred when would-be home buyers decided to rent instead of buy as housing prices began to fall last year.”
“The resulting increase in demand for rental units allowed landlords to raise their prices sharply. Now the shoe may be on the other foot.”
“Owner’s equivalent rent, which carries the greatest weight of any item in the core CPI, rose at only about a 3 percent annual rate in the six months ended in April. That’s down from a 4.6 percent rate in the six months ended last September.”
“Brandeis University economist Stephen G. Cecchetti said yesterday that last year he ‘was warning that rises in OER would eventually push core inflation over 3 percent. Well, that hasn’t happened.’”
“At that time, Cecchetti said, he thought that years of rapid increases in home prices had so outstripped the change in rents that once house prices stopped rising, it would take years of rent increases to close the gap.”
“‘What I failed to see was that the combination of a high inventory of unsold new homes, combined with increased mortgage defaults could flood the rental market,’ he said. That glut ‘is holding OER down now and is likely to continue to do so in the foreseeable future. The result will be falling CPI inflation,’ Cecchetti predicted.”
“Ohio Attorney General Marc Dann, likening the subprime lending industry to armed robbers, said he wants to sue Wall Street firms because their bond sales enabled consumers to get mortgages they couldn’t afford.”
“‘If somebody was buying guns and giving them to people to go and take people’s houses at gunpoint in Ohio, we’d be prosecuting them and throwing them in jail,’ Dann said.”
“Securities firms encouraged ‘irrational loans’ to be made, Dann said, by providing a liquid market in which mortgages were bundled by the thousands and sold as securities.”
“‘I want to see the e-mails, I want to see the documents,’ he said. ‘I’m guessing somebody at some or all of these places was predicting the bottom was going to fall out.’”
“The state may seek damages from mortgage companies and investment banks even for ‘purely criminal’ situations in which borrowers committed frauds against lenders, Dann said. He cited the harm such schemes did to communities that could have been prevented if lenders had been more cautious.”
“‘My clients are certainly taking Marc Dann’s comments extraordinarily seriously,’ said Richard Gottlieb, a partner in Chicago at Dykema Gossett PLLC, which represents firms involved in home lending and securitization, including Irvine, California- based New Century.”
“Savings and commercial banks with federal charters are protected against state regulators, and charges against other lenders probably will fail, too, Gottlieb said. Still, attorneys general often ‘gain most of their leverage through the desire to avoid bad press,’ he said.”
“Lehman Brothers Holdings Inc., Countrywide Financial Corp., Morgan Stanley, and Merrill Lynch & Co. were the top sponsors of subprime-mortgage securitizations last year, according to newsletter Inside B&C Lending.”
“‘The question is who benefited from this that still has money,’ Dann said, adding he’s also weighing suits against ‘four or five’ more subprime lenders.”
From Reuters. “Ohio’s attorney general said on Tuesday he won’t hesitate to file civil racketeering charges against Wall Street investment banks if his investigation finds they had a hand in fraudulent subprime lending.”
“‘We’re going to try to find a way to hold them accountable,’ Dann said.”
“He said one legal strategy he might pursue is using the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act, which was formulated to fight organized crime. The act allows for civil claims to be filed, too, to allege fraud. ‘We’ll take the case where the evidence leads us,’ Dann said.”
‘The confidence index sink to 30 in May from 33 in April, matching the September reading that had been a 15-year low at that time.’
Anyone remember how the big builders were very pessimistic in their October 06 comments, only to almost immediately begin with the spring bounce talk?
‘Savings and commercial banks with federal charters are protected against state regulators, and charges against other lenders probably will fail, too, Gottlieb said.’
Aren’t Ameriquest, etc, non-depository?
So how is the spring bounce doing so far this year? I guess there is too much bad press scaring potential buyeers with talk of dropping prices and increasing foreclosures.
With regards to holding lenders accountable, this is the New America. Big business is seldom if ever held accountable for much of anything, although as it becomes more clear that these activities played a substantial role in the comming economic downturn this sentiment may change. I am always amazed when I hear people talking about how regulation is unnecessary and corporations will serve the best interests of the greater good. Had regulations been in place preventing lenders loaning more that people could afford to repay and to verify income, credit etc, we would not be even close to where we are today.
“So how is the spring bounce doing so far this year?”
In areas that I am watching (Pasadena CA area, High Desert area, and Central Coast area), worse than last year’s “spring bounce” (aka the “soft and sweet, wise and wonderful, ooh, our mystical, magical Spring Selling Season”). Inventories are 20%-50% higher than the same time last year.
So sad.
Hey!, I’ve got an idea! How about we all have an expectation that we take care of ourselves?
Loan doctoring aside (where LO’s change/alter applications unbeknownst to the borrowers), doesn’t each individual have an obligation to read and understand what they are signing?
I’d rather we enforce the laws on the book with regard to fraud. I’d rather we enforce testing in schools with regard to math skills so that borrowers can understand interest rate resets. In short, I’d rather that people get a fu*king clue about how life works so that I’m not held personally responsible vis-a-vie higher taxes for their screw-ups!
I don’t give a shit that lenders offered people more money than they could afford to pay back. It is up to each individual to decide their path in life and what they choose to do. What a bunch of crap this idea of “big brother” having to look over our shoulder and legislate intelligent behavior.
Here is a friggin NEWS FLASH! People will fu*k you financially if you let them! How’s that for a “big idea”? Anything NEW here?
Holy Shit! Let the friggin market adjust and let’s be DONE with it. The dolts that believed trees grow to the sky can spend the next 30 years in servitude or WALK, I don’t care! What I do care about is having the friggin gov’t A). Add more stupid legislation to the 5′ stack of rules we all have to live by already. B). Bailout stupidity with MY tax money!
Rant off.
I agree that people should be responsible for their own actions. But that also needs to apply to predatory lenders, who basically lie, cheat and steal. I don’t want a nanny state, but I also believe that capitalism without sensible regulation leads us back to the days of the robber barons, a path we seem to have taken these past few years.
I agree with you.
It’s similar to this child snatching case in Europe. It was probably unwise for the couple to leave their small children unattended in a hotel room. However, that does not absolve the people who abducted her.
I agree with you.
It’s similar to this child snatching case in Europe. It was probably unwise for the couple to leave their small children unattended in a hotel room. However, that does not absolve the people who abducted her.
“predatory lending” is an oxymoron.
This is the mentality that big corporations looooove. Talk about stupid - the people who believe that the free market will take care of everything. This is the mantra of Republican propogandists (you know ‘em, Limbaugh, Hannity, etc….) whose goal it is to fool the masses into believing this fallacy. Oh, sure, the companies will do just fine all at the expense of the stupid ass American working person who worries about his piddly ass taxes while the corporations and the rich folk are afforded tax breaks and loopholes galore. If you think you don’t need government regulation, you’re stupid - just the way the corporations like you. (And this is coming, btw, from a successful businessman who can’t believe how easy it is to make money once you get alot of it….)
You cannot legislate morality!
If you didn’t protect people from the consequences of their own actions, we wouldn’t need to legislate morality. People would’ve learned it the hard way.
Quote: “What a bunch of crap this idea of “big brother” having to look over our shoulder and legislate intelligent behavior”
Sad thing is that the same people who want “Big Brother” to help them out of the mess they created are also the same people that don’t want “Big Brother” interferring in their lives and taking away their liberties (because, apparently, that’s what he does best.)
Can’t have your cake and eat it, too.
regulations ?
not the cure
but risk w/o bail
that’s the cure
the regualtors you admire brought you this are are planning to bail folks at taxpayer expense
flatffplan:
I don’t support bailout. I do support *sensible* regulation. When the fox is guarding the chicken coop, the chickens become lunch.
I’m with you, Nick.
As a left-ish liberal-ish voter who thinks **lenders, regulators and related firms** are the primary culprits in the credit bubble, I will still fight all the way against a bailout.
If folks think the masses need to be bailed out, let the lenders (who profitted all these years) do it.
Just because we believe in common-sense regulations does NOT mean we want to bail out the morons. I think they deserve to lose “their” homes to foreclosure. Hopefully, they will have learned a lesson from all this.
well said
Regulations are helpful; it’s really prevention versus cure. Problem is we have all of these people f-ed over; call it irresponsible, call it stupidity, but the lenders have clearly taken advantage of it. Mind you, I don’t think anyone should be bailed out, but the power of the banks (and their lawyers) and other powerful corporations without sufficient regulation will always end up hurting the little guy.
“So how is the spring bounce doing so far this year?”
In Phoenix, MoM existing home sales dropped 9% from March to April. They had to go back to 2001, when we had 20% fewer people and a very bad year, to find a worse April for total home sales.
Other than the 2001 blip, you have to go back to ‘97 to find an April with fewer existing home sales, when the population was 25% lower.
This is presented as a “return to normal” level.
A few days before these numbers, we were softened up for a FHA bailout with twin stories of how people are being hurt by tighter lending standards. One describing how realtors are being hurt, and the other on how unqualified buyers are being locked out.
Odly, the local paper never talks about the affordability index, what % of our extra million people are currently employed building houses, the 11 month supply of houses now on the market, the huge number of houses bought here in 2005-2006 with sub-prime and Alt-A, etc…
Just “turn the money back on!!!!” and “Nothing to see here, so move along to your closest realtor to buy a home” articles.
Have a client who’s looking to buy in Phoenix, I did a little research and what I saw was hilliarious. 25k and you can have my house… Is that really happening in Phoenix.
The banks aren’t protected from people refusing to do business with them. Bad press is good, Wall Street needed this.
“Anyone remember how the big builders were very pessimistic in their October 06 comments, only to almost immediately begin with the spring bounce talk?”
I’ve never seen an industry so knee jerk in their over reaction to the tinyest bit of good news, in the face of overwhelmingly bad fundementals, especially when you consider the long “business cycle” of the industry.
I have heard a person falling from great height will hold onto anything all the way to the ground. Some kind of foolish instinct I guess.
RICO-FICO
FICO-RICO
Very Blurry.
REICo
Spain is toast as Brits are starting to bag the second home in Spain thingy
The Telegraph. “Spain’s foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust, despite membership of the eurozone.”
What exactly does this quote mean? Are they talking about low equity against outstanding loan balance or something? Is Bank of Spain a division of Countrywide… what’s going on here?
ajas, if you read the full article you’ll see something about eurozone regulations that prohibits countries to bail out each other. It looks as if Spain would be on its own if things got really serious, although I can’t say I know enough about this financial stuff to tell if that’s the case. But it does look a little scary.
It looks to me like a typical eurobond crisis - foreigners, in this case from UK, who have British pounds - a separate currency, invade a market and bid it up. The domestic banks in Spain overextend the credit during the boom, and the credit ends up being in the foreign currency. When everything cools, comes the time to pay up, and the banks are in a crisis.
It happens to a lot of smaller economies, for example Chile in the 80’s, Argentina in the 90’s. Russian default was also caused by foreign currency speculators.
The Spaniards detest the Brits. Wait till they find some excuse to start nationalizing all those ex-pat houses.
“The subindex measuring builders’ view of current market conditions fell to the lowest level since February 1991, while their view of the market six months from now and their perception of buyer demand both dropped to match the 15-year lows hit in late 2006.”
I am sure this is just a pure coincidence, but the national economy was in a recession in February 1991.
http://www.nber.org/cycles.html/
Good point.
“He said one legal strategy he might pursue is using the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act, which was formulated to fight organized crime. The act allows for civil claims to be filed, too, to allege fraud. ‘We’ll take the case where the evidence leads us,’ Dann said.”
Organized crime? That is so cool.
“Organized crime” = a natural consequence of excessive deregulation
I think it’s a bit of a stretch to call what is ongoing and imploding, organized…
RICO is a terrifying tool to use. Treble damages in civil court! All that seems necessary is to show a pattern of deceit, fraud. RICO killed the Expos move in 2002 and Selig settled out of court.
Killed Drexel. Probably the only thing that could have brought those guys down.
big gov lov is the perp
hud
fnm
fre
fha
the triple damages will come from taxpayers
Amen, A-I!!!!!
Alad-
I think it’s a bit of a stretch to call what is ongoing and imploding, organized
I must respectfully disagree.
The collusion and conflict of interests I have seen between crooked L/O’s; the real estate agents who black-mail them by threatening to not bring business unless a certain appraiser is used; and the appraiser who always brings in the number to corner a selling market is easily on par to any scam devised by organized crime.
Just ask Tony Soprano’s FHA appraiser, Victor…
You remember how shocked you were when arthur anderson & enron had their shredding party…
You ain’t seen nothing yet~
I nominate NAR for a RICO investigation.
“disorganized crime?”
housing bubble was the dream of the “regulator” men
1997? housin fo everyone act
2003 same
hud
fha
enopugh regulation for you ?
Get rid of “no-doc” loans forever and who would suffer? Me? You? Capitalist society? Allowing no more no-doc loans ever again would hurt no one. That is the kind of missing regulation we are talking about. A good comparison would be to scald protection in plumbing fixtures. That not all problems can or should be fixed is no reason for paralysis.
Actually “organized crime” = a natural consequence of excessive regulation
The more you regulate an economic activity, the more underground and unregulated it becomes.
I was just going to say the same. Organized crime has always had their best “profits” during times of extreme regulation. Think Prohibition, war on drugs, gambling, prostitution, etc. Just like borrowing money, all these “bad things” are personal choices. Let the FBs suck on it.
I think the government has more important things to do other than baby-sit money lenders. If you can prove that a lender was committing fraud, then go after them. Plenty of ways to do that with the existing laws.
“The more you regulate an economic activity, the more underground and unregulated it becomes.”
So you would recommend that we abolish any vestiges of the rule of law and let the unfettered market have full say in who does what?
Regulating and outlawing are two different things. The government regulates alcohol consumption as a matter of public protection; otherwise children would be drinking and we’d have drive-through bars. And people would be stupid enough to partake. Same deal with lending, and, like alcohol, the victims are not just the borrowers, but good people who needed a house, got a conventional mortgage and now have a house worse less now then when they bought.
Man a drive through bar. That would be sweet.
Well said, Mikey(2).
Isn’t that legal in Texas?
Yes - plenty of Beer Barn’s in North Texas. San Antonio has curb service at many ice houses.
mikey…
Ever been to japan and see a beer machine ???
Chris
Ever been to japan and see a beer machine ???
Used to have them in the Navy barracks in San Diego.
So, for arguement, say a bank or lender had a regulation that required (gasp) that it verify income from potential borrowers. In what manner would this go underground? Would we have bank managers out back by the dumpster with briefcases full of bank cash?
I think we are taking about some really common sense regulations here, and an industry which has demonstrated it cannot handle the responsibility of lending large sums to people.
individuals interested in committing fraud, will do so regulated or not.
the_voz,
Sure, you will always have a certain small % of scumbags that will always want to break the law, no matter how reasonable. The problem is, when all regulations go out the window –even sensible ones, like requiring income verification & down-payments– we all suffer. Regular people suffer in the form of an insane credit/asset bubble and being persistently outbid by SDCIA-Jeff fucktards with toxic loans.
Some of us just want a fair opportunity to bid on housing-for-shelter without having prices grossly distorted by reckless “privatize profits and socialize risk” lenders and their idiot army of SDCIA-Jeffs and Casey Serins.
Casey & Jeff = Mutt & Jeff?
‘Some of us just want a fair opportunity to bid on housing-for-shelter without having prices grossly distorted by reckless “privatize profits and socialize risk” lenders and their idiot army of SDCIA-Jeffs and Casey Serins.’
Very well said! I hope the ‘Save our Homes’ crowd on the left side of the aisle hears you.
Sounds like big bad Dann is about to open up a can a “whoop azz” on these banks, brokers, mortgage lenders, Wall Street, etc. Is this guy related to Housing Wizard?
Yo! Big Dann go hit Bronzilla in the ballz for me. Countrywide has got to be guilty of something (insider trading/market manipulation/breach of fiduciary responsibility/fraud) and they got the money or at least a capitalization! Tak’em down and hang’em high!
NPR did a segment on Ameriquest. Former employees described all the shady things they saw being done (transcript below; do a google search w/ npr ameriquest ). There’s plenty of skeletons in these closets. Dann is probably getting inspiration from the (benefits reaped by) Eliot Spitzer.
———————
STEVE INSKEEP, host:
It’s MORNING EDITION from NPR News. I’m Steve Inskeep. Good morning.
Many people who are losing their homes to foreclosure say they were lied to by the companies that sold them their mortgages. Ameriquest is one of the biggest of those lenders. It was investigated for predatory lending by state prosecutors, and the company now faces a class-action lawsuit from borrowers.
NPR’s Chris Arnold talked to former employees of the company who offer a window into the hyper-aggressive practices that allegedly spread through the subprime lending industry during the housing boom.
CHRIS ARNOLD: A few years ago, Ameriquest was a fast-growing lender with 200 branches and thousands of employees calling and convincing people to refinance their homes. It had splashy ads on during the Super Bowl. The founder and owner of Ameriquest, Roland Arnall, became a billionaire. Last year, President Bush appointed him to be ambassador to the Netherlands. But amidst all that came allegations of predatory lending, and even former employees now say the company’s fortunes were built on a culture of deception.
Mr. TYSON RUSSUM(ph) (Former Employee, Ameriquest): I didn’t really realize that until somebody called up and threatened to come up and shoot us all in the head.
P’cola Popper ……I think that the existing laws cover the crimes that have taken place ,so actually other than more disclosure requirements for lenders. I’m not really in to over kill . I think these low down, no doc stated loans were stupid without insurance and tight underwriting/tight appraisals .
You just don’t give sub-prime borrowers low down loans ,especially if they don’t qualify income wise .The guidelines were violated (fraud on the loan application/inflated appraisals), the risk ratings on the loans were false. The secondary market is just discovering the degree of the crimes now .
The situation went beyond fraud liar loans because of how corrupt things got in loan offices . We had crime rings ,friendy RE agents /loans reps, builders and countless borrowers engaging in inflated appraisal for cash back schemes .When crime is so rampant that it starts to actually set the market price of real estate than its a threat to the stability of the system the same way a robber of a bank is .
Massive fraud is not a free market system .A free market system implies no unfair advantage or violations of laws . Look at how the liar speculators and liar unqualified buyers drove up the price of real estate .its like false interference with the market contraction that would of taken place in 2002 (by faulty fraud loans )served to help extent the already inflated market for another 4 years . People aren’t going into foreclosure because they lost their job ,they are defaulting because they were fraudulent loans ,or they were cash out deals ,or a speculator never intended to live in the property (so the loan was not underwriter in consideration of that higher risk ).
Yes I’m into law and order . i don’t like my tax dollars bailing out criminals , liar unqualified buyers , and liar greedy speculators .If you get rewards for crime you continue to repeat it .A society that does not dole out reward and punishment in a just manner is doomed to fail and fall .
I’m with you on this one HW. Well said.
Thanks auger-inn
HW-
Good post, brother.
Marc Dann for President!
Marc Dann for President!
Marc Dann for President!
Hit the Wall Streeters who have been pocketing huge profits and
enabling and encouraging reckless lendings, that wreaked communities
after communities. They are the ones with money, not the bankrupted subprime lenders.
Fire all the regulators who were “asleep at the wheel”, who were protecting Wall Street interests.
Of course Goldman Sach’s Paulson will block all these attempts.
of course he is just full of hot air.
Whoa! Whoa! Whoa! Since when is it a crime to make money in this country by taking advantage of people’s greed/stupidity? If I encourage you to give me $1000 for an asset that will be worth $500 tomorrow and you are stupid enough to do it, what law am I breaking? That is all Wall St did. They (like you say) encouraged people to live beyond their means. They didn’t put a gun to anyone’s head.
I’m on your side Ed. I exploit my clients’ ignorance, and their impatience to Have It All today. I don’t need to lie to them: they lie to themselves. The big-bucks borrowers who have priced me out of buying a decent house should now get out of my way! - via foreclosure if that’s what their contracts call for.
“Since when is it a crime to make money in this country by taking advantage of people’s greed/stupidity? ”
- That type of thinking is why some powers to be are not interested in providing a financial education in our public/private schools.
I’m with Ed on this one…
Good point.
If this was all about people buying half million dollar yachts they couldn’t afford, there would be no sympathy. But because it involves people “losing their homes”, we’re all supposed to cry for them. Which is ridiculous. As many here have pointed out, these homes weren’t “theirs” in the first place, if they weren’t paid off. Second, as you say, a contract is a contract, all else equal. Third, it’s not as if these people “losing their homes” can’t just move to a cheaper place. Call me when they’re starving, then maybe I’ll give them a job. Until then, it’s a legal matter between them and their lender — not a matter for gov’t aid.
The problem is public perception. Banks and other lenders have been held out as bastions of public trust. In addition to lending money, the banks hold our money, protect it with their big vaults, etc…. It’s kind of like the priest who has sex with a parishoner; do you blame the woman who got caught up in the moment and believed the priest when he said that the Catholic church permits sexual relations between priests and parishoners under certain circumstances? How about the millions of people who undergo risky surgical procedures from the profit-driven doctors? We can’t expect people to be experts in everything; we can only ask for their due diligence.
Ed ,its ok to encourage spending ,all retailers try to encourage spending ,but the line is drawn when you commit fraud in order to buy that product . If a person overpays for something ,yet they can afford it ,it’s just a stupid move .If a person commits fraud in order to buy that product than it’s a problem .
Ed: If I encourage you to give me $1000 for an asset that will be worth $500 tomorrow and you are stupid enough to do it, what law am I breaking? That is all Wall St did.
Actually, I think that’s what homeowners did to mortgage bond holders. The bond holders gave homeowners $1000 cash for mortgage bonds that might be worth $500, if that.
I hope everyone who wishes to see brokers and RE’s held accountable realize that the home sellers who were represented by those brokers and RE’s are liable for the damage done to the buyers.
Sellers are liable because they signed a contract authorizing the broker/RE to represent them.
Let’s not have any sniveling here when sellers start to lose their bank accounts, properties and cars.
clearview ,if a seller did not engage in any fraud ( cash kickbacks to the buyer ),and they just put the house on the market ,and the features of the house were advertised fairly at the market value at the time ,they are not guilty of any crime IMHO. If the REIC/lenders inflated the entire market by faulty lending and hit the market with fraudulent appraisals ,they are to blame . The seller usually have nothing to do with where a buyers goes to get a loan .
I would agree that if a builder was in collusion with the “special lenders” to put unqualified appliciants into a housing project in order to sell that tract out, than maybe that could be considered bad faith or fraud . Just a normal seller marketing a property trying to get the highest price the market will bear ,(with no hidden side agreement or fraud to the lender ) is not committing a crime . Often times a seller has no knowledge of the lies or sales puff the real estate community is telling buyers to get them to buy . What about the National NAR ad campaign to get people to buy . The seller usually fills out a disclosure form declaring the material facts about the property also. Builders that have defects in their building are liable you would think . Just my 2 cents ,
I have a dream…a perp walk featuring a realtor cuffed to a mortgage broker cuffed to an appraiser, all wearing orange jumpsuits and convicted under RICO.
There’s popcorn somewhere in the dream, I’m pretty sure.
“‘What I failed to see was that the combination of a high inventory of unsold new homes, combined with increased mortgage defaults could flood the rental market,’ he said. That glut ‘is holding OER down now and is likely to continue to do so in the foreseeable future. The result will be falling CPI inflation,’ Cecchetti predicted.”
I am wondering if his prediction factors in the policy response?
His last prediction didn’t pan out, by his own admission. Why hold stock in this new one….
Because he’s learning from his mistakes, and has the balls to admit when he’s wrong, rather than cheerlead. Haven’t you ever F’d up?
CPI will be going down?
Does this mean mortgage rates will start going down, possibly seeding another housing bubble?
No, because falling home prices do not exactly encourage buyers, who are better off waiting until prices settle out. Witness Japan over the period from 1990-2006, when negative inflation (aka deflation) accompanied by rock-bottom interest rates was not sufficient to respark a property bubble. And I suspect our property glut is worse — 2m+ vacant homes were mentioned in the last report I saw on the subject.
Wait until it gets to 6-10 million “units” unsold….then see them sweat.
Glad I have a lousy 53K mortgage now and did not go for the “spin” when my credit union wanted me to refinance (HELOC). I can sit here an lose 30-40% of my equity and still be in the “black” when I sell this place.
The 250K Pultes down the road are empty and the for sale signs are rotting in the sun.
“The 250K Pultes down the road are empty and the for sale signs are rotting in the sun”
Sounds like poetry! What’s the next verse?
Oh Yeah! I almost forgot! How IS Pulte doing? Pulte rang the bell sort to speak.
Roidy
The empty Pultes down the road from me go for $1m+…
“Glad I have a lousy 53K mortgage now ”
Dude, pay that puppy off in two years!
Stucco-stand by for news-FLASH- Orlando sales from may 1-May 16…..ready, 499…we are so toast here. Luvin it.
I don’t know about it lowering mortgage rates (plus I don’t think it would help at this point), but it does seem like it could give the FED an excuse to lower rates. “Inflation” could be seen to be “moderating”.
“give the FED an excuse to lower rates. ”
historically, rates are already extremely low…
seems to me they have been trying to get and keep them at a level where they have the ability to do something meaningful, like after 9-11, in the case of a true emergency
FEDs not gonna need an excuse to lower. as the DOW bubbles over the top through the summer, and housing continues the death spiral.
FED cuts after the SEPT/OCT stock market crash, and recession is “formally announced”
Goldilocks better be loading up on porridge and sleep, the bears are coming out of hibernation in Q4……..look out below.
There is disinflation as long as inflation is not exported from China and Japan, but China and Japan are starting to export inflation. I do not foresee any deflation the rest of the world GDP is expanding in real terms greater than 5%. The US GDP has dropped from 11.2T in 2000 to 10T in 2006 (not adjusted for inflation, but adjusted to the EURO).
RE CPI, I started thinking about Stagflation (increased inflation with a stagnant (high jobless rate) economy) again…
http://en.wikipedia.org/wiki/Stagflation
“As a policy matter, there is one school of thought that the best policy mix is one in which government stimulates growth through increased spending or reduced taxes while the central bank fights inflation through higher interest rates. In reality coordinating fiscal and monetary policy is not an easy task.”
Hmmmmm:
Unbridled war spending and social programs spending (by Republ;icans no less). Check.
Lower taxes. Check.
Higher interest rates. So far, higher than some (the “but the CPI is so low” crowd) would like .
Any thoughts on continuing to spend like drunken sailors while keeping interest rates high to fight off/prevent stagflation? What could possibly go wrong?
Though we are going have difficult times, it is not going to be a repeat of the 1970’s. The world just doesn’t work that way. Thats why I don’t thing that stagfation is going to happen. The 1970’s were not a repeat of the 1930’s, even though both decades were times of economic woe. Economist in the 50’s and 60’s had studied the depression, thought they knew how it could of been prevented. The policies of the 70’s were based upon preventing another great depession. Those policies caused the great stagflation. In a way an inverse of the great depression. We are not in the world of 1970 or 1930, so you can’t use that historical experience to predict the future. This credit bubble unwinding is more like the panic of 1907, rather than the great depession or the 70’s stagflation.
Duane -Right on ,the current problem is more like the 1907 Panic .
1907 Panic Summary
(1) Based on a credit crunch
(2) Money became extremely tight
(3) Caused Congress to form the Federal Reserve System by 1913
(4)Root cause -over expansion and poor speculation/bank scandals lead to a stock market crash and bank run and money became extremely tight .
(5) J.P. Morgan went a long way in preventing the crash by causing dollars to come back in the market .
“‘I want to see the e-mails, I want to see the documents,’ he said. ‘I’m guessing somebody at some or all of these places was predicting the bottom was going to fall out.’”
I’m predicting some of these same somebodies were planning ahead for predatory exploitation of the foreclosure boom which they helped to create and which is currently underway.
Seen the latest DiTech commercials on TV? The woman asks the viewer if they had one of those “adjustable rate loans,” and are now feeling the pain. Answer to your problems? Refi with DiTech of course! Never mind that DiTech was an enormous player during the bubble. Lost another home to a crappy DiTech loan!
I heard that ad this morning. It drives me nuts. One of the lines is “did you get one of those adjustable rates to qualify”. Doesn’t that imply that someone considered your income before they approved a loan (and, of course, that they considered it only under the initial payment amount)? Does anyone think that this much thought went into handing out loans under the old paradigm? They just stuck people into loans that gave really high fees. I don’t think income had that much to do with it.
Sorry, bad mood today. I’m getting sick of my 1 bedroom apartment. Looking at waiting another 3 years or more to get into something nicer is making me grouchy. When are they going to tighten up lending standards!!!
I know! Every time she asks the question, I always add, “…Y’know, the ones we were selling like mad a couple of years ago?” It infuriates me that they think people don’t remember that they were pushing those toxic loans as hard as anyone…
Has anybody noticed the decided uptick in realtor commercials? Saw them back-to-back last night. REMAX and the Century 21 and then 5 minutes later, Century 21 again. Gonna have to get a TIVO…
roger that, gotta sell to some dimwit……increased trolling for GF through the networks, masterfull stuff
“‘If somebody was buying guns and giving them to people to go and take people’s houses at gunpoint in Ohio, we’d be prosecuting them and throwing them in jail,’ Dann said.”
“Securities firms encouraged ‘irrational loans’ to be made, Dann said, by providing a liquid market in which mortgages were bundled by the thousands and sold as securities.”
“‘I want to see the e-mails, I want to see the documents,’ he said. ‘I’m guessing somebody at some or all of these places was predicting the bottom was going to fall out.’”
“The state may seek damages from mortgage companies and investment banks even for ‘purely criminal’ situations in which borrowers committed frauds against lenders, Dann said. He cited the harm such schemes did to communities that could have been prevented if lenders had been more cautious.”
Sounds like this dude fancies himself to be the next Eliot Spitzer, maybe with national political aspirations. These chest beaters are so easy to see through. Next.
That was my take, too.
Yeah, that was my first thought also. Except that Spitzer only raked the crooks over the coals once he had all the evidence. Then he would come out and say “Hey look what these guys did! I know, because I’ve gathered all this evidence.” This guy doesn’t sound like he’s done an investigation yet, just that he’s pretty sure if he did one he’d find lots of crooks.
Which is true, and I hope he finds them, but right now he sounds like a jackass going after some duke lacrosse players.
Maybe, I don’t know enough about the guy to say.
But this may be an Ohio-oriented thing. The government in Ohio has suffered a great loss of respect (to the extent it had any) under the previous administration. During the last election, the Republican leaders of the state suffered a nearly complete sweep from office. The prev Gov (Taft) had the lowest approval ratings in the nation. Then the scandal with the state’s money going to a coin dealer with close political ties. Finally, then Sec of State Ken Blackwell had, in the eyes of many in this state, a material hand in orchestrating the last presidential election in the state, the state that narrowly gave Bush the election. Blackwell then ran for Governor last fall and lost badly.
So the newly elected Democratic leaders of the state are eager to show the voters that they are listening to the concerns of the populist, as opposed to what the voters felt about the previous administration.
I expect to hear a great deal of saber-rattling from Ohio as the new administration tries to build broad populist support. As to substantive actions, I expect very little will come of it.
Dann = Tool. Look at the “argument” he is making. He attempts to rely on an emotionally charged, but completely irrelevant and actually misleading term “gun.” Nevermind that the people actually doing the evictions are sheriffs with guns. We ignore the sheriffs why? Because they are operating under authority of the law. Who else has been operating within the law? Why, everyone. Sure, it stinks, but nothing was illegal at the time. Everyone at every level was greedy, but one may be greedy and still be within the law.
As for the argument that there has been “damage” to the “communities” for which the state should be entitled to recover, can he itemize? Can he quantify? Why is it the state who is suffering? Hasn’t the state done more damage to communities with its zoning laws than anything lenders ever did?
There is nothing to this case. No cause of action, no damages, no compelling state interest. Ergo, Dann is a publicity seeking tool. nothing more.
There was an article in the el lay times about a sherrif that evicts folks from their houses, that have been foreclosed on…
Could be one of the most dangerous professions out there.
After a few county sherriffs and servers get shot and killed, the foreclosure preceedings will stop.
You can squat then because several million p.o. ed FB’s will want to shoot the first official to take away their homes.
This is going to get ugly…..living in a place that you bought for 500K and is worth maybe 250K now, ARM’s resetting, payment, taxes and insurance going through the roof, gasoline 5 dollars a gallon in a Hummer to a cube farm job that will dissolve away in this recession, and then this process server comes to take your house….
I see dead people.
/sarcasm off
Only a little OT, Yahoo/AP:
“Housing slump continues in April”
http://news.yahoo.com/s/ap/20070516/ap_on_bi_go_ec_fi/economy
“Even with the improvement, housing construction is 25.9 percent lower than a year ago. And in a worrisome sign for the future, builders cut their requests for new construction permits by 8.9 percent in April. That was the sharpest drop since a 24 percent fall in February 1990, another period when housing was going through a significant downturn.”
Two things:
1. I’m seeing the phrase “worst since 1990″ more and more. It doesn’t bode well for the “things will only get better from hear” crowd.
2, Even with falling home construction, the builders are still adding to inventory. It’s like watching a train wreck in slow motion.
“better from HEAR” = “better from HERE”. Dang!
we’re just getting started… If the mother of all global credit bubbles unwinds, there will be blood on the streets (literally and figuratively) like we haven’t seen in a long time.
I’m waiting for the phrase “worst since 1933″ to start to be used more often. Early 90’s was nothing.
Might have been nothing in terms of blood in the streets, but the Brooklyn co-op I was renting at the time had been purchased by my landlord for about $80K and you coiuld buy similar units for $32K by ‘95. That’s a 60% price haircut.
Dummest fininacial thing I ever did was not buy a 2 bedroom in that building. And I had just paid off my student loans too…
The U.S. Mint only made Cents and Half Dollars, in ‘33…
That’s how dead things were.
“Ohio’s attorney general said on Tuesday he won’t hesitate to file civil racketeering charges against Wall Street investment banks if his investigation finds they had a hand in fraudulent subprime lending.”
“‘We’re going to try to find a way to hold them accountable,’ Dann said.”
Glad to hear someone in the justice system plans to go after the subprime kingpins.
“Glad to hear someone in the justice system plans to go after the subprime kingpins.”
Ohio’s attorney general should be careful what he wishes for -);
If this starts to happen, I think price declines will start to seriously accelerate. If lenders are unable to sell off their crap mortgage paper to Wall Street, the tightening will begin in earnest. We’ll be back to downpayments, cash reserves, no credit card debt, income verification, etc. You know, the good old fashioned standards of just 10 years ago.
Sh-sh-sh-sh…
Oh please. These guys all are looking at the main chance (political future); they could care less about the idiota population in their states.
I think we can all see the funny side of it though. I mean, it’s obvious that wall street has been trying to play the system in the form of bailouts, so this is just fair turnabout.
Also, I bet they didn’t see this one coming.
Sure they did. They’ll pay their fines which will amount to chump change in comparison to the profits they made. The chest beaters will get on TV and go on to run for Congress. Everyone at the top will be happy and the screwed will remain screwed.
Good luck. This is the same old thing as the SL scandal. The cash is gone, a small percentage of folks will get killed, and the rest of us will either pick up the tab through a bail-out (god I hope not) or lump it if we over extendend ourselves.
For supposedly intelligent people our Legislators are amaizingly slow on the uptake on this stuff. The REIT managers moved out of residential and into commercial real estate in huge numbers more than a year ago.
“small percentage” = “wishful thinking”
http://www.mortgagefraudblog.com/
I guess this has been posted before but lots of info here too…..
Thanks for reminding. Another case from the above web site.
He’ll get out of jail in 5 years, and $17 million richer. Every Joe 6-pack
should be doing this.
Man Sentenced In $17.5 Million Mortgage Fraud Scheme
Jeffrey Tyler Wine, 28, Kansas City, MO, was sentenced in U.S. District Court to five years in federal prison without parole. The court also ordered Wine to pay $4,946,748 in restitution. The business owner was sentenced for a $17.5 million mortgage fraud scheme that involved 280 residential properties.
Last year, Wine pleaded guilty to mortgage fraud conspiracy and money laundering. The defendant admitted that from November 2001 to May 2005, he conspired with others to defraud mortgage lenders by inducing them to loan victim-investors $17,558,440 to purchase 280 residential properties.
Let’s not forget the “investigate Casey” petition:
http://www.petitiononline.com/serina2/petition.html
Economy, this relates to the housing downturn leads to large drop in consumer demand, which leads to recession:
“U.S. could still grow 2.7 pct 2007: adviser”
http://news.yahoo.com/s/nm/20070516/bs_nm/usa_economy_lazear_dc;_ylt=Ar6scFvsWyE4Tb2URC1SauiyBhIF
“Weaker exports and a steady slide in spending on homebuilding helped slow U.S. growth to an annual rate of just 1.3 percent in the first quarter, its softest pace in four years.
“We could still make 2.7 percent,” Lazear, chairman of
President George W. Bush’s Council of Economic Advisers, told reporters at a briefing in Paris.
“I mean obviously it’s harder when you have a 1.3 percent first quarter and you have to build on that.”
…
Second quarter growth would depend partly on the performance of the housing market, Lazear said.
“We don’t think it’s over yet in a sense that the declines that have already taken place (in housing) will continue to show up in this quarter,” he said.
“But there is some evidence that there is a bottoming out.”"
—–
I used to have a management position in the video game business, and it was always funny/alarming/depressing when a team got behind schedule (which was almost always the case). Without fail, there was always some manager (that *had* to hit his numbers) that would cry out “well, we are behind now, but if we work really hard and really smartly, we can make it all up and get back on schedule”. Mind you, it is not very often that a team is NOT pulling overtime, and we ALWAYS at least TRY to work smartly. So the jist of it was that the past performance (just weeks ago) was no indication of how much we could get done NOW. In other words, they were saying that not only could we get the remaining stuff done in the time we originally spec’d, but we would actually do it FASTER than we had originally spec’d. Again, this is right after we had been making progress SLOWER than originally scheduled.
Perhaps the economy would do better if we all got out and pushed?
A good friend of mine works for EA.
Sony bought Sigil which I think was based in SD. According to rumor, the entire Vanguard staff which I think is almost all of Sigil was pulled out into the parking lot and fired.
If true, that is a lot of the bright young things with nice salaries out of jobs.
Ahhh I remember those type of summary executions well. My favorite is to lure the employees to a resturant for a “meeting” then lock the doors and disable their accounts. A day or two later they can pick up their belongings in a brown cardboard box.
A close friend of mine was stiffed out of 4 weeks of pay and all of his accumulated vacation time when the video game company he worked for went other.
I think that the mortgage industry is starting to go through that sort of stuff right now…same type of industry (balls to the wall fast and lose with best practices etc.)…the interent companies were the same way.
Oh yes… watched it happen to others and thankfully I got out of tech before it happened to me.
I just find it interesting that there are 100 less people in Carlsbad with high incomes which may have to sell in a down market.
That’s true of almost any engineering project, arroyo.
“‘The crisis in the subprime sector has infected other parts of the mortgage market as well as consumer psychology, and as a result the housing outlook has deteriorated,’ David Seiders, the builders’ chief economist, said in a statement.”
Chief engineer at Yugo: “We thought these cars would last forever, but then the cheap parts we used started breaking, and next thing you know, we have all these Yugos broken down on roadsides from coast to coast. I don’t know how anyone could have predicted this.”
LOL. Thank’s… about spilled my soda all over my keyboard with that one.
That was a good one, AALL!
(It’s hard to see the coastal real estate bubble zones from KC…)
===========================================================
Fed’s Hoenig sees economy picking up
By MarketWatch
Last Update: 11:29 AM ET May 16, 2007
DENVER (MarketWatch) — Federal Reserve Bank of Kansas City President Thomas Hoenig on Tuesday night said that he expected the first quarter would be the low point of the U.S. economic slowdown and the economy would pick up from here.
“My own outlook (is) the economy will slowly, gradually increase over the course of the year from our current level of 1.3% towards 2% and above 2% over the course of 2007 and … a higher growth rate going into 2008,” Hoenig said.
The Federal Reserve’s “modestly firm” current federal funds rate target of 5.25% is designed to “bring the inflation rate down but it is also designed to allow the U.S. economy to move forward and expand gradually over time,” he said.
Hoenig, a voting member of the FOMC this year, spoke at a U.S. economic forum in Denver.
Hoenig dismissed fears of a recession, saying the consumer “has continued to be a strong supporter’ of growth.”
http://www.marketwatch.com/news/story/feds-hoenig-sees-economy-picking/story.aspx?guid=%7BB98A7C8F%2DFA74%2D4459%2DB62F%2D6A2C14D8B0EB%7D
‘Hoenig dismissed fears of a recession, saying the consumer “has continued to be a strong supporter’ of growth.” ‘
Hmmmm…. I’ve been told that autos and fashion apparel are the “canarie in the coal mine” for retail sales. They are the easiest to trim way back on.
Reports are that auto sales suck. Clothing retailers are reporting horrid sales. In fact, just about all levels of retail say their apparel sales are disappointing.
Did we mention falling confidence?
Me thinks the consumer is becoming less of a supporter of economic growth… at least, not U.S. consumers.
Darrell: these hacks from the Fed are really starting to annoy me. As you mentioned, the plunge in auto and clothing sales is widely reported, yet these sunshine and lollipop spin doctors keep trying to polish the turd. I’d like to give Thomas Hoenig a swift kick to the crotch. Same for Hank Paulson.
The hankster is getting quite the wallop, vis a vis his palatial estate in droughtville, USA, aka palm beach.
comes around goes around
(Don’t forget to click on the chart w/recession bars superimposed…)
Economy
May 16, 2007 11:16 am
Five Things You Need to Know: Housing Off to a Good Start… on Planet Denial; Some Light Wednesday Reading; Large and In Charge; IMF Selling Gold Based on Mr. T Gold Indicator… We’re Guessing; Kill Debt Now
http://www.minyanville.com/articles/index/a/12852
I pity the fools that are selling…
Yeah, but damn are they making good buying opportunities for you and I.
from 2001 Jan 30th
FRB meeting
(regarding putting SS into private assets)
Chairman Greenspan: Meaning, lower their surpluses and refund taxes.
Mr. Meyer: Think of it as “money rain” every day.
http://tinyurl.com/2dlzw6
I will spend time reading these just released reports. 2001 was a critical year in the expansion of the bubble.
Wow. Lots of stuff there, Hoz. Thanks for the info & look forward to your opinions, if you should choose to share them.
All this talk of lower rental rates and yet in the past month in the western end of Sacramento, it seems like they are all jacked up now. I used to be able to find a number of 3/2 or bigger for 1300 or less and now they all want 1800.
So the rates are increasing and yet I see so many vacant houses. Who is sitting on all this negative cash flow? Are these the last twitches or death throes of the FB crowd?
Did you try contacting them? Methinks Extreme Rental Lowballing is going to be a fun sport.
Maybe they can add that to Most Extreme Elimination Challenge. The “lowballers” equipped with helmts will slide down a greased and oiled slope toward the “balls” of the landlord. If you crack him in the nuts and make him kiel over, you win a point for your team! I can envision Kenny Blankenship commentating now.
helmets, HELMETS.
LOL> that would be deadly fun.
Here’s an article on the evil mortgage brokers collecting fees for putting a couple in a mortgage whose annual payments exceed their annual income.
http://biz.yahoo.com/rb/070514/usa_subprime_brokers.html?.v=5
Flip side — the started with a $200K mortgage in 2001 and ended with a $600K mortgage in 2006, having spent $80K per year more than they earned for five years! That’s more than my family’s entire budget!
Hell, they probably have $500K stashed in a Swiss bank account.
Don’t be too shocked if when this whole bubble plays out, you don’t see some BK FBs unearthed with $500-$750K stashed somewhere. Then buy some podunk place in Canada (like that house for $90K that TXChick linked us to about 3 months ago) and never be heard from again. Heck, why didn’t I think of this? Maybe, because I, like most of us here, still believe in paying back your debts, not shafting people or organizations.
“That’s more than my family’s entire budget!”
Never mind that. You will soon be asked to chip in your fair share to help ’save their home.’
“ended with a $600K mortgage in 2006, having spent $80K per year more than they earned for five years! ”
And yet people STILL don’t see how cosumer demand can drop from the current level and plop us into a recession.
year one: Oh look, $80K, lets spend it!
year two: Oh look, $80K, lets spend it!
year three: Oh look, $80K, lets spend it!
year four: Oh look, $80K, lets spend it!
year five: Hey, where’s the $80K? WHAT?!! We have to pay it BACK?!!
After spending more than you make for X number of years, you don’t return to baseline spending, you go into hyper-UNDER-spending. Multiply by millions of housholds.
“The Housing Outlook Has Deteriorated” to put it mildly. In 2006 per capita income was about $43500. The average house price according to our friends at the NAR was 227,000. YOu go more than 3x your annual gross income, you’re screwed, end of story. Might we have a problem where housing drops back down to $130,500 nationwide? That would be good for us but I’d bet we might have a problem. Unless of course, the ‘experts’ on the TV and on the internet seem to think that per capita income in the USA will go to $75800. Does anyone here foresee wages going that high? I think the housing bubble is actually a way of hiding hyperinflation. If prices went up by 100%, this translates to 14 - 16% inflation annually from 2000/2001 to now, depending on what year the housing bubble started in your neighborhood. Also, I get a kick out of people fighting and kicking over $4 gas. Everyone knows that we can run out of oil but never run out of energy. It’s almost near impossible. People worry about gas going from $1.30 per gallon in 2000 to $3.10 now but have no qualms about spending 400K on a vinyl/brick/granite/ramen noodles MCHouse and 40K on a F450 dually thing. Anyways, I think you’re being awfully optomistic about housing going back to just 2000 prices. I rent right now and I don’t care if housing falls. I don’t care if housing goes back to 2000 prices, 1990 prices, or 1857 prices. Who cares anyway? If people are stupid enough to spend 300K on some trailer home in BUbbatown, GA or Cletus City, CA, I don’t care. I’m more worried about the political fallout from when everyone finally realizes their house isn’t worth 10% of it’s peak price. I can’t imagine that some FB would sit there and say “my house lost 90% of it’s value. Oh well better go out and stock up at Walmart”.
I see where you are coming from, Xstate. However, my concern is with the BIG picture. You see, this whole economy is smoke and mirrors. 70% of it is consumer driven. Now, when you take into account all the credit used, “Houston, we have a problem!” See, if all the sheeple actually used cassh/check or paid the CC off every month and actually saved/invested after that, I wouldn’t be so worried. However, when one accounts for all the debt and future entitlements of the fed, state, county, and local gubmints, as well as of this at the corporate (see GM) and personal level, well, the numbers are staggering, to say the least. You see, this whole thing is a giant pyramid scheme that is about ready to collapse. At some point we will no longer be able to service everything, corporately and individually. An printing more money is not the answer. At that point, you might as well use it for toilet paper.
Household income is $55K = $165K home price using 3X. That is the number you use, not individual income.
Is the 55K household income over every household (renters plus homeowners)? The avg homeowner probably has higher household income, causing the 3X rule to be greater than 165K.
that’s for all households from a single crackhead in the ghetto to Warren Buffet’s family.
Renters as a whole earn much less than owners. In my old zip code in 2005 the difference between households that owned vs. households that rented was $35K a year according to Census numbers, $75K vs $40K.
You make a good point that 3X median isn’t saying much and it should be 3X household income of owners.
“Ohio Attorney General Marc Dann, likening the subprime lending industry to armed robbers, said he wants to sue Wall Street firms because their bond sales enabled consumers to get mortgages they couldn’t afford.”
Um no Marc, people’s greed combined wth even greedier and unethical mortgage brokers are what enabled them to get mortgages they couldn’t afford.
For the 1000th time stop making the FBs victims.
But the FBs were told by the lenders, govt, friends & family, etc. that they could afford these mortgages.
It took nerves of steel to fight the crowd.
We also need to recognize that the lenders do this (loan money) every day, while the FBs usually have very little experience with mortgages & homebuying. Until just recently, you could count on a lender telling you what you could or couldn’t afford — see, they actually wanted to be repaid!
Nobody informed the FBs that the game had changed, and that the lenders apparently didn’t care if the FBs were capable of paying back their debts.
Wow…ain’t life a bitch.
NO more double digit HELOC ATM money from your physically depreciating asset.
Watch for more road rage, assaults, murder, paybacks, and mayhem.
How about this? If this does not illustrate the sickening excess at the high end, I don’t know what does.
http://news.yahoo.com/s/nm/20070516/en_nm/arts_auction_dc
“We’re obviously thrilled with the results,” said Tobias Meyer, Sotheby’s worldwide head of contemporary art who also served as auctioneer.
Hell, I would be too, knowing that my commission just paid for my home, the second house, retirement, wife’s retirement, all the kids’ college through grad school, and a swathy vacation for the next 30 years.
The painting is crap. I am about as artistically challenged as they come, but I could do that. What dreck! TX, are you surprised that people pay this. Just look at housing and how people bought in at atrocious prices. Two things I do know from all of this credit buuble is that easy money has been frothing around and people no longer understand value. That POS art, I wouldn’t even touch that. Now a Rembrandt, maybe, although not at 75 million. Once again sheeple, VALUE, VALUE, VALUE! But why bother, the government doesn’t care about value (see $600 hammers), so why should the rest of us?
Well, actually, I like Rothko’s work a lot but not $73M worth. I’m sure the buyer was some private equity asshole who will hang it above his bidet.
And for contrast, don’t miss this . . .
http://www.businessweek.com/magazine/content/07_21/b4035001.htm
Art is the new bubble.
Buy a crap load of some no-talent, unknown hack’s “art”. Then get some friends to help you bid up a few of his works. Soon, everyone has to have one, and you unload your crap at huge profits, letting the “last in” speculators wondering why this crap “art” is now worth 90% less than they paid.
Rothko and Basquiat (mentioned in the article) are hardly hacks; they are considered icons of contemporary art. I used to fantasize 15 years ago that I could get a Basquiat work some day, guess not.
I think the question raised in this discussion is what makes something valuable or good. Public consensus? Consensus in the field? Subjective consensus doesn’t do it for me; but I’m a trained scientist, so I’m always looking for objectivity. I don’t get fashion, art, or wine. Maybe I’m ignorant, but I can’t really afford to have taste anyway. I’ve thought of “taste” as something rich people conjured up as a matter of distinguishing themselves from the po’ folk.
My take on art is this…
Ever since photography showed up for the common man, paintings went away from their traditional look, which was a fair reproduction of whatever the artist was looking at.
Paintings from the impressionist era onwards had to be something other than what a photograph could display.
The results have been mixed at best, with the last 50 years being the most dreckful garbage imaginable…
Russ Winter has recently written a few posts on bifurcated consumption. Good stuff.
I have to wonder how many people and how long will they hold out knowing the house is worth only 60% of their mortgage and the commute is 50-100 miles each way with thousands of others on the road with you. In the next year-5 years, life is going to get very miserable for these people.
“I have to wonder how many people and how long will they hold out knowing the house is worth only 60% of their mortgage and the commute is 50-100 miles each way”
Not to mention going from considering oneself a “RE genius” with financial security for life to just being one more sucker who fell for this national ponzi scheme.
I wonder how “vocal” people are going to be when it comes to admitting to a life way beyond one’s income.
My wife and I had an incident 2 weeks ago with a crazy driver. The guy side-swipes my car (wife was driving it) and wouldn’t pull over. I got out and asked him to pull over when he was caught at a light and the guy went nuts. He was screaming and totally acting crazy.
First time this has happened to us to this degree. And we have lived here for 25 years.
Very sorry to hear about that, Joe. Did you get a license plate# & report it to the police?
Hope you find him & have him arrested for “hit & run”. Good luck!
“The state may seek damages from mortgage companies and investment banks even for ‘purely criminal’ situations in which borrowers committed frauds against lenders, Dann said. He cited the harm such schemes did to communities that could have been prevented if lenders had been more cautious.”
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Too little, too late! Where were you back in 2003 Marc when you could of done some good for all those poor souls you profess to care about?
Where was he? Chilling in the office waiting for it all to happen so he could ride to the rescue.
Don’t anyone miss this . . .
http://www.businessweek.com/magazine/content/07_21/b4035001.htm
Poor plankton…
Scum suckers….
A few times I’ve walked onto auto lots which looked to have cars at pretty good prices. Then they start telling me about financing, and I say no thinks… I’ll pay cash. They then start telling me of all their fees and that they specialize in people with poor credit, and if I’m paying cash, I should go somewhere else.
It is as if their entire comission/profit is on the sucker financing, and if you’re paying cash, they just want you to go away. They have enough fees and crap to get you to pass on their low “list” prices.
I read an article recently about these sort of operations. They are COUNTING on buyers defaulting within a year. Then they repo the car, detail it, and sell it to the next chump. Apparaently their profit per car blows away what conventional dealers get.
Growing up, our next door neighbor, was in the used car biz and his gig was repoing a car, after like 2 or 3 payments and selling it again…
I think my mom told me his record was a station wagon that he’d run through the spin cycle 17 times~
Good article txchick good article…
“‘This screams of closing the stable door after the horse has bolted. House price growth has clearly peaked and is decelerating quickly,’ he said.”
That line sure does ring a bell…
Good article from Business Week. Getting credit used to be big deal to celebrate. Kind of like getting dressed up in a shirt and tie when you went on an airplane. However, now anyone can get credit to buy a home or a car. Even if they cannot afford it. This country is dangling the proverbial carrot among the middle class and lower class. They have borrowed more than they can afford to pay back.
Companies will not be able to arbitrage out of this problem.
The housing market is on a long decline downward. This is they tip of the iceberg. Appraisals are coming in far lower than 20%-30% off market value. Hard Money loans are booming.
BTW, can someone tell me why the FED didnt reimburse stock investors after the dot com bust but they are going to help out people in housing? The FED knows how bad housing is going to become.
The consumer cannot take anymore. Period.
“BTW, can someone tell me why the FED didnt reimburse stock investors after the dot com bust but they are going to help out people in housing? The FED knows how bad housing is going to become.”
They are not going to help out people in housing. If you paid $300K for a house that is soon to be worth $150K, no FHA refi can help you. You’re screwed.
They are looking to help out the banks. Let them refi that $300K loan on a $150K house to FHA guaranteed, then when you realize that you way overpaid and walk, the bank gets paid back from the U.S. Treasury.
Why the help for the banks? The banks will give enough in camapign contributions to make it worth the poloticians effort.
No bailout out for stock purchesers because not enough of that money would have been returned to the politico’s.
What is the timeline for the passage of the Bankruptcy Reform and the collapse of lending standards? I think some folks are expecting indentured servatude, but it only works if people’s income is above the state median.
LOL, again, I look for attacks on it and it to become a campaign issue in ‘08
It is good that the state is getting into the mortgage lender business, because the law of unintended consequences says that mortgage lenders in the state of Ohio will henceforth be very reluctant to lend money to any Ohioan other than through the very strictest and most rigorous guidelines.
Fearing being named in lawsuits by the AG, mortgage companies will reject borderline borrowers, and demand greater down payments. Likewise, PMI companies will raise premiums.
And all will be very reluctant to loan any money to those with borderline credit, including those trying to refinance from ARMs, Alt-A’s, etc. Worse, through these actions responsible citizens who are just trying to get mortgages or refinance will suffer, although they were never before in danger of foreclosure.
Thus, foreclosures will only accelerate in Ohio, and the state’s distinction will grow. This will have been fostered by politicians (I include AG). The citizens will suffer all the more, and the politicians will continue to blame ‘wall street.’
That this will come about is all as clear as the hand in front of my face.
Ohio is an interesting case, because RE prices at best have been flat since the last century.
So this puts the lie to those who say it is blind speculative greed that caused borrowers to take on more than they could afford, in expectation that large annual gains would continue apace.
Perhaps all the Buckeyes wanted was a house to live in. Too bad they couldn’t really afford it.
The good news is that traffic congestion during the commutes decreases every year. With the disappearance of factories the air is cleaner than ever. People talk to each other again. And in the next 10 years, when Florida and California are parched fields blowing in the wind, Ohio will have lots and lots of water, and a growing season that does not depend on irrigation and snowpack, and property values will soar once again as the west coast refugees flock in.
The problem with crime is that the damage is already done and usually the money is gone ,or the victim is dead .
What kind of fines/punishment do people deserve for helping to create the greater depression no. 2 ,or the greatest National housing crash . Doesn’t the court system seek to make the victims whole again and apply punishment to the wrongdoer ?
This mania that was fueled and riddled with alot of crime/fraud is so big that you can’t get justice on it because we don’t have enough jails .How can you undo 5 million loan transactions or rebate taxes that were based on mass fraud that inflated prices ? This fraud/faulty speculator driven unchecked lending had more to do with the run-up on real estate prices than people give it credit for ,but you needed the greedy/fearful borrowers for it to work.
If lenders/appraisers /underwriters had stuck to the guidelines the market would of been capped in 2002 IMHO and the builders would not of overbuilt and on and on and on .What do you do with a industry that inflated prices with easy money that should of taken another 20 years to get there with this RE investment scheme that was marketed ?
What do you do with Wallstreet that rated junk /fraud loan paper at lower risk ?What do you do about the false advertising/cheerleading campaign that went on during the boom, and is still going on, that cause panic buying and investment buying based on faulty self-serving myths that “real estate always goes up”, and its tax free-gains easy money ?
And the worst part of of this madness is the so-call victims ,the borrowers ,were the parties that were in on the loan crimes . What do you do with people that agree to commit fraud so they can get a mortgage payment that will exceed their incomes ? Boy , that just doesn’t add up does it ,not the way people normally act unless they are under a belief that they can’t lose or will come out ahead .
It was a crime -infested real estate cheerleading mania ,financed by dumb fraudulent easy money, and the damage is done, and the market will crash .Just don’t ask me to pay for other peoples crimes .
Talk about a mass-fed real estate investment scheme that was marketed and left unchecked or unchallenged by the media/experts .(except Ben Jones of course and a few others .)
“…left unchecked or unchallenged by the media/experts…”
And, quite amazingly, the media and top economic policymakers seem continue as best possible under the circumstances to ignore or misrepresent the situation at hand. I guess this is why bubbles are only clearly visible through the rear view mirror (as top policymakers at the Fed have asserted).
I love it.
“Ohio Attorney General Marc Dann, likening the subprime lending industry to armed robbers, said he wants to sue Wall Street firms because their bond sales enabled consumers to get mortgages they couldn’t afford.”
“‘I want to see the e-mails, I want to see the documents,’ he said. ‘I’m guessing somebody at some or all of these places was predicting the bottom was going to fall out.’”
Awesome! Go after all of these slime balls.