Bits Bucket And Craigslist Finds For May 17, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I posted this late yesterday but thought DC Metro people might appreciate it being posted again here.
Should be for the bucket tomorrow but I thought I would post it here as well.
A friend is selling in McLean, VA. Her house has been on the market for a year. It is an updated original, windows, roof, kitchen and interior. Her realtor told her to drop the price 10% at least (she already cut the price 10%) if she HOPES to sell.
She is in no way mode. I didn’t know what to say.
McLean is a sought after area here in NoVa. That is a big deal.
So is the place updated or original. And did she reduce her price by 10 or 20% off original asking price. Are other places selling around her or is she just asking wishing prices and not gettin’ prices.
Good questions.
when military spending gets hacked N VA will take a hit
military spending getting hacked? not in my lifetime. Even if Billary wins next year, she ain’t cutting no military spending.
Ed is right.
Even if a democrat wins the WH in ‘08 they are not going to pull the troops or cut military spending.
No matter which party, threats of cuts or promises of a ’smaller government’ are all smoke and mirrors to appeal to the base of each party in hopes of a primary win.
“Even if a democrat wins the WH in ‘08 they are not going to pull the troops or cut military spending.”
If the choice ends up (1) finance the war with Treasury bonds paying 12% (2) sharply raise taxes (3) hightail it out of the ME, you will see them pulling their heads out of their collective a$$es really fast…
Somebody mentioned in last night’s California thread that, even though things aren’t moving, they are seeing higher listing prices. The “wish” price is still everywhere. A friend showed me some listings from Minnesota last night. They are insanely overpriced.
The end of this stupidity is going to take a long, long time as it has been pointed out here on thousands of occasions. Go hug your kids or buy a chili dog. Let all of these “owners” dream without us.
I figure it’s taken 10 years to get here and we still have insane financing around (liar loans, 100%, etc.). I’ve warned my husband that as we sell our house that it may well be 10 years back down in starts and stops. Once we close my plan is to hang out in our rental abode, save our money, and hang out with our kids for the next few years without the headaches of ownership.
Countrywide is now offering 50 year mortgages.
Please say you’re kidding.
A 50 yr loan is worse then useless. You’re still paying all interest and near no principle. What I’m afraid of is the 50 yr with a 10 yr teaser.
Think of the tax writeoff! Woo hoo
Those have been out awhile…
Mortgage broker I was talking with on Sat. night said every loan he was doing for purchases over $400K are choosing 10% down and STATED INCOME, good credit is required. He’s not even following up with people with average or lower credit anymore. His example was a 477K loan for a 530K purchase for a couple who are each on commission , builder paid all closing costs.
Easy money is still available…
“His example was a 477K loan for a 530K purchase for a couple…”
A 477K mortgage is a huge responsibility for any family.
Looks like people are still lying in order to qualify. Haven’t learned a damn thing, have they?
I agree with sentiment. When I sold my house in Las Vegas, I did a little of that myself. Held out, held out until one day I said the hell with this, dropped $40K off the price and sold it quite fast. I still check in on the old ‘hood via realtor.com and the same homes for sale 3-4 months ago are still for sale at the same price today. I figured my comp would wake some of them up, I was wrong. Of the 6 other homes in my subdivision for sale, not one has lowered the price, even after my home sold for $50K less than what they’re all asking. Guess they think I was a sucker for selling so “cheap” since the house is “worth” $50K more.
Good luck with all that ex-neighbors!!
Ed: Somehow you were able to drop the price by $40K! You’re out and that’s good. Are you out of Las Vegas?
what do you mean somehow I was able to drop the price? It’s not that difficult to do really.
Yes I moved from Las Vegas and glad I did.
I do believe they meant that many many sellers are unable to lower the price due to debt. HELOC, Toxic loans etc. They do not want to bring a check to the closing so they hold onto the wishing price.
You are correct lowering the price is not hard to do in itself; these others just have no cushion to do so.
We are still in the so called “spring buying season” which I consider from March 15 thru June 15. By Memorial Day, and the start of the summer vacation, I believe the overpriced home sellers will have enough of the stress and BS of their agent, and cave to whatever price it takes to move their “castle”.
yes, it will take many many years to cure this madness and return to a normal market. Just look at Europe, where the market sometimes sounds a bit similar to CA. In some EU countries inventory for sale AND prices have been climbing for years, thanks to a continuous stream of lower rates, new subsidies and incentives, crazy mortgages, more government guarantees/bailouts and of course more fraud. People (including me) were expecting the end for the bubble around 2001 (after ten years of double-digit gains) but prices have doubled or tripled since and are still rising in every EU country that I know of. Some of the concepts that seem to be new in the US like 50-year mortgages or generational mortgages have been used here for years already - although they are not really popular, I guess plain fraud is a lot easier for everyone involved.
You might appreciate this…
http://observer.guardian.co.uk/review/story/0,,2078270,00.html
thanks for the link, excellent story!!
wealth redistribution like never before, exactly the same story as in the Netherlands over the last 15 years. I have never seen stories like this in our Dutch newspapers though, they always write about like RE as if every citizen is a winner in this pyramid game. Makes you wonder if there is any chance that this will end without real blood in the streets …
That was an excellent article, thanks!
What’s funny is the reference by one guy to how he “earns” more on his house each year through appreciation than his salary. Sure sounds like the dot-com bubble when your stocks were going up thousands a day sometime. And we know where that ended.
Also, the “buy-to-let” crowd carry a 400K mortgage, but can only charge 1.5k for rent. Their carrying costs on even an interest-only mortgage are over 3k…
So It’s NOT too much demand for the available supply as they all say, it’s obviously a bubble. And until you SELL your house, it’ paper profits only!
One of the best articles on this issue I have seen.
Thanks for sharing.
This is where I got the link from. There’s quite a bit of discussion there from actual Brits, it appears.
“Somebody mentioned in last night’s California thread that, even though things aren’t moving, they are seeing higher listing prices.”
A couple homes down the street from my parents were on the market from April thropugh November of ‘06. Neither sold. Both relisted in February of this year at HIGHER PRICES and then sold at the prices they were listed for all last year. The idiot buyers didn’t track the market and thought they got a deal. I’ve seen builders in the Chicago area doing this. Raising prices throughout the building phase uintil the units don’t sell and then “cutting” prices to the levels they last sold at and the moron buyers think they won the battle.
TRACK YOUR MARKET PEOPLE!!!
“TRACK YOUR MARKET PEOPLE!!!”
This reminds me of PDXRenter’s post yesterday about an Oregon realtor’s blog in which he (the realtor) states:
“One of the most frequent questions we are asked about a property is, ‘how much did they pay for it?’ It doesn’t matter. We have no idea what the history of the sale is.”
Did you see his tactics to stifle discussion on that thread? First he posted a new blog post VERY quickly (hoping to divert attention to the new post & comments on it). When that did not work, he CLOSED THE COMMENTS on that HOT THREAD!
“TRACK YOUR MARKET PEOPLE!!!”
This reminds me of PDXRenter’s post yesterday about an in which he (the realtor) states:
“One of the most frequent questions we are asked about a property is, ‘how much did they pay for it?’ It doesn’t matter. We have no idea what the history of the sale is.”
Oops
A lot of those “wishing prices” are I don’t want to bring a check to closing prices.
Shouldn’t your post read:
“A friend is TRYING to sell in McLean” ?
I have no desire to own in this area until all the fluff, a.k.a. greed, is out of pricing. Your friend is not selling nor is she trying to sell. If she really wanted to sell she would cut the price but her greed, as well s the gredd of all the other sellers in her area, is blinding her to the point that she is just deluding herself into thinking she is trying to sell her home. A house is only worth the price someone else is willing to pay. Obviously its not worth what she is listing because no one has come forward for over a year to pay her pipedream price.
FYI-Converting one’s greed based sales price into a greed based rent price doesn’t work for me either.
Since we have been looking at rental housing in VT, I can say around here it’s painfully obvious (to me anyway) who has bought recently and is trying to cover their mortgage and those who are renting at market rates.
There’s a large set of condos built in So. Burlington, VT between 2003-2006. These are 2bed/1bath with some “luxury” type amenties but no special views (unless you count the grocery stores). Around here that should rent for maybe $1100-$1200, tops. 2bd/1 bath apartments in “average” condition go for about $900 per month. I’ve never seen a starting price lower than $1400 per month for renting for those condos.
I see the same thing around here. The few SFHs for rent in the nice neighborhoods are $7000/month and up.
It’s easy to play “Spot the FB” in the rental listings. Condos are only a little less unreasonable than SFHs.
The other day I think I heard the Last of the Red Hot Flippers. This contractor-type guy came into my bank, talking loudly on his cell phone…about his RE, of course. He said he rented his in-law suite to a physical therapist for $1300/month. That’s a lot of money for two rooms and a bath. In these parts you can get a really nice 2 BR apt. for that money.
All I can say is it must have been one doozy of an in-law suite.
I’ve got a friend about to put a pretty nice place in McLean on the market, too — I think they are really putting a good, make-it-move fast price on the place — so, I’m looking forward to seeing how accurate my pricing instincts are. They’ve been there since around 2000 (maybe even earlier), so I expect they’ll do fine (depending, of course, how well they do buying a new place in Bethesda — where they claim stuff is still moving fast in good neighborhoods — houses they have liked have sold in less than a week there, they say).
“Her realtor told her to drop the price 10% at least (she already cut the price 10%) if she HOPES to sell.”
Is this the kind of advice ONLY a realtor can give according to the dumb realtor broad on the 60 Minutes piece. Your friend is the perfect candidate for Redfin or FSBO. She could afford to drop the price another 10% is she didn’t have to pay a realtor.
“then i’m the realtor for you”
then im not the realtor for you.
You don’t need to see his FICO score.
This isn’t the house you’ve been looking for.
You can go about your business.
Move along…
I live in McLean. The interesting properties in my neighborhood are tear-down 1960s ranch houses purchased for ca. $800k and up goes a McMansion. There is a funny sight on one street with a ranch house stuck between two of these units. These new houses all have the same look but appear to be done by some shoestring developer. Some appeared to have been pre-sold but the spec units have lingered for a long time.
One funny sight was a RE agent who was nervously ripping out the for sale and repositioning it several times, as if that’s the reason that the place has not sold umpteen months.
You can lead a horse to water, but you can’t make them drink it, but you can drown them in it.
housing bubble video
http://tinyurl.com/yntcyq
Hehehe… no national bubble, and a realtor saying now is a great time to buy.
Default
http://www.bloomberg.com/apps/news?pid=20601103&sid=afU.aOTMRdIc&refer=us
“The foreclosures have “the possibility of making economic conditions worse, because they will shrink consumer spending,” said Weihong Song, professor of finance at the University of Cincinnati. ”
But massive government spending to rescue speculators shouldn’t have any adverse affect. That’s nice!
Good point, NYCityBoy. If these gov idiots think it is bad now, just wait until we are REALLY in a Depression. And they will have already spent the money that will really be needed just to help people live.
Please send me a BIG check too. I will then go out and consume… you know, do my patriotic duty.
“The worst housing slump since the Great Depression”
There! Somebody finally used the “D” word.
You mean somebody outside this blog?
The culprits are slow growth in the economy, manufacturing job losses and “aggressive lending practices that were barely policed,” said State Treasurer Richard Cordray in an interview.
These government idiots. Uh, what about buyers who took on too much debt? Housing prices at historic highs?
“Look here, buddy. We don’t get votes by holding our constituents accountable. So, just stop it with the “what about buyers?” crapola.”
Sad but true, the one and only thing a politician cares about is getting re-elected!
HOLD ON A SEC!!!!!
“The independent Ohio Housing Finance Agency devised a plan to sell $100 million in taxable bonds in the next month for a mortgage refinancing program. The proceeds will allow homeowners to get fixed-rate mortgages at a forecast rate of 6.75 percent, compared with the current U.S. average 30-year fixed mortgage rate of 6.13 percent. The bonds are backed by the mortgages and taxpayer money is not at risk. ”
Skip ahead!!!!
Their “use case”:
“Almost four years ago, the couple refinanced the mortgage on their two-story house, built in 1890. They got a 30-year adjustable rate mortgage that now resets every six months.
The payments have risen by more than a third since then and are now $729 a month at 11.75 percent. The couple owes $71,300, Alicia Cook said.
A slightly bigger house down the street is valued at $54,500, according to Cuyahoga County records. The Cooks want to refinance but can’t because they’ve been late making payments over the past year. The couple also has a fixed-rate second mortgage with a payment of $277 a month.
While the Cook’s are now up-to-date, their financial troubles have mounted. They owe about $5,700 in gas bills and their two cars have broken down.”
So, they sell bonds to refi these poeple that owe something close to $100K on a house that is likely worth less than $50K. But don’t worry, we can’t lose money, because we can always sell that house to get back the $100K. WHAT????
just goes to show that the government is there most of all for the benefit of (mostly corporate) criminals and idiots, and will stick normal hard-working citizens with the bill. Don’t worry because this is normal, in Europe it is the same or even worse.
–
From yesterday…
CA Home Sales For Apr’07 Down 48.4% From Jun’05 Peak Sales
And down 37.6% from Apr’05 (two years ago). These are all home sales (new, resale, SFH, condos) reported by DataQuick.
This should take a serious bite out of the economy.
Jas
It’s a 1950s house but completely updated. Systems, roof, flooring, etc.
Her price is pretty close to what others are listed for although I think those are ‘wishing’ prices with all the new builds offerring so many incentives.
I think this spring selling season is where denial is still present but fear is setting in.
Would she make a profit at that price or is this one of those “can’t sell because she owes too much” things. What is the price exactly, square footage, etc. Just curious.
Txchick:
She will make plenty of profit at 20% off but used the term ‘retirement’. One of the interesting things is that is what the realtor said to her, “You want to retire don’t you? Lower the price and take that money and run.” You know things are getting scary around here when realtors are saying such a thing.
I think that’s what people need to understand at this point; if you lower by X% and can still make a profit, get out while you can unless you are sure you are going to stay put for 10 years.
I have to say that I really didn’t think the bubble would hit that area as hard. I knew it would hit, but I never thought I’d hear those words about that area.
Sean: I don’t want to post the MLS # for fear of losing a friendship. I thought it was significant to post b/c it is such a desirable area. She’s a much older very nice lady.
Only the very highest end properties (and only a few places in McLean qualify that way…think Kennedy compound) are immune, I believe. Think about it, to move up to that $1M house in McLean, you’ve got to sell your $700k house in Fairfax, and that buyer has to sell their $400k house in Centreville, and so on, and so on. By taking out the first-time buyers, everything else suffers eventually.
I live in 22202 with lots of older homes right near the Metro, and the really nice renovated ones are selling at roughly the same prices as last year, but the crapola ones aren’t selling at any price. There are vacant houses with grass out front that’s 2 ft. high. And this in one of the most desireable commuting neighborhoods in No.Va.
what is the MLS listing number?
Who cares let it rot on the market for another couple of years. After a few years of YOY price drops and her race to the bottom cuts she’ll see the light, cut the price in a meaningful way and eureka it will sell and she will learn the wisdom and value of just getting it sold and moving forward with her life, instead of having it consumed by her own greed.
My guess is she is intent on at least 200K profit minimum. Mclean is a nice area. Used to be a lot of State Dept. and CIA types lived there.
NO. VA is still selling and inventory seems to be a tad less than last year at this time. That said it is still not different here.
My wife is unemployed and has been for awhile. The middle is gone from the job market here.
You keep thinking that, and I got land to sell you in FL.
unless you have security clearence it’s not that special here - all the x military are employeed , till 09
There is plenty of $ in higher level lawyers and media types and the lobbyists and international business folk. That crowd concentrates in McLean (for the conservatives) and Bethesda/Chevy Chase and Georgetown for the liberals. I am mildly surprised (though pleased, of course) to hear that there has been price deflation in McLean.
DC isn’t “different” at all with respect to the credit bubble, but that shouldn’t have had too much effect on the housing stock that is used by people who are really and truely rich (and pulling in $500K per year in a bad year). Nice to hear that general market forces are working. Very nice indeed.
“unless you have security clearence it’s not that special here - all the x military are employeed , till 09″
A jumbo mortgage disqualifies many employees from obtaining a secret security clearance or higher. It’s a serious problem these days, and there is no sign of backing-off either; risk is risk.
Countrywide
CFC to issue $4 billion of convertible bonds priced at 3 month LIBOR MINUS 3.5%-MINUS 2.25% depending on Series. The proceeds of the sale are to be used to buy back 23 million shares (current value $920 million) and “general corporate purposes”.
I’m thinking the above is good for shorts/puts because it signals the company’s inability to generate sufficient cash from operations or from the sale of portfolio loans/securities. Also keep in mind that convertible bonds are dilutive to present common shareholders and bond buyers may immediately short the shares resulting from conversion to lock up the return.
Price activity for the underlying and options should be interesting today. I’m holding CFC Oct 37.5 PUTS.
MarketWatch
http://tinyurl.com/yrtfb9
Great for shorts. Definitely. This is the kind of stuff you saw in telecom companies in 2000.
Plus it kills that whole BS Cramer “Buy-out” rumour that was supporting the stock. If this thing does pop for whatever reason I am gonna jump on this sucker with both feet and a shovel.
Hope so. I got my “short order” in several months ago, waiting for it to hit 25 or so to cover. I’m a patient man though - I can wait for the burger - it’ll get here at some point.
What is it with the restrictions on option trading anyway? Etrade won’t let me buy puts even though I’ve had a bunch of money with them for ten years. I guess they think they are protecting me from myself, but since when did a financial institution care about that?? Or maybe they don’t like me because I don’t churn stuff.
It’s good for the CEO and all the insiders looking to dump stock at grossly over-inflated prices.
They borrowed the money to fund the stock buy back so that old leather face can sell his shares into a stronger market. CFC is one criminal organization.
I got Jan 08 $40 puts and Jan 08 $35 puts. A ton of them, and I’m about 70% down on them so far. Are you telling me that I’m going to make it all back? I just feel like dumping them all right now, this has killed my Roth IRA.
Patience! It’s only May. By January CFC could very well be bankrupt.
Comment by davidcee
2007-05-16 06:22:16
Tell me how good business is at your Wal Mart and Home Depot , and you will have a good clue as to where your town is heading real estate wise.
My apologies for answering to yesterday’s Bits thread but:
David–I’m in farm/retirement country as in no real businesses other than a handful of restaurants. Walmarts are 1/2 hour away so not sure if that is a good read for this particular community. But Oneida Walmart is so packed on the weekends I’ve decided to avoid it. OTOH, Lowes in Oneida (right next door to Walmart) is brand spanking new and incredibly empty. I would say Oneida and this down are very different so not sure that’s indicative. A lot of people here use the high quality contractors to do their work. Many make the statement that they don’t like to sweat or get dirty.
Here in the upper midwest, Menards is almost always packed. Home Depot & Lowes are not so.
Menards and Fleet Farm are doing well…more locally oriented hard goods sellers.
Walmart, Kmart and new Targets are always empty every time I go there even on a Saturday morning. Kmart is the worse here, do not even know how they keep the lights on. Places are a tomb.
“Here in the upper midwest, Menards is almost always packed.”
In the past two weeks, I’ve visited two local Menards stores a total of four times. A graveyard every time, much to my shock. It’s the height of bedding plant/shrub sales time and they had almost no customers shopping.
It’s nice to find parking spaces right up front, but surprising to see so little home improvement store activity since it usually peaks this time of year.
I don’t believe I have ever seen a Walmart on a weekend that was not absolutely packed. The question should be does it take you 5 minutes or 10 minutes to find a parking spot at your local WM, not “how is your WM doing”?
Every time I walk into a WM, I feel like my IQ drops about 30 percent, and when I leave I feel like I need to take a shower.
So stop going, that will mean one less person in front of me in the checkout line.
I never get this hatred of WM by people who shop at WM. I also don’t get why IQ has anything to do with anything. If I can save 15-20% off my grocery bill by shopping at WM vs. Publix or Kroger, I’ll do it. For all the talk here about people wasting money on SUVs, plasma TVs etc it’s a little hypocritical to bash WM for providing goods at low prices.
I would agree except that it’s not actually cheaper, it only appears so. Because of WM’s shady employment practices, their employees whom they refuse to hire for enough hours to have to provide health insurance cost the taxpayers(i.e. You and I) Billions. Yes, that’s Billions with a capital “B.”
But hey, as long as the chinese plastic crap made by exploited chinese and other workers is a few cents/dollars cheaper for you, it’s all good right?
We’ve become a quantity trumps quality country…
Its the trade unionists and thier supporters who hate WM.
Walmart is the future. If Walmart could ever get into RE and Lending you would see much of this insance 6% monoploy with 16k in loan fees all end. As hated as WM is, they are what passes for honest in corporate america - compare them to New Century and they shine !
Actually, they may be the past. Cheap goods imported great distances in huge quantities and shipped all over the country will never survive rising energy prices.
i was in HD last week. after walking around, a female clerk helped me for quite awhile. she was my personal shopper and i was elated to have her. way to go HD
Amen Ed and sd:
I can buy the exact same Black and Decker iron, or Panasonic phone or Sony TV at WM for $$ less than I would pay for it at other retail stores. Is the snob factor worth overpaying for basic goods?
[cue to scary music in the background with the husky voice-over: Walmart, Halliburton, Microsoft]
Went to a Home Depot in Santa Clara, CA, 3 days in a row. DESERTED each of those three days.
News from the UK:
There was the normal pull-out in the Times newspaper called Times 2 yesterday. The cover headline:
Over-Taxed, Over-Mortgaged and Overdrawn? Discover the Joy of Thrift
Funny how it is no longer cool to be over-consuming. The pinch is definitely on in this country. Today’s newspaper headlines were focused on the fact that the BofE is likely to raise rates again - which are directly tied to mortgage rates (almost all mortgages are variable here).
It is all unwinding… globally.
It is all unwinding… globally.
Globalization. The Worst. Idea. Ever.
Obviously you never saw Godfather 3.
I did. Hey, NYCityBoy, you need to give a Hedgie a Wedgie today. I figure you are the closest to Wall Street, so you are elected. You’ll need to get a buddy to go with you. Just sneak up behind one of those wastes of flesh in a suit, have the buddy lift the back of the suit jacket, you reach inside the waist band and pull up hard. Real hard. Make sure the guy gets sqeezed good, like the rest of us have been. Maybe you can even frog-march him down the street a little. C’mon. Do it for the bloggers.
Speaking of hedgies read that John Edwards disclosed that he pulled in $400K plus in compensation from FIG in his income disclosure. Unless you want the USA completely subordinated to the hedgies advise everyone to strike him off the list.
Which candidate is least likely to perpetuate the plutocracy?
John Edwards is an odious, supercilious waste of space on the earth.
Ron Paul
“Which candidate is least likely to perpetuate the plutocracy?”
No one, at least no one that can win.
But he has great hair!!
In response to Stucco–probably Kucinich, but I just saw the results from the 2008 Iowa Caucuses and he only received about 0.5% of the vote.
thus, the extraordinarily wealthy will continue making the decisions for us peons.
Meant for Palmetto,
“Just sneak up behind one of those wastes of flesh in a suit, have the buddy lift the back of the suit jacket, you reach inside the waist band and pull up hard. Real hard. Make sure the guy gets sqeezed good, like the rest of us have been.”
….just pray he’s not going commando. :-’
Not all hedgies are bad…
Wedgies for Hedgies?
Globalization has been around for a century and a half. They used to call it imperialism when the white hats could throw their weight around. Now that we are on the short end of the stick its the worst idea ever? Interesting.
1/2 a century? Uh try thousands of years. Trade is what built Rome, Greece, Portugal, Spain, England and yes the good ole USA. The lack of trade is what caused the great depression. Stopping trade would be the absolute worst idea out there.
Wow - finally!
Thanks for the reality check, Ed.
Sometimes the loony bins get the run of the place around here, but thankfully it usually doesn’t last too long.
I hope it has started unwinding, but I still don’t see the evidence - homeprices in Europe are still rising in EVERY country, including the UK. Money supply (M3) is still surging at record speed, now over 11% in Europe. The end to this credit/housing bubble has been called many times before and every time again it proved to be wrong. Never underestimate what politicians and central bankers will do to keep the biggest pyramid game of all times going.
Can’t they just call a spade a spade……..
From the LV Review Journal:
“This correction or slump or slide or dip or whatever you want to call it is deeper and longer than most expected,” Smith said. “It will get better, but until sales and permits improve, it will continue to be very painful for a lot of folks and businesses.”
http://www.lvrj.com/business/7549657.html
(I think “crash” would be more appropriate)
“housing bust” is the traditional description for the status quo situation
“40% of the 22,000 homes on the market are vacant”
Sin City is now Ghost Town City. What a frightening statistic.
And the ones that went to heloc-loco to enable themselves to gamble, will no longer be able to do so, and $5 a gallon gas is the coup d’gras…
Stick a fork in vegas.
AMF
Nah. That’ll look like “full occupancy” compared to 2009.
Slump may continue? No kidding!
http://www.ft.com/cms/s/46dad328-03a7-11dc-a931-000b5df10621.html
Not so fine China, notes:
A naturalist friend who has been to China perhaps a dozen times and has seen the changes up close and personal, just got back from a month’s sojurn there and told me that “it’s much worse of an ecological disaster in the making, than he’s ever seen”…
He thought they might be reaching their “tipping point”, ecologically, leading their pack of worries, is the near complete degradation of freshwater sources, poluted to the point of uselessness~
tick tick tick tick tick tick tick tick tick tick
boom!
Aladin, …and what will a Billion starving people do once they had the taste of the ‘good life’, and then can’t even return to their agrarian life?
if they are starving from pollution they will probably not revolt. And obviously most of the environmental troubles start outside the cities, where the good life is still a fairy tale (or something people remember from long ago, because much of the Chinese countryside is worse off compared to 10-20 years ago).
So much for Chinese culture being “in tune with nature”.
Its hard for any people to be in tune with nature when there’s over a billion of them…
Aladinsane - my step-mum has friends in Shanghai that she visits/has to stay here regularly - the environmental degradation over in China is immense.
Everything from a perpetual dustbowl in the Norhtwest due to the years-long drought, clouds of sulphuric emissions from the ever increasing coal-fired power stations, to the silting up (and consequent loss of the fishing industry) at the mouth of the Yellow River, after the 3 gorges dam stopped normal downstream flow.
From what my step-mum’s friends have said, it would seem that only about 20% of the ecological disasters get reported (both inside and outside China) - and normally in specialised magazines like ‘New Scientist’, rather than the MSM.
Its hard for any people to be in tune with nature when there’s over a billion of them…
True, but it seems that their government for the past 50 years has had no regard whatsoever for the environment
AP’s Headline:
“Jobless Claims Fall to 4-Month Low”
A 4-month low? Who measures anything in 4 month increments?!! What kind of a title is that? Are finance writers forbidden from writing anything negative? Is there a code?
Jobless claims are worthless indicators. Many of the people who are getting laid off, (in construction,etc.) were previously unemployed over the Dec - Jan timeframe. Therefore, their “new” claims for being unemployed do not count as “first time jobless claims”.
I am “newly” unemployed (again) as of this past Monday, but my claim will not count as “first-time jobless claim” because I was also unemployed in January — and THAT one didn’t count because my original claim was filed back in June of last year…
Just another example of how our government cooks the books in order to give the illusion of prosperity in this country.
What statistic do you pop up in then? Thanks.
If he is looking for work and has no job of any kind, then he counts as unemployed.
Sorry to hear it. I’ve been there and it sucks. Good luck with your job search.
Did they count all the Mexican construction workers who are either heading south or not heading north?
I doubt that many illegals file for unemployment. Kind of hard to prove they were employed, espedcially when many were paid off the books or with false identities.
Any 1099 construction worker isn’t eligible for unemployment, legal resident and illegal alien alike.
Countrywide Financial Corp. (NYSE:CFC - News), the largest U.S. mortgage lender, plans to add 2,000 sales jobs this year as a housing slowdown batters weaker rivals, Chief Executive Angelo Mozilo said on Monday.
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The Calabasas, California-based company is also rolling out new products such as reverse mortgages and 50-year subprime loans to pick up market share, Mozilo said at a UBS financial services conference.
“The market is undergoing very turbulent times,” Mozilo said. “Our competition continues to consolidate, and consolidate rapidly.”
Funny that the CEO is selling shares while he pumps this stock. We all know what Wall Street buys, and that is, companies that have the perception of growth companies.
Yeah they need those 2,000 people and probably 2,000 more to sort out the NODs and foreclosures.
Is Countrywide a “legitimate subprime lender” that Ben Burnanxiety spoke about this morning? I wish he would have spoke more about where the bodies were being kept in this subprime mess.
On the front page of today’s WSJ is an announcement that BB will give an 8:30am speech at the Chicago Fed on the topic of the subprime market and regulation. Should be an interesting talk, though a talk on the subprime market and deregulation might have been more appropos.
Subprime Worries Persist Despite Views of Bernanke, Paulson
Topics: Consumers | Economy (U.S.) | Economy (Global)
By Reuters | 28 Mar 2007 | 04:47 PM ET
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Testimony by the two top U.S. economic officials on Wednesday raised fresh concerns in financial markets about the deteriorating housing market, despite their view that subprime mortgage problems are “contained.”
The practices of lenders in the $1 trillion subprime sector have drawn scrutiny from regulators and law enforcement officials who believe some borrowers have been fraudulently induced to take on more debt than they can handle.
http://www.msnbc.msn.com/id/17841616/
BB’s was a ittle shaky during the speech, leads me to believe he’s holding the party line to contain the spread of fear and panic.
2 points:
1. Inflation is at 2.5% and GDP at 2…….thats goin backwards folks.
2. SubPrimes goin to get worse before it gets better…..thanks for the update
In Sum…..no need to worry, wages are goin up, employment is strong, consumer is still spending….
M2cents
WE are in Recession, suprise rate cut come on the heels of 2% correction inside 60 days.
He’s got a horrible halting manner about him, can’t quite pull it off, as there appears to be a shred of cred, left in him, somehow…
What a rotten fall guy position to be in, all of the blame, with not so much acclaim.
There are some nice parting gifts for you, though…
30 pieces of silver and 15 minutes of fame.
From the article:
“The latest data from the Mortgage Bankers Association showed applications for fixed-rate mortgages are up 30 percent year-over-year while applications for adjustable-rate mortgages are down by 18 percent.”
What’s fascinating to me is that “fixed rate mortgages” no longer necessarily mean fully amortized loans. You can get “30-year fixed rate loans” that are interest only. Of course, they’re really not IO for 30 years — the IO component is good for say the first 3 or 5 or whatever years, and then they switch to a much higher, fully amortized payment. But the interest rate itself *is* fixed for all 30 years. Some good that does ya, since you get creamed by the post-IO payment.
So, I’m watching Bernanke on CNBC. They have the “bullet points” popping up BEFORE he even makes the comment.
Pop Up: Increased home ownership good for neighborhoods.
Bernanke: Sub-prime has increased home ownership, which is good because owners take better care of their properties.
Pop Up: No splii over to other markets
Bernanke: Most foreclosures are only in sub-prime.
Pop Up: Substantial equity from earlier price gains
Bernanke: Foreclosures unlikely to grow too high due to substantial equity most homeowners have in their properties…
Blah, blah, blah.
How stupid do they think we are?
Oh, nevermind……
Wait… We’re coming to a conclusion…
Restructuring working for many…
Banks limited on how many they can restructure…
Banks having problems restructuring…
Agencies helping borrowers learn of options…
Congress must look at regulations… Don’t shut down sub-prime, just limit adusive, encourage “best practice”….
Truth in lending act. Borrowers get full info. blah, blah.
He ain’t even done yet, and…
Pop up: Bernanke does not address “Ability to Pay” issue.
Blah, blah, blah….
Regulations to prevent adusive lending without stopping sub-prime lending….
Wait? What about borrower fraud? Expanded home ownership combined with high prices means we’re sellng houses to people that flat out can’t afford them!
Economy slowing. Sales plung, listings soar… looked to be stabalizing until sub-prime pop, now back in crash mode. Foreclosures to rise dramatically.
That said, we don’t see this as a big problem. Lots of equity, strong labor market, financial system can absord the losses without too many problems, no spill over…
Move along, nothng to see here.
we don’t see this as a big problem…
So we don’t need a bail out.
Excellent news.
Like I’ve said, they’re painting themselves into a corner. They’ll deny it’s a problem until it’s obvious, by which time it’ll be far too late to do anything about it (not that anything beneficial could be, mind you).
Move along, nothng to see here.
and certainly don’t look up or listen to the humming sounds from the sky …
Been a lot of talk about this next song,
Maybe, Maybe too much talk…
This is SUBPRIME BLODDY SUBPRIME..
now get in line and march to the register, pull out the plastic and spend you drones, SPEND!!!
Pop Up: Increased home ownership good for neighborhoods.
Bernanke: Sub-prime has increased home ownership, which is good because owners take better care of their properties.
Where does one even begin with this spin-o-rama?
Sub-prime owners who are stretching to pay their extortionate mortgage payments can’t afford to buy the tools, hardware, etc. to maintain and improve their properties. To say nothing of hiring outside contractors.
How stupid do they think we are?
I believe it’s beyond them thinking we are stupid. They must think we’re all comatose.
Sandicor’s April sales results for San Diego are available here:
http://www.sandicor.com/statistics/stats2007/04statistics.html
For the SFR category, there were $3.4b in new listings (valued by list price) versus $1.1b in sales. The ratio seems abnormally high to my untrained eye. Any comments?
Stucco-How bout the UT cheerleading yesterday with the HUGE fonts that resale prices were UP 1.7%. I haven’t see fonts that large since Kennedy got shot.
Of course in the small print, they mentioned that new house prices were DOWN 10%. They also failed to mention that short sales are not counted on this resale mis-information.
Great news, Bernanke says everything is fine Subprime is good for home ownership. It looks like we were all worried for nothing!
Can anyone explain why the stock market is dropping like a rock? I thought it was all good?
http://www.marketwatch.com/tools/marketsummary/
DJ US Housing Market index is up …
(http://tinyurl.com/3xv8lt)
…it must be good news!
Too good, maybe.
Perhaps they are pricing in a lower probability of an early rate cut.
So let me get this right. Bernanke says housing woes will not spill over into the rest of the economy. So, why has the GDP been shaved in half over the last year. BECAUSE OF THE HOUSING WOES. Thus, housing has affect the overall economy in a negative way so far.
Now he tells us that housing is not done going down. So, if housing has already hurt the economy, what will it do if it goes down even more. HURT THE ECONOMY EVEN MORE.
Do people really buy this stuff?
FRAUD
With an industry database showing a 30 percent increase in loans involving suspected mortgage fraud in 2006, the Mortgage Banker’s Association is asking Congress to set aside $31.25 million over five years to hire more FBI investigators and prosecutors.
In its annual mortgage fraud report, the Mortgage Asset Research Institute (MARI) said the sharp increase in mortgage fraud is partially because lenders are finding more cases of fraud in loans originated in 2006. But the slowdown in the housing market has also helped reveal fraud cases previously masked by strong price appreciation.
After a loan is approved, it’s unlikely to be reported as fraudulent as long as borrowers continue making payments. But a slowdown in home-price appreciation has fueled delinquencies and defaults nationwide, as borrowers find themselves unable to refinance loans with balances that approach or exceed the value of their homes.
Once a loan becomes delinquent, a lender may discover that it was made under false pretenses.
The most common type of fraud in 2006 originations involved falsified employment histories and exaggerated income, MARI said.
Florida topped the MARI fraud index, followed by California, Michigan, Georgia, Utah, New York, Illinois, Minnesota, Colorado and Nevada.
California, which has enjoyed a low reported fraud rate for several years, climbed from eighth to second on the MARI fraud index in 2006, suggesting that the slowdown in the state’s housing market is revealing previously undiscovered instances of mortgage fraud.
In a letter to members, MBA president and chief executive officer Jonathan Kempner said that suspicious activity reports to federal regulators related to mortgage fraud have risen from 3,515 per year in 2000 to more than 28,000 in 2006, representing losses of about $1 billion.
Those numbers likely represent “only the tip of the iceberg,” Kempner wrote, because the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) collects reports only from federally insured lenders, not independent mortgage lenders.
Although MARI collects data from a broader variety of sources, including lenders, insurers and government agencies, it releases them in the form of an index for states and metropolitan areas, and does not disclose raw numbers of reports.
Kempner said the MBA has asked the House and Senate Appropriations Committees to set aside $31.25 million over a five-year period to provide 30 new FBI field investigators and two new prosecutors at the Department of Justice to coordinate prosecution of mortgage fraud cases. The MBA also advocates providing $750,000 for task forces that would target areas with higher-than-average concentrations of mortgage fraud.
While problems were once concentrated in relatively few states, mortgage fraud incidents are “now more evenly distributed across nearly all states,” MARI reported.
States with the fastest growth in mortgage fraud reports during the first quarter of 2006 were New Jersey (up 250 percent from the same period in 2005), California (214 percent), Arizona (213 percent) and New York (187 percent).
States that achieved reductions in reported cases of mortgage fraud included Georgia (where reported cases were 68 percent of 2005 levels), Colorado (78 percent), Illinois (81 percent) and Michigan (90 percent).
Instead of reporting raw numbers, MARI assigns a numerical measure to each state that indicates the extent of fraud problems.
The MARI Fraud Index, or MFI, indicates how the number of fraud reports for each state compares with fraud rates nationwide, given the number of loan originations in each state. A state that has 5 percent of fraud reports and 5 percent of loan originations would be assigned an MFI index of 100, while a state that has a reported fraud rate that’s twice what’s expected would have an MFI of 200.
Georgia has led the nation on the MARI Fraud Index in recent years with MFIs of 310 to 506. This year’s highest-ranking state, by contrast, has an MFI of 208, while Georgia reduced its MFI to 125.
MARI attributed Georgia’s “dramatic” improvement in large part “to the strong, coordinated stance against mortgage fraud that has been taken by a number of different groups in Georgia — industry members, mortgage and banking regulators, legislators and state law enforcement officials, coupled with the FBI and the United States Department of Justice.”
The Georgia Department of Banking and Finance introduced a new examination program that focused resources on anti-fraud efforts in late 2003, which led to an increase in cease-and-desist orders and license revocations.
In 2005, Georgia was first state to criminalize mortgage fraud, with penalties of up to 10 years in jail for first offenders and 20 years per property for violations involving multiple properties and loans.
Prosecutions of mortgage brokers, bank officers, closing attorneys, paralegals, real estate agents, appraisers and straw borrowers followed, at both the state and federal levels. One closing attorney received a 30-year federal sentence.
While 55 percent of all incidents reported to MARI involved application fraud, the percentage among subprime loans was even higher — 65 percent.
Fraud involving tax or financial statements was reported in 27 percent of incidents (16 percent among subprime loans), and 22 percent involved false verifications of deposit (14 percent among subprime loans). Other examples of reported fraud included appraisals (11 percent overall/14 percent subprime), verification of employment (9 percent overall/10 percent subprime), escrow/closing documents (8 percent overall/10 percent subprime), and credit reports (9 percent overall and subprime).
While the ranks of subprime lenders is thinning, and many of those who remain have tightened underwriting standards, more people chasing less business will create “severe pressure on all players” to approve loans for borrowers with marginal credit.
That, coupled with light penalties for fraud perpetrators in most states, make conditions “temptingly ripe for escalated mortgage fraud activity,” MARI predicts. “Professional fraudsters will devise new and improved schemes to exploit the weaknesses in loan origination processes.”
Got a URL to this story?
Comment by peter m
2007-05-16 06:32:27
http://www.zillow.com/HomeDetails.htm?zprop=20345459
This is a repost: LA county marginal slummy areas are swarming with Mortgage Fraud. Have only done a limited amt of perusing in several slummy areas per zillow and noted lots of suspicious activity, of which the following example from Inglewood(LA submarginal hood area)is taken:
‘Also in same Lennox(Inglewood 90304) hood heres a case of fraudulent repeated selling-3 sales in a six month span,last sale up to $470,000.’
If you are a realtor/broker/seller working the inner LA hood areas you can make out like a bandit fixing up, selling, re-selling inner LA POS plain stuccos for one-half million, using every manner of frauduent overappraisal/kickbacks and every RE con trick in the book to sell that SCentral LA POS property. And the lenders,banks,gov’t watchdogs apparrantly do not give a rats ass what goes on in the ghettos, or are completely bamboozled.
Comment by peter m
2007-05-16 07:24:52
for those of you who don’t know LA county all that well there are literally thousands of run-down third-world slums and hoods where RE fraud is occurring.
I have done only a limited amt of checking in three notorioius LA hellholes(Pacoima 90331, LA Scentral ZIP 90011, and Lennox/inglewood 90304)thru Zillow, a total time spent of 1/2 day, and have ferreted out at least 10 cases of blatant outright RE fraud.
These listed areas/zips represent less than 5% of the total LA county third-world Hellholes so the amt of RE fraud going on in LA county must be staggering. This is one of the reasons why LA County is still showing positive 5.9% yoy per April Dataquick: all the rediculously fraudulent overappraials and selling of POS properties to mainly immigrant purchasers.
comparing the bad neighborhoods of LA to 3rd world slums is a bit of a stretch. All these houses have electricity, running water, and sewer. All the properties have ownership and title registered with the county. 3rd world slums are no comparison to LA.
3rd world slums are no comparison to LA.
Just wait.
Question:
I know this has been discussed here before.
I have a family(1) member who is buying a house from another family(2) member who owes $130,000 on the house. No. 2 is going to sell the house to no. 1 for $170,000 (appraisal amount) then the mortgage company is going to take $40,000 from the $170,000 as a down payment to reduce the amount owed on the loan to $130,000. This will reduce their interest rate some and they can only afford a $130,000 home payment.
Does this sound right?
On the face of it, (2) is in effect gifting the 40K downpayment to (1).
That isn’t going to worry the lender, as long as the appraisal is valid. They have got a 1st lien on a 170K property backing a 130K loan.
I don’t see a problem here.
Thanks
Talk to a lawyer about filing an appropriate gift tax return. There won’t be any tax owed at all if you are dealing with a couple selling to a couple (yearly exclusion is $44K). And unless these folks used to be much wealtier than they seem to be now, anything above the yearly exclusion will only reduce their future available combined gift/estate tax exclusion, so don’t worry about there acutally being any tax due, but it is better to get it documented that there wasn’t any tax due.
Except, they will be paying a property tax on 170K rather than 130K. Why would they do this by the way? It seems they are buying a house for 130K, at least that is what the seller is getting. Where does 170K come from?
Scandal in Paradise
Big scandal surrounding a house I posted up a few months back in Ben’s weekend local markets report as a “flip that will probably flop”. Briefly the house is located in an all white area surrounding the P’cola Country Club and evidently the flipper (who is not a local) sold it to a black guy. Accusations are that a millionaire white guy who lives across the street allegedly tried to interfere with the sale to keep the black guy out of the neighborhood.
Not sure if you can get access but here is the article:
http://www.pensacolanewsjournal.com/apps/pbcs.dll/article?AID=/20070517/NEWS01/705170319/1006
“Accusations are that a millionaire white guy who lives across the street allegedly tried to interfere with the sale to keep the black guy out of the neighborhood.”
This may be a rare example of a bigot doing a black guy a favor…
Kane County, IL. What I am seeing: homes that were listed up to two years ago being relisted now. Some where listed up to a week ago and now have a new listing as of May 1st.
All at prices around $50K - $100K more than original listings. My filter is set to 3 acre minimum with 3bd, 2ba.
My guess is that the owners didn’t sell at the lower price and have set the prices higher so that they can lower it “dramatically” later hoping to generate interest / sales.
One case:
Lovely brand new Victorian built in town by a speculator, still for sale 16 months later. Price started at $350K, then listed MLS at $325K, then listed “by owner” at $300K now they added “will pay your mortgage for 6 months”. Love the house would like to move my mother in when it forecloses maybe we’ll make an offer or $100K or less …
Meanwhile Mom is renting the house across the street from me in the forest preserve 3 acres - keeping two of my horses there (rehab). Crazy 3 bd 2ba rambly ranch, owned by my FB neighbor who “has to get” $400k for it to break even. Good luck with that. It can’t be worth more than $150K for the house don’t know what 3 acres inside a 750 acre forest preserve is worth though.
Mina
This is long but SO worthwhile. Ben, don’t gong it, okay?
Don’t Confuse Risk Taking With Value
John Succo
May 17, 2007 10:00 am
Governments are becoming a larger part of the real economy with their debt creation. Free money means lower returns for everyone.
I haven’t had much to say lately. Just more of the same. With money growth my firm estimates at an egregious 14% (compared to a falling GDP now quoted in the 1-2% range, we can safely say that the money is becoming more and more anemic in producing growth), no wonder speculation in stocks and other assets is unabashedly high, along with risk. But I don’t confuse risk taking with value and I hope you don’t either.
I have suspected for a long time that government “intervention” or “participation” (or whatever you want to call it) in private asset markets is as high as it has ever been. The markets are just not acting “naturally” to me. They seem orchestrated in many ways. Why? With the levels of debt in the system (we have no historical reference), central banks must keep asset prices rising so that the debt doesn’t look so bad on balance sheets. To keep the public and corporate sectors borrowing, they have to have rising collateral. Governments are becoming a larger part of the real economy with their debt creation. Free money means lower returns for everyone.
One piece of evidence is something strange going on in option pricing. If governments are buying risky assets like stocks, they wouldn’t buy individual stocks, they would buy indexes. Any rally in stock markets would be led by index buying, not from the bottom up where investors buy individual stocks because they see fundamentals improving. Option prices are saying that is exactly what is happening.
My firm measures how stocks correlate with each other by comparing individual option prices of stocks to index option prices. From this analysis my firm backed out an “implied correlation” number. The lowest the number can be is zero (no correlation among stocks) and the highest is one (almost perfect correlation among stocks). Normally correlations fall as stocks rise because healthy rallies are created from the bottom up; normally correlations rise as stocks fall because corrections are caused more by macro events like recessions that affect all stocks. There is also a psychological element: greed is slow and builds over time, but fear is fast and comes quickly in the night. 1998 saw correlations near one.
In November 2006 I saw correlations the lowest ever at 0.2. Complacency was very high as no one was concerned with macro factors. Correlations jumped to 0.65 on Feb. 27 as a quick correction saw a fair amount of index put buying. I have never seen a correction or its corresponding jump in implied volatility and implied correlation abate so quickly. Central banks have indeed done their job in training markets that liquidity will always be supplied when needed (although their ability to do so is exponentially waning).
Recently we are seeing correlations creep up as the market grinds higher. This is quite unusual. Implied correlations are not high at 0.48, but they are high for this low level of implied volatilities for individual stocks. Please refer back to my comments on the New York Fed’s poorly thought out analysis of correlation implications between 1998 and now as it pertains to hedge funds.
The reason correlations are creeping up is that the rally is not being led by investors buying individual stocks, it is being led by index buying. I see a large and unnatural buyer (the buyer wants to pay the highest price possible) in indexes every day. I suspect it is the Bank of China buying U.S. stocks with sterilized trade dollars.
Stocks that want to go down because investors deem the fundamentals deteriorating are eventually dragged up with the rest of the market because of the index buying. Index buying infers that participants just want exposure to stocks regardless of fundamentals.
This increases risk. When trade slows down (as it is), there will be less trade dollars to recycle. When debt gets too high there will be less sterilization and lending to buy stocks.
Good article. One potential explanation might be the difference between 401k contributions between 1998 and now. 401k’s are pushed hard, and especially with index funds pushed the hardest (Buffet says they are great right?). And with the baby-boom generation about to retire, they are most likely putting a lot in their 401ks now. Is that enough to fully explain it? Probably not but it *may* be a part.
401k plans were made legal in 1981, which coincidentally was the start of the stock bull market. Coincidence? I wonder how much of the stock market is 401k money. Will have to do some research
well one reason may be that ETFs are very popular now-a-days..
RIght after Bernanke, CNBC had a fool on taking objection with his comments on exisitng homes sales dropping again.
“First quarter of this year were pretty good. Sure, a drop in MArch, but that is due to strong Jan and Feb”.
ARE YOU A FOOL OR A LIAR?
First quarter was before sub-prime pop, so was a whole other world.
April data is out and it fell off a cliff. How about using current conditions instead of 3-4 month old data?
“First quarter of this year were pretty good. Sure, a drop in MArch, but that is due to strong Jan and Feb”.
Jan and Feb sales were strong in my area. (homes that went under contract in Nov-Dec ‘06). Folks were buying “the dip”. Spring listings are priced higher, and sales are not as strong. I’m wondering if there are buyers waiting in the wings for prices to fall again this winter, and if a new homeselling season is in the making. During the RE bust, will November and December be the months that more homes go under contract?
Possibly… especially if there is a large upswing in ARM resets as predicted (starting around Aug). But then again, some people may wish to wait until spring again so they don’t have to deal with the weather (you can see more of a house w/o snow, and who wants to move in it?!?)
WOW…
They even believe the lies of everlasting equity growth in Canada. Just had a story on about the Ontario Teachers’ Union Retirement Fund doing some agressive buying….
The fund currently has twice as much going out as coming in, and with their own Baby Boomers about to retire, that ratio is only going to get worse. But, the teachers aren’t worried. The poeple running their investment fund will make it all okay.
Bernake: “We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system…”
So:
a) He does admit there are “troubles…”
b) He makes a prediction based on that observation.
For this prediciton to have any credibility, he would also need to have predicted a year ago that:
a) Today there are no troubles, but soon there will be troubles in the ’subprime sector…’
If he was unable last year to clearly predict what he sees today as ‘troubles’ occuring under his watch, what credibility does he have today in predicting the lack of troubles for next year?
Logic is a wonderful thing. Too bad the MSM does not seem to have very much (any) of it.
A quick story of Central Florida crashing:
A good friend of mine has recently disclosed his housing problems. He and girlfriend bought house a few years ago for around 67k. They had a small mortgage, but refinanced to do “repairs and upgrades”. 60k loan. House “estimate value = $230k. (15k repairs required). Money got squandered. $12k fees for refinance yielding about $40k, about 1.5 years ago. At the time, people were knocking on the door to see if they wanted to sell the house………3000 s.f., 1.25 acres land, built a-frame 1964…Plant City/Zephyrhills area.
Fast forward to today. Having spent all the money, with no income and the house as the only asset, no one wants to “lend” them any more money. They figured they would walk away with about $150k. They were even looking for a smaller, less expensive house to buy with all the money. I think it works out they owe about 80-90k. No sure. But no one is coming with any loan money, even for a hefty fee. A local realtor is will to list the property but for “no more than $125k. Yesterday, he had a “will buy any house in any condition” person come by to look it over. He said he wouldn’t go the $125k they thought they could get. They are behind on payments and looking at foreclosure on the existing high payment loans. They think the land is worth $125k. I think the land is worth $25k based on my historical experience, less the 2001-2005 land speculations.
I am going by on Saturday to look the place over. 1.25 Ac. 3000SF ..$125K ??
But I thought RE in Florida was worth $200/sf. That makes the house 600k, doesn’t it?
Having spent all the money, with no income and the house as the only asset, no one wants to “lend” them any more money.
Nobody works?
She is an alcoholic that doesn’t do much. He is employed irregularly, so they can’t verify any income.
But they haven’t been keeping up with the payments, apparently. I don’t know all the details.
All i know for sure is they think they will lose the house in a couple of weeks if they can’t sell it.
She is an alcoholic that doesn’t do much.
well if she can stay drunk living in their car won’t bother her too much. I don’t mean that snarkily. There is real value in staying comfortably numb. For some dumba$s reason I decided to step into the world of reality. *Ouch!*
What’s the surrounding area like? Rednecky? Suburban?
Zephyrhills/ Plant City are outlying towns away from Tampa. The area is farm country trying to be a city. Plant City is strawberry capital. Migrants and illegals. Lots of vacant land around and between the 2 locales, sprinkled with houses. I don’t know where this is relative to town, but believe it to be RURAL.
I lived in Zephyrhills 10 years ago. Was very rednecky then. The young people (under 65) were all natives and a wild indictment of Fla. schools and all the other people were retirees from the midwest in their little retirement trailer villages. The majority of the people were hanging out waiting to die and the rest of the population held down 4.25 an hour job taking care of them.
Very pretty land though. Mind the sinkholes.
If they have strawberry farms nearby, they should have no trouble finding a buyer.
http://www.dailysouthtown.com/business/388406,171BIZ3.article
Subprime mortgage lender to cut jobs in Chicago area…
In the Chicago-area, ACC will eliminate 515 jobs at facilities in Schaumburg and Rolling Meadows, starting May 25, according to a filing with the state of Illinois.
News like this has me thinking about the ex-employees of these subprime co.’s that are folding or doing mass layoffs. I feel sorry for the support staff (clerical/IT/maintenance/etc.) who weren’t involved in the dirty lending work. But the ones on the lending end: surely they knew what a mess they were creating when originating these toxic loans and screwing those FB’s? I also wonder just how obscene their pay & commissions were during the boom, and whether their past employment in subprime will be seen as a negative when interviewing for new work.
JL’s OCR blog
Real estate, finance create 25% of big U.S. layoffs
New federal stats out today show that real estate and financial businesses — construction, real estate services and all finance work — accounted for 25 percent of all jobs lost in major layoffs nationwide in the first quarter. (Press release is HERE!)
These industries combined had 333 major layoffs involving 34,982 workers. The Bureau of Labor Statistics counts major layoffs as events costing 50 or more workers a month or more of lost wages. Data is taken from unemployment insurance claims.
Real estate/financial combined for one-quarter of the nation’s big cuts. A year earlier — first quarter ‘06 — real estate/financial was just 14 percent of the national layoff pie as workers losing jobs in these niches grew by 34 percent in a year.
In SoCal, where stats are not broken out by industry, a total of 70 bosses in all businesses cut 8,588 workers in the first quarter. That’s up 51 percent from 2006.
In the year ended in March, SoCal bosses cut 41,890 folks in major layoffs — the highest yearly rate since fourth quarter 2003.
Bloomberg calls the top of the credit bubble:
May 17 (Bloomberg) — The meteorologists of the global credit markets are fretting that the balmy weather investors have basked in for much of this decade is about to turn stormy. It’s tricky, however, to identify the rods that might draw down lightning from the clouds.
Calling the turn in the credit cycle has been a losing strategy in recent years. War, pestilence, leveraged buyouts and the collapse of the U.S. subprime mortgage market have all been unable to derail the rally in corporate debt. As the reasons for concern accumulate, strategists are starting to reach for their furry bear suits.
http://tinyurl.com/3dly6g
The credit bubble will not reach a top until the last bear who would have called it is too scared to do so…
couldn’t agree more
manias always last longer than anyone with a sane mind can imagine.
while everybody is watching clown Bernanke do his magic tricks on stage, behind the scenes the Paulson gang is busy blowing more bubbles and assembling extra black helicopters.
Testing 1,2,3…
Newsflash:
Dept of Home Loan Security
We knew one day, if we didn’t loan them over there, they’d loan us over here.
And the inevitable has happened…
A series of i.e.d’s have gone off, planted in the shoddy construction of domiciles of dubious need, confined in entirety so far, to the Massive Sue-Me Triangle, in the Inland Empire.
Nobody saw these Inland Empire Defaults coming, the populace was 10x as unprepared for what hit them, verses our country’s preparedness on that fateful day, back on December 7th, way back when…
To add insult to injury, turncoat Sheriff John (You have no idea how many postcards my mom sent you, in vain attempts to hear my name, on your tv show, circa 1965… curse you~) has been in charge of foreclosing
on the very lives of those, so effected.
In a comes around goes around moment, it turns out that the bigger the suv, the more detrious you can leave with, as the sheriff will only give you so much time, to close out your lives, before you gotta scat~
In a bit of irony, it turns out the Hummer vehicle is a perfect fit, for those that have too much junk and not enough time to figure out what to keep, or what to leave…
“You’ll never have a party in this house and eat your birthday cake, your birthday cake, your birthday cake”
The sheriff taunted…
ee-CON-omists are hopeful that this will be the only area in the country that suffers the devastating results of i.e.d.’s, as there is no easier place to make fun of and more deserving, that has the initials, i.e.
More news to follow, as it breaks~
Written by Mark Heschmeyer (mheschmeyer@costar.com)
http://tinyurl.com/ysrpgr
May 16, 2007
All Bets Are Off for Housing Sector Recovery
News: National
Housing Slide Continues in April as Inventory Remains High and Demand Soft
The U.S. housing market continues to search for a bottom. The latest housing figures for April show
prices, sales, building permits, housing completions and industry confidence all continuing to deteriorate.
The continued weakening also has analysts and economists adjusting their forecasts for the rest of the
year downward - again.
Could be a the start of something:
“New housing permits issued across Utah in this year’s first quarter continued to tumble, indicating a housing slowdown could be around the corner.”
http://deseretnews.com/dn/view/0,1249,660221326,00.html
My sister-in-law just announced her intentions to move up to a gigantic home in Utah priced near $500K. I interpret this as a sign of declining future home prices in Utah…
A glance at the Treasury yield curve today suggests something amiss. I have never seen a uniform selloff across all durations before. Can anyone explain what is going on?
http://www.bloomberg.com/markets/rates/index.html
Get your mortgage now or be priced out forever, subprime borrowers! Don’t wait until the housing prices actually go down.
http://tinyurl.com/2n3mes
From the Motley Fool
OC starter homes a little more affordable
25 percent can now afford first homes thanks to a drop in prices and higher incomes.
http://tinyurl.com/34qt2s
JL’s blog, OCR.
Pimco renter says housing’s bottom ‘over a year away’
Mark Kiesel is still renting. He’s the bond-market expert at Pimco in Newport Beach who made a splash a year ago by backing up his bearish outlook on housing by selling his O.C. home and becoming a renter. Well, he’s published an update on his real estate view. Here’s a snippet:
Based on the current outlook for housing, I will likely be renting for one to two more years. While many factors that influence housing prices have turned negative, I suspect we have not yet hit bottom. In fact, housing prices should head lower throughout the rest of this year and next year as well. Why? Housing inventories remain high, delinquencies and foreclosures are set to rise as homes purchased over the past few years by speculators and individuals with teaser-rate and adjustable-rate mortgages come back on to the market, affordability is low, and sentiment and risk appetite has shifted negatively. Most importantly, the availability of credit is set to take a turn for the worse as lenders tighten credit standards.
This is all great news for renters and buyers who are patient. Over time, housing prices and interest rates should decline, resulting in improved affordability. This adjustment, however, will take time and occur over a period of years, not months. Housing is illiquid and prices are sticky. As a result, potential buyers should exercise patience and not jump back into the housing market too early. A year ago, I described the state of the U.S. housing market as “the next NASDAQ bubble.” The NASDAQ took over 2½ years to go from peak to trough. I suspect that housing prices could display a similar pattern, and we are still over a year away from the bottom. Given these risks, I prefer renting versus owning, and an investment strategy which favors defense versus offense.
Another one from the blog. Might have been posted already, this is from yesterday.
Marin is 1st Calif. county with million-buck median homes
Tidbits from DataQuick’s April review of Bay Area homeselling stats …
• Marin County’s median for resale houses reached $1,010,000 last month, the first time any California county passed the million-dollar mark.
• A total of 7,447 new and resale houses and condos were sold in the nine-county Bay Area last month. That was down 10.5 percent from 8,317 in March, and down 18.4 percent from 9,129 for April last year. Sales have decreased on a year-over-year basis the last 27 months. Last month’s sales count was the lowest since 5,636 homes were sold in April 1995. The strongest April in DataQuick’s statistics, which go back to 1988, was in 2004 when 14,430 homes were sold. The April average is 9,614.
• The median price paid for a Bay Area home increased last month to $659,000, a new peak. That was up 3.1 percent from $639,000 for the month before, and up 3.8 percent from $635,000 for April last year. The prior peak was in June of last year at $648,000. Prices have increased the last three months.
• Quote: “With sales this slow, prices would decline if there were a huge number of motivated sellers listing their homes. That doesn’t appear to be the case. It’s likely that potential buyers are biding their time, as are sellers. It’s hard to buy a home if you think it might go down in value. Things could pick up this summer as buyers see that values are not dropping,” said Marshall Prentice, DataQuick president.
From OCR’s “Mortgage Insider” blog.
New Century sells final assets for $188 million
This is it folks. New Century Financial of Irvine, once a mega subprime lender, a “new shade of blue chip,” has a buyer for its last major asset. Carrington Capital Management LLC, a company New Century helped create, won bidding for New’s loan servicing operation, agreeing to pay $188 million.
Carrington upped its offer 35% from the initial $139 million when New filed for bankruptcy on April 2.
A hearing on the sale is set for Monday, May 21.
That’s it. Now I guess we wait to see if the government ever files charges related to securities trading and accounting issues, or not.
Kind of long but interesting…another one from that blog.
What creditors get paid when a subprime lender goes bankrupt
I remember chatting with Jack Mayesh after he founded Brea-based ResMae Mortgage Corp. in 2003, with Ed Resendez and Bill Komperda.
They previously ran Long Beach Financial Corp., which went public in 1997 and was bought in 1999 by Washington Mutual.
Mayesh planned to do it all over again with ResMae, a subprime lender, and got venture capitalists to inject a few million into the company. Then the subprime industry died, and ResMae filed for bankruptcy. They never had that big IPO.
Anyway, earlier this month I saw a Bloomberg story on it that outlined what creditors will be paid:
Subprime lender ResMae Mortgage Corp. intends to pay between 7.6 cents and 14.6 cents on the dollar for the claims of unsecured creditors, who are owed up to $143 million.
Its Chapter 11 plan calls for ResMae to exit bankruptcy in the hands of Chicago hedge fund Citadel Investment Group LLC, which bought the Brea, Calif.-based company for $22.4 million at a bankruptcy court auction.
A confirmation hearing on ResMae’s Chapter 11 plan is scheduled for June 5. Judge Kevin J. Carey of the U.S. Bankruptcy Court in Wilmington, Del., last week approved the plan’s outline, known as a disclosure statement. Companies in Chapter 11 are required to win approval of the disclosure statement — a description of how creditors will be paid — before the creditors can vote on the plan.
Under the plan, about $900,000 in secured claims will be paid in full. Unsecured creditors, owed between $119 million and $143 million, will recover an estimated 7.6 percent to 14.6 percent. ResMae’s existing stock will be canceled and shareholders will recover nothing.
San Diego: Everybody wants to live here (but they don’t bring their kids?):
http://www.voiceofsandiego.org/articles/2007/05/17/news/01population051707.txt
“When voters approved $1.51 billion worth of bonds in 1998 to help relieve overcrowding in the San Diego Unified School District, the school system projected that more than 156,000 students would be attending its campuses a decade later. Instead, schools will likely enroll fewer than 130,000 students.”
….
“At the time, the district enrolled 138,500 students. That figure was expected to increase to 156,474 in the 2008-09 academic year.”
The question has been asked many times and now via email I have just received ….. The Answers. (absolutely sure to offend somebody, somehow, someway so apologies up front)
Where to Live After Retirement
You can live in Phoenix , Arizona where…..
1. You are willing to park 3 blocks away because you found shade.
2. You’ve experienced condensation on your butt from the hot water in the toilet bowl.
3. You can drive for 4 hours in one direction and never leave town.
4. You have over 100 recipes for Mexican food.
5. You know that “dry heat” is comparable to what hits you in the face when you open your oven door.
6.. The 4 seasons are: tolerable, hot, really hot, and ARE YOU KIDDING ME??!!
You can Live in California where…
1. You make over $250,000 and you still can’t afford to buy a house.
2. The fastest part of your commute is going down your driveway.
3. You know how to eat an artichoke.
4. You drive your rented Mercedes to your neighborhood block party.
5. When someone asks you how far something is, you tell them how long it will take to get there rather than how many mil
es away it is.
6. The 4 seasons are: Fire, Flood, Mud, and Drought
You can Live in New York City where…
1. You say “the city” and expect everyone to know you mean Manhattan .
2. You can get into a four-hour argument about how to get from Columbus Circle to Battery Park, but can’t find Wisconsin
on a map.
3. You think Central Park is “nature,”
4. You believe that being able to swear at people in their own language makes you multi-lingual.
5. You’ve worn out a car horn.
6. You think eye contact is an act of aggression.
You can Live in Maine where…
1. You only have four spices: salt, pepper, ketchup, and Tabasco .
2. Halloween costumes fit over parkas.
3. You have more than one recipe for moose.
4. Sexy lingerie is anything flannel with less than eight buttons.
5. The four seasons are: winter, still winter, almost winter, and construction.
You can Live in the Deep South where…
1. You can rent a movie and buy bait in the same store.
2. “y’all” is singular and “all y’all” is plural.
3. “He needed killin’” is a valid defense.
4. Everyone has 2 first names: Billy Bob, Jimmy Bob, Mary Sue, Betty Jean, MARY BETH, etc.
You can live in Colorado where…
1. You carry your $3,000 mountain bike atop your $500 car.
2. You tell your husband to pick up Granola on his way home and he stops at the day care center.
3. A pass does not involve a football or dating.
4. The top of your head is bald, but you still have a pony tail.
You can live in the Midwest where…
1. You’ve never met any celebrities, but the mayor knows your name.
2. Your idea of a traffic jam is ten cars waiting to pass a tractor.
3. You have had to switch from “heat” to “A/C” on the same day.
4. You end sentences with a preposition: “Where’s my coat at?”
5. When asked how your trip was to any exotic place, you say, “It was different!”
LOL.
Check out this Phony FLIP this House
http://www.myfoxatlanta.com/myfox/pages/Home/Detail?contentId=3200981&version=2&locale=EN-US&layoutCode=VSTY&pageId=1.1.1