A Continued Period Of Weakness
Some housing bubble news from Wall Street and Washington. “Former Federal Reserve Chairman Alan Greenspan said rising defaults in the subprime mortgage market and tightening loan standards will bring a ‘continued period of weakness’ to housing, making it difficult to forecast growth in the next year.”
“‘We have considerable difficulty,’ Greenspan said Thursday in a speech. ‘We have never been through anything like this. I can’t say how it is going to come out.’”
“Greenspan said the housing market has been hurt by a ‘huge surge in subprime borrowing’ in the past few years, with imprudent loans made on the basis of rising home prices, and a similar surge in ‘Alt-A’ mortgages.”
“‘We are sitting in a market that all of a sudden prices are flattening out,’ Greenspan said. ‘You can immediately see a backing up of problems.’”
“His outlook has been more pessimistic than that of current Fed Chairman Ben Bernanke, who said in a speech Thursday that the housing slowdown won’t have a broader impact.”
“‘We do not expect significant spillovers from the subprime market to the rest of the economy or financial system,’ Bernanke said in a speech.”
From CNBC. “In a speech today at the Federal Reserve Bank of Chicago, Fed Chairman Ben Bernanke detailed the many ways in which financial regulators, including the Federal Reserve and Congress, could act in order to prevent a recurrence of the subprime mortgage crises.”
“My question, even with steps 1 and 2, is: why is all this a new idea? I mean, I thought all this stuff was in place already; you know, like the federal government might have already had some rules in place to keep banks and lenders from ripping me off.”
“Chairman Bernanke did teach me a few new terms in today’s speech: TILA, HOEPA and Regulation Z. ‘The purpose of Regulation Z is to ensure that lenders provide borrowers or potential borrowers with clear, accurate and timely information about the terms and conditions f loans,’ Bernanke said.”
“I’m still asking the same question. If all this stuff is there already, then why is housing in the mess it’s in now?”
“‘The Chairman misspoke when he said that the Federal Reserve is ‘authorized’ to write rules by the Home Ownership and Equity Protection Act (HOEPA). In fact, the law requires the Federal Reserve to write rules to protect home borrowers from unfair or deceptive practices,’ claims a ‘Statement of Senator Dodd in Reaction to Bernanke Speech.”
“‘I hope that Chairman Bernanke is right when he says that a slumping housing market will not affect the broader economy, but I would not bet the house on it,’ (said) Senator Chuck Schumer.”
From Bloomberg. “OceanFirst Financial Corp., a New Jersey-based banking company, will shut its subprime mortgage business and said the unit’s president resigned after defaults were hidden from top management.”
“The bank blamed loans it made to borrowers who weren’t required to document their income, according to a presentation for investors included in a federal regulatory filing today. The mortgages covered as much as 100 percent of a property’s value.”
“OceanFirst said some of the loans made in 2006 quickly soured, and unnamed officials at the Columbia Home Loans unit ‘concealed’ the defaults until February 2007. New subprime loans were halted by the bank in March, and OceanFirst has taken $21.6 million in charges.”
The Herald News. “Nationwide, reported cases of mortgage fraud increased by 30 percent between 2005 and 2006, according to data released on Wednesday. But in New Jersey, reported fraud incidences more than doubled in the first part of 2006. The state recorded the highest increase in the country.”
“New Jersey and other states enacted anti-predatory lending laws in the last several years to crack down on mortgage fraud. But New Jersey’s law only covers refinancing, not purchase loans. And at the request of loan rating companies, lawmakers tossed a statute ensuring a loan was in a borrower’s best interest, Wolfe said.”
“For unscrupulous loan officers, risky mortgages translated into quick cash through high fees and interest rates. And even mortgage bankers admit that greed was a motivator.”
“‘It’s bank robbery without a gun,’ said Corey Carlisle, a senior director at the national Mortgage Bankers Association. ‘Unless there’s a real threat of enforcement, they think they can get away with it, because they can.’”
The Grand Rapids Press. “Foreclosures declined locally and across Michigan from March to April, but Grand Rapids real estate agents said the market has yet to hit rock bottom.”
“Real estate agent Gail Brinks said 66 homes went to sheriff’s sale this week in Kent County alone. Sometimes, there can be as many as 100 per week, she said.”
“Veteran real estate agent John Schlundt Bodien believes conditions are likely to worsen before they get better. ‘We can’t continue to have fraudulent appraisers,’ he said. ‘People are offering loans for property with the wrong values.’”
“Willis Blackshear combs through Ohio mortgage filings, looking for time bombs to defuse.”
“The Montgomery County official, who oversees real estate filings in Dayton, is searching for loans with balloon payments, or interest rates that may soon rise to unaffordable levels. He has found more than 3,100 in Montgomery, which had one of the highest foreclosure rates in the state last year.”
“‘It’s crazy,’ Blackshear said. ‘I knew it was bad, but I didn’t know it was this bad.’”
The Business Journal. “Real estate appraisers face a dramatic increase in their licensing requirements beginning next year…adopted by a national foundation authorized by Congress to establish such rules.”
“But, the updated criteria may, or may not, be a hedge against repeats of the current real-estate mortgage lending meltdown in which some appraisers have played both witting and unwitting roles.”
‘Unless there’s a real threat of enforcement, they think they can get away with it, because they can.’”
They can, they will, they are.
The time tested Souffle Defense…
“‘We are sitting in a market that all of a sudden prices are flattening out,’ Greenspan said. ‘You can immediately see a backing up of problems.’”
Er, no Alan, prices are not “flattening out”. They’re falling. The first derivative has become negative, not just the second.
Ever take any calculus?
You so doom & gloomy, Greenie…
“His outlook has been more pessimistic than that of current Fed Chairman Ben Bernanke, who said in a speech Thursday that the housing slowdown won’t have a broader impact.”
He works for Pimco now. Bonds do better when bears rule.
Did you mean Pimpko?
“‘We have considerable difficulty,’ Greenspan said Thursday in a speech. ‘We have never been through anything like this. I can’t say how it is going to come out.’”
******
Oh, OK. I get it.
Only *now* it’s clear that we’ve entered an era without precedent.
LOL! I haven’t had a better laugh in a long time.
“‘We have considerable difficulty,’ Greenspan said Thursday in a speech. ‘We have never been through anything like this. I can’t say how it is going to come out.’”
Isn’t it a little scary this comes from a near 90 year old man who lived through post 1929 Great Depression? He wouldn’t have been too young to remember all the suffering.
I wonder when he had his “rosebud” moment?
When he turned his moral sails in favor of the Korporate Brobdingnagians, repudiating everything he once stood for…
My mother was born in 23′ in Germany. She lived through Germany’s depression which was worse then the US. Greenie was definately around.
It was an evil experiment:
http://www.economagic.com/em-cgi/data.exe/fedbog/fedfund
on Greenspan.. Now Big Al recognizes the dangers now that he is no longer in charge. He can stop the greenspeak and say clearly that there is problem & reminds us he is no longer in charge. But if he were in charge, he sees the dangers, the recession, & uncharted waters. {implying he would act, attempting to maintain his shaddered Maestro status.
While Ben is having “problems back up, like a sewage system, he reports on damage control…”well contained, tightening up lending standards”, not a broad impact to the economy”
Interpretation: The housing slump is not the problem. Its our lending. Since the delinquent loans for Sub prime & Alt(a) are sharply rising at their current rate of ascent @ 14 &13% respectively, resetting Arms are due to explode in July $40 Billion then $50 then 60 billion per month over the next 27 months. Ben has a plan off-shoring the risk and bailing out and leaving investors as the bag holders, Meanwhile Ben tells us I am ” pumping dollars from the helicopter” the economy of banks isjust find. But @ a 20% annual clip?
Meanwhile back at the ranch, Ben unwittingly is being baisted and marinaded to take the fall, as Shumer, Dodd &Big Al…. get their quotes / shots in about their genuine concern.
Isn’t Greedspan saying this analogous to a fire chief who goes around all over town covertly flooding every building’s basement with gasoline, lighting a very long fuse, then retiring and declaring (from a nice, safe distance):
“Wow, just look at that horrible fire, what a shame. I wonder how that happened? Sure would suck to be fire chief in that town” (*whistles* and rolls eyes).
The only problem with Plan Z…
Is that you’ve run out of letters for the next plan, if it doesn’t work out.
‘The purpose of Regulation Z is to ensure that lenders provide borrowers or potential borrowers with clear, accurate and timely information about the terms and conditions f loans,’ Bernanke said.”
Tip o’ the iceberg stuff…
“The Montgomery County official, who oversees real estate filings in Dayton, is searching for loans with balloon payments, or interest rates that may soon rise to unaffordable levels. He has found more than 3,100 in Montgomery, which had one of the highest foreclosure rates in the state last year.”
Yes, Dayton has been hit hard. It is an old-stype havey manufacturing city. Of course, much of that will be gone real soon.
The bank blamed loans it made to borrowers who weren’t required to document their income, according to a presentation for investors included in a federal regulatory filing today. The mortgages covered as much as 100 percent of a property’s value.
And whose fault is that?
Greed has a price.
Greed has a price.
… and the taxpayers will pay this price, not the banks.
They still do plenty of stated, though you need a much better score to get 100%. But now we get to learn a new term known as ‘4506′ where the lender goes down and pulls your tax papers on stated deals. It’s not new, exactly, but I think it’s going to be a lot more common and you’re going to see a lot of deals that don’t close. Those are docs that you can’t forge.
The real threat to everything, at the end of the day, is not that people are in houses they’re doomed to lose… People can make enough money to pay down these I/O deals for years. It’s that they can’t squeeze any more cash out of them. Cash that props up that small “consumer spending” slice of the economy. 1.3– you can put lip stick on that, but throw a minus sign in front and folks start to worry.
last I knew (ok 15 years ago) the IRS just gave lenders the agi so you could just claim self employment on stated deals and get around it. We had guys going for 500k+ in the early 90’s with agi’s around 40 grand. We needed 20% down then but other than that the deal was the same as today. You can buy software that will take your agi and pump the rest of the return with exemptions, deductions etc. to agree with whatever gross income you want to claim.
Those who lost their homes due to this no doc loan, probably won’t look forward to owning again.
I looked for a stated 100% and couldn’t find one. 720 Fico and I had to be bringing money to the table.
Wow, things have changed more than I thought.
I guess 95 is the new 100. That’s gotta sting.
In a speech today at the Federal Reserve Bank of Chicago, Fed Chairman Ben Bernanke detailed the many ways in which financial regulators, including the Federal Reserve and Congress, could act in order to prevent a recurrence of the subprime mortgage crises.”
You’re way too late to the party, Ben.
The punch is gone, and the Wall Street looters have stolen everything.
Never too late to respike the punch bowl…
Yeah, but when everyone’s already puking their guts out, the demand just isn’t there.
Private Equity firms and Hedge Funds have. Once the companies are loaded up with debt, they will then try and sell stock in that company and then they will load up the Hedgie with debt and then do that as an IPO as well. Finally, when the house full of cards comes tumbling down, they will be in Switzerland.
No worries — Agent Bernanke is on the case:
From Times Online
May 17, 2007
Bernanke adds his voice to fears of buyout bubble
The Federal Reserve chairman says central bank is monitoring ’significant risks’ in bank financing of private equity deals
Robert Lindsay
Federal Reserve Chairman Ben Bernanke today added to fears that banks were stoking a buyout bubble by lending to private equity firms.
During the Federal Reserve’s annual bank structure conference, at which he made a speech on the health of the economy, he was asked whether he saw banks taking on too much risk by financing private equity deals.
Mr Bernanke stated: “There are some significant risks associated with the financing of private equity including bridge loans. … We are looking at that.”
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article1805322.ece
“Private equity” 101 - how this works, and why they seem to have so much money!
1) They do a deal looks like a mutual fund or IPO prospectus, by lining up billions in commitments, with the promise of fantastic returns based on the past, when hardly anyone was doing this.
2) Investors agree to fund upon “demand” but place no money on the table just a signed contract to fund. {In our case we committed $10 million over the next 5 years.
3) We are told during the proposal stage chances are we won’t need the full commitment as your returns will most likely be sufficient, after year one. So far we are in 14% from October close..
4) They get $5 billion committed { or whatever} no money down and the general partners keep 5- 15% equity off the top, a management fee, a split of the profits and total control..
5) Now they go out and make deals that no longer are making sense, and sending a notice for the cash due in 5 days. {aka -Chrysler}
Why buy now just before a recession?, but then I am not the genius getting free money/ equity, a profit split and a mgt.fee to boot! :>(
Wall St. looters…. that’s the way it always work. Read history. The “big boys” sold and turned billions for this housing crash and now the fools are asking what went wrong? The boys are soon to be “out of the country” if they haven’t already left and drinks, party, sunshine, and ocean are their focus now. O, by the way, don’t try to call their cell phones as the message “sorry that number is no longer in service and there is no new number” . Surprized? I don’t think so.
The IMF selling off a bunch of mellow yellow @ this point in time, including the good graces of mister turncoat, reeks of wrong…
The golden parachutes are being packed, for Korporate Malfeasances, Inc.
http://www.theage.com.au/news/Business/IMF-still-eyeing-gold-sales/2007/05/15/1178995095005.html
can I have an “amen” to that? —hd74m
Why are so many of these stories STILL so dependent on quotes from real estate agents? Are they the only ones qualified to comment on the market? Methinks that some of the HBB-ers are much more clued in.
Reporters don’t investigate. They reword press releases and ship the story. The biggest issuer of press releases are the Realtors.
Well then, maybe we should issue a press release.
You know that is a great idea. Unfortunately someone has to write it. My wife does this for a living on the political side of things and I know they get paid big bucks to do it.
What would be ideal is if there was an openpressrelease.org set up kinda like digg where people could write press releases and readers could comment and vote on which press releases were good. After a certain number of positive votes the press release would be sent to the associated press.
Just an idea.
Right, and some commentors in opposition could volunteer to take the place of the “usual suspsects” always asked for quotes to provide a “balanced” story.
http://www.google.com/search?q=how+to+write+a+press+release
You have to have an assumption of credibilty.
Not real credibility, just some reason for reports to assume you are credible.
“You have to have an assumption of credibilty.
Not real credibility, just some reason for reports to assume you are credible. ”
Easy.
We just need to make ourselves an “association” or an “institute”
It would be like this:
“Ben Jones, president of the National Association of Housing Statistics, states that…”
or
“House Inspector Clouseau, of the Institute for Affordable Housing, an economic thinktank located in the Midwest, acknowledges that…”
I’m willing to bet there’s some higher education bloggers willing to lend their insight for quotes.
I do computer work now but I have a BA in Economics from Colorado State University that I’d be willing to throw around if you’re looking for credibility. I’m sure there’s people with even higher level degrees that will do the same.
When you stand for what’s right it’s not hard to find people that agree with you.
You can add me to that list. MBA with a concentration in Finance.
Oh, I forgot to mention… The press release has to be shocking (that we have), AND it has to be what the people that buy ads want to hear (ooops).
What real estate company is going to want to buy ads in a paper that says “NOW is a horrid time to buy!”.
I know a lot of smart cookies hang out on this blog, when I feel dumb……
BS-Marketing
MBA
CFP, RE License, and other assorted pieces of paper that cost money and time.
I’ll confess to having a bachelor’s degree in economics. But I’ve never worked in the field, except for one crummy academic journal job.
Hey! Not to brag but I have a BA in BS, would that help?
The whole key, is it would have to intially seem like just so much more realtor tripe, at first glance…
And then bury them towards the end and tell the truth, with a good helping of subterfuge hiding it from the booboise, but not lost on anybody, with half a brain.
Find a doctor and a fundie backed publication, then you don’t have to have any expertise in a field to get news out there…
(NOTE - there are good conservative think tanks, but most of the talking heads are just worthless)
Dr. Laura - PhD in physiology not psych
James Dobson - PhD in child development not Divinity
Rush Limbaugh - flunked out SEMO… do you have any idea how hard it is to flunk out of South East MO State?!?
Pat Robertson - failed the bar exam
I qualify as the least qualified - M.D., Ph.D. No expertise in real estate, business, or finance whatever.
The best four years of my life were in kindergarten. I’m the least qualified. I got into my business from the back of a match book cover ” High School dropouts/ College Grads you to can earn big money”
MS in Real Estate and Urban Analysis headlines the education section of Ol’Bubba’s resume.
We need data that can be reported on a periodic basis. For example:
—>The monthly survey of independent real estate analysts (bloggers) continued to weaken in April. The survey index, which is intended to project independent analysts assessment of future market conditions, reached 7.0 on the Richter Real Estate Scale, indicating that most analysts consider the market to be undergoing a severe correction that will last for more than one year.
“‘We have considerable difficulty,’ Greenspan said Thursday in a speech. ‘We have never been through anything like this. I can’t say how it is going to come out.’”
Well how come everyone is predicting a bottom now and that the worst is behind us if we have never seen anything like this?
did he mean we’ve never kept interest rates so far below inflation for so long - whoops
Actually to me Greenspan’s statement is more accurate than other experts ,except we have been through things like this ,think Great Depression of 1929, Panic of 1907,Florida Housing cash of 1926.
We have been in a time like we’ve had the last 5-7 years.
It was call the Roaring 20’s
The Roaring 20’s was caused but rampant speculation and low interest rates.
Sound familiar?
Very familiar…
Joseph E. Stiglitz
The Roaring Nineties
A New History of the World’s Most Prosperous Decade
How one of the greatest economic expansions in history sowed the seeds of its own collapse.
http://www2.wwnorton.com/catalog/fall04/032618.htm
End of the Roaring Twenties
[edit] Black Tuesday
The Dow Jones Industrial Stock Index had continued its upward move for weeks, and coupled with heightened speculative activities, it gave an illusion that the bull market of 1928 to 1929 would last forever. On October 29, 1929, also known as Black Tuesday, stock prices on Wall Street collapsed. The events in the United States were the final shock to an unsound economic system, leading to a worldwide depression that put millions of people out of work across the capitalist world throughout the 1930s.
“My major concern was always the procedure for appointing the president (world bank). These are supposed to be international economic institutions—international public institutions—and particularly since the issue of governance is so high on the agenda, for them to exhibit such a democratic deficit—where they don’t ask who’s the most qualified person regardless of nationality, race, religion, or gender—is really a very big mistake. Instead they accept who the president of the United States thinks should be the Bank’s president. The way the president is chosen undermines the ability of the Bank to achieve the objectives of the institution and particularly its legitimacy in dealing with issues of governance, on which it has placed such emphasis in recent years.”
Joseph Stiglitz May 13
“Now Wolfowitz has lost any chance to make up for Iraq, as Robert McNamara managed to do - to some extent - after serving as secretary of defence during that other US foreign policy debacle, the Vietnam war.”
from the Guardian
and from the G8 meeting today
concerning hedge funds
“Britain and the US prefer a light touch but Germany, where such funds are often referred to as “locusts”, wants stiffer regulation. Mr Steinbrück received important backing this week from European Central Bank chief Jean-Claude Trichet who said there was an “emerging consensus” that such a code of conduct was needed. Other countries disagree and their officials have refused to allow today’s communique from the meeting to have any mention of the code of conduct.
Mr Steinbrück, who has made the code a main aim of Germany’s presidency of the G8 this year, acknowledged that was the case but said he was not working to a particular timetable.” Guardian UK
I like that Hedge fund locust.
Speaking of McNamara, I wonder if anyone else realizes how eerily similar Donald Rumsfeld is/was to McNamara. Same self-confidence, same “gonna change the world” attitude, same devastating outcome.
Next Secretary of Defense should be a retired-after-30-years Sergeant Major or Chief Petty Officer.
should be renamed to Secretary of WAR……..just like the good old days.
Unfortunately as a culture we have zero respect for enlisted types…or anyone else who’s likely to tell us the truth instead of what we want to hear.
the speculation isnt as rampant as dot-com bubble……
anecdotally, none of my “friends” are day trading again…..
But how many of your friends have two or more condos/houses ?
fortunately, all of them sold in ‘05-’06…..on my absolute stance that I would not speak to them again if they DIDNT sell…..not only that but I also talked one down on a condo purchase in Vancouver, 2bdrm 2 bath for 345k…..hes lucky he only lost his 15k deposit, idiot. He still thanks me to this day.
oh, all except my jacka$$brother, hes got 3 houses, no condos, and monthly nut that makes my eyeballs hurt…..
some-bitch still owes me money.
Wit has to do with mirth…
Witting & Unwitting in this instance means:
Criminal Act & Willing Accomplice
“But, the updated criteria may, or may not, be a hedge against repeats of the current real-estate mortgage lending meltdown in which some appraisers have played both witting and unwitting roles.”
another 10,000 on up side in a week!
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 was 855,892
6/24/06 was 860,647
6/29/06 was 866,037
7/01/06 was 858,675
7/09/06 was 870,854
7/11/06 was 882,239
7/13/06 was 886,055
7/14/06 was 890,896
7/18/06 was 895,022
7/21/06 was 900,000
7/25/06 was 905,170
7/28/06 was 910,001
8/01/06 was 903,718
8/12/06 was 915,336
8/19/06 was 920,755
8/26/06 was 925,176
8/29/06 was 951,242
9/15/06 was 955,352
12/1/06 was 925,170
12/2/06 was 915,258
1/01/07 was 857,760
1/20/07 was 900,302
2/14/07 was 932,055
4/21/07 was 1,148,456
4/27/07 was 1,171,189
5/11/07 was 1,192,290
5/18/08 today 1,202,413 active homes Nationwide
http://www.ziprealty.com/maps/index.jsp?usage=search&cKey=74rbwvlk
A 50% increase in RE nationally in 11 months? Wowsers!
mid may 2006 was 799,000
mid may 2007 is 1,202,413
As you noted, that is a 50% YOY increase in inventory — can’t blame that one on seasonal fluctuations.
You forgot the “Mapril” effect!
But Zip has added new geo areas. So, it really is apples to oranges.
Yeah, I think it has been the bad weather we’ve been having for, oh, the last year…
Now that is a China like bounce in shue fly Supply.
Question for the class>>>>
Now as the supply curve shifts outward & upward Anl.RofChange?
While demand side is slipping 25% for the 2nd straight year.
What should our model graph look like next spring fall?
Constraint elements:
14% delinquncies rising “rate of change”
Arm resets averaging over $40 billion for next 26 months.
How will demand meet supply will there be equilibrium?
More significant: Up 270K in three months (29% inventory increase going into the hot spring selling season)…
Inventories are presenting a strong case for meltdown and no one wants to talk about it. How can we even be near a bottom or even a flattening-out that some of these idiots, Bernanke included, when inventories in most areas have already rocketed by last years highs with no let up in sight?
Nobody wants to talk about the other elephant under the rug, either: millions of vacant homes.
Or the other elephant that is not shown in that figure…
FSBO…I know here in Port Charlotte the number of fsbo vs mls is way past what it was last year…Say maybe 30-40 % more for sale ????
Chris
I’m convinced that several banks and builders are sweating bullets due to the hundreds of thousands of newly completed, yet unsold, homes on the market. They can’t simply carry these things forever. Somethings brewing…
“I’ve seen the elephant”
California Gold Rush term, meaning essentially:
I came out west, tried my luck, didn’t have much and am leaving with my tail between my legs and going back from whence I came.
Something’s brewing, Banteringbear….Yep….National bankruptcy….why do you think the major corporations like Halliburton are picking up and leaving?
They all stole so much and this beer can is empty.
“….over the road, to watch China blow!!”
Clash “Russia versus G.I. Joe” (Sandanista album)
Charlie Don’t Surf…
aladinsane
It’s Fast Rough Factory Trade!!
The Mutants, Creeps and Musclemen are shakin’ like a leaf…
It blows a hole in the radio when it hasn’t sounded good all week…
This pretty much sums up RE, F.B.’s and the end of the 2000 “teens” bubble.
Sweet as…
(New Zealand slang: way cool)
As local elected officials look for $$ to replace declining revenue from real estate sales, I think they should start looking at ways to fine people for vacant houses/condos.
And severely curtail loss deductions from not being able to rent… too many specvestors bought a rental property - never intending to rent - taking a write off on the loss of rental income, with the purpose of waiting a few years to then sell at new market prices.
Inventories are presenting a strong case for meltdown
That’s why govt. bailouts won’t work. Does the govt. intend to allocate funds to purchase all the excess inventory?
I haven’t seen the specifics of proposed FB bailouts, but the little I’ve seen sound like band-aid feel good measures to help a few FBs lick their wounds. And keep the “community assistance” crowd employed.
disclaimer: no diss on the community aid crowd. Some of my best friends are social workers.
They are bail outs for the banks.
Direct bailout:
Oh, the owner owes $300K on a house that is worth $100K? Go ahead and foreclose and we’ll give you the $200K diff.
The FHA bailout:
Oh, the owner owes $300K on a $100K house? Refi them to an FHA loan, then when you default, we’ll pay you the $200K back.
If someone owes $300K on a $100K house, NO bailout can begin to help them. I don’t care if we give them 2% interest rate, they still owe $300K on a $100K house.
You hit it on the nose . If they can stop all these foreclosures and get the FB to pay on the note for at least 10 years(and even pay some equity ) they are hoping the market recovers by that time .
Also they got to put all the damage in a easy to bail out form . Having all these bad loans spread out with a bunch of lenders makes it impossible to get the bail out operation going in a effective manner .it’s easiers to say “come to us and lets see if we can help you “.
The problem, like you said ,is these borrowers still have declining real estate values and they are still bad pays and speculators that were looking for equity profits ,not paying on a declining asset .
Well the only bailout that will help borrowers at that point is foreclosure, followed by an insolvency forgiveness of their 1099 tax liabilities or bankrupcy protection against a defficiency judgement.
Than you messing with contract law on loans made because some lenders(bagholders ) relied on having remedy for loss which involves a right for a deficiency judgement .
Does anyone really think a revenue-strapped government is going to be issuing tax forgiveness?
Housing Wizard–As opposed to reducing the lender’s risks by making it more difficult to get bankrupcy protection. Because that’s never happened.
But we’re at the bottom. The worst is behind us. Buy now or be priced out forever. You know, they aren’t making any more land. In 12-18 mos, prices will start appreciating again as soon as all the illegals become legal.
I hope the illegals all come in with $1m in cash, so they can help the San Diego housing market get back on track…
Actually it’s probably going the other way, where the illegal takes the cash back from the loan and heads back home to live like a prince.
It’s certainly thoughtful of the hedgies and investment bankers to stoke the Latin American economies like that.
If I were an FB and had a backdoor “get out of jail free” card, that’s exactly what I would do.
“The Grand Rapids Press. “Foreclosures declined locally and across Michigan from March to April, but Grand Rapids real estate agents said the market has yet to hit rock bottom.”
At least my newspaper isn’t playing the spin game. I would almost like these guys to lighten up a bit.
ZR may have added additional states in this last year. Number is up though not certain number means anything other than it is up.
While that may be true, I personally have been watching and comparing specific areas that really are the pulse of the West. Trust me, it’s ugly and getting uglier.
One caveat with using ZipRealty’s numbers in such a fashion is that the number of homes in this stat will naturally increase as they increase their geographical coverage.
Thus the importance of tracking specific areas that Zip has been tracking for some time. The numbers i’ve been watching aren’t as dramatic as the ones posted above that might be deceiving, but they are dramatic nonetheless. As mentioned, most “important” areas have already surged past last years highs reached late last summer. I believe next month is going to be awesome with the realization by by sellers that there is no bottom in sight and they can’t rent their homes, let alone rent it for a loss. At the risk of breaking my arm patting myself on the back, I’ve been pretty spot-on with my predictions on inventories. Inventories will continue to rocket up through May, but watch next month - it’s going to be hard for anyone to ignore.
FWIW - the DC area (one of the most bubbleicious) has been flat YoY for a while now. Very high, and increasing MoM, but not increasing relative to last year. I think we hit “critical mass” where a lot of sellers just gave up and de-listed, waiting for the market to bottom out and go back up some before even trying.
IMO I think we’ll see that nationwide, where ineventory will flatten at a high level, and probably remain there for about 3-4 years, maybe more, and then start trickling down. From them on sales then will be driven not by equity cash-out but rather by normal needs (job moves, retirement, death, etc), since there won’t be much equity there to cash out, except by those who have paid off most or all of their mortgage. In other words - a normal housing market.
Not going to happen. Combine “demand destruction” with “get out with whatever equity you can” psychology and we’ll go much higher.
In my area that I’ve been tracking (Napa, certain parts of Solano County) over the last year or so, the inventory in the price range relevant to me is up 50-75%. Prices are easily down 10%+ from the peak and more if you consider what prices would need to be to halt the sales volume slide.
In my case, I agree with TJ. Supply will only get worse for years to come as “owners” are shaken out of their homes because of affordability reasons. Maybe the % rate of increase will slow down, but this is compounding going the wrong way for homeowners. Although the area is wealthier than it was say 15 years ago, it’s still quite poor from an income to housing price standpoint and was very dependent on aggressive lending.
It’s like blowing up a balloon with your mouth. Once, you stop blowing, all that air comes right back out in a hurry. It doesn’t just plateau and sit in the balloon for a while before deciding to leave.
“‘We are sitting in a market that all of a sudden prices are flattening out,’ Greenspan said. ‘You can immediately see a backing up of problems.’”
“His outlook has been more pessimistic than that of current Fed Chairman Ben Bernanke, who said in a speech Thursday that the housing slowdown won’t have a broader impact.”
The former and incumbent Fed chairmen have diametrically opposed views of the potential subprime fallout. History will prove one of them wrong.
Greenspan playing the “get out of jail free” card with stronger downside risk comments, against the steadfast panic control of Bernanke……..BB has a leash, he goes too far, and Daddy’s gonna yank.
And AG laid a dookie on the carpet and is hoping to convince daddy that it’s BB’s doing.
The gubmint can just soak the rich to pay for all of the messes. Here is one example they are trying. Maybe Paris Hilton is good for a few, and all of our other ’stars’.
http://sports.yahoo.com/nba/news?slug=ap-warriorsowner-taxes&prov=ap&type=lgns
hey,
lets get the video of Paris getting deloused……and title it re-education for spoiled brats.
anybody remember the show “Scared Striaght”?
The Business Journal. “Real estate appraisers face a dramatic increase in their licensing requirements beginning next year…adopted by a national foundation authorized by Congress to establish such rules.”
“But, the updated criteria may, or may not, be a hedge against repeats of the current real-estate mortgage lending meltdown in which some appraisers have played both witting and unwitting roles.”
Whatta boatload of bureaucratic crapola.
Uniform Standards of Professional Practice has been on the books since the days of FIRREA and the last real estate meltdown in the ‘90/’91 bust.
The update course was a cont. ed requirement every 2 years.
But anybody in the appraisal biz for any length of time knows exactly who the nortorious rubber stampers are.
And make no doubt about it…these bastards took control of entire markets enabled by dirtbag loan orginators.
I knew one guy who with a solo L/O who controlled 85% of the re-fi and appraisal biz in Maine’s second largest city.
In biz for only 4 years, the dude paid cash for $600k in real estate.
Complaints against these types to appropriate government officials were always met with shrugs of the shoulders.
If anybody should be held accountable for the demise of the appraisal profession, it should be members of the Fed regulators and the state licensing boards themselves.
But I can guarantee that with a dead fee structure and increased regulation what few honest and ethical appraisers still around will bail.
The destruction runs deep in this debacle.
I happen to agree with your take on the problem hd74man. It got so corrupt that appraisers were forced to conform or starve .What about that group of appraisers that went to Washington in 2004 I think to complain and they got the deft ear .
HW~
The fatal cast of the die relevant to the integrity of the appraisal system was made when Congress revamped the HUD/FHA panel system which allowed the originators control who they wanted to do the appraisals.
It was the proverbial puttin’ the fox in charge of the chickenhouse.
And so the slaughter of legit appraiser’s began.
Guy’s including myself who had been on the origianl panel for anywhere’s from 10 to 20 years never saw another FHA assignment again.
It was this group that went to Washington DC to protest in 2004.
Congress could have given a rat’s azz.
They blew everybody off.
Their sanctimonious posturing now is enough to make ya vomit.
So you can begin by pointing the finger at these POS, and all the bureaucratic underlings who turned a blind eye to all the continuing complaints as to how rigged the system became.
BTW…The subprime market took a lot of HUD/FHA underwriting away with their liar loans, for which we the taxpayers can say, whew…
I can’t even begin to imagine the quality of the depreciated garbage which are the underlying assets for the trillions of MBS’s fenced to suckers, ’cause most of the stuff FHA/VA/HUD financed I saw couldn’t come close to the 30 year remaining economic life rating which was required for underwriting.
Yep, I hear you ,good post ,hope someone brings up the appraisal protest that was ignored .
I always appreciate your posts. Thanks.
So long as the people hiring them want a bunch of liars, that’s what they’ll get. Once we go back to banks lending their own money, they’re going to WANT honest appraisals and will be much more likely to get them.
“We are sitting in a market that all of a sudden prices are flattening out,’ Greenspan said. ‘You can immediately see a backing up of problems.’”
“Flattening prices” are NOT the root problem. If you are in a house that you can truly afford, it doesn’t matter if appreciation flattens or goes negative. It’s a roof over your head and a nice deduction come tax time.
The problem is that people are in houses they can’t afford, which none of the politicians want to say in public. And, unless they want everyone else to be stuck with the same ball & chain, prices have to come down in line with household income.
They won’t admit that until they absolutely have to, which will be when J6Pack is already squealing from the pain.
“You can immediately see a backing up of problems.”
I have a septic field system and when it backs up the “honey truck” comes out to suck out the tank. Where is the “honey truck” that sucks up the political BS?
““‘It’s bank robbery without a gun,’ said Corey Carlisle, a senior director at the national Mortgage Bankers Association. ‘Unless there’s a real threat of enforcement, they think they can get away with it, because they can.’”
That is exactly what I have been wrestling with since I realized how cash back fraud was working. It really is tantamount to theft. Instead of using guns, they use fraudulent appraisals and loan docs. Why can’t the RICO act be enforced against the REIC? Anyone??? How is this any different than a mafia scam??
First, the bank was not robbed, it’s the Chinese, the Europeans (HSBC).
Second, it has been good for many Americans (Joe 6-pack, lenders, realtors, builders, cities …)
Now, all we need is to pull back the price, and homes will start selling again.
JMW-It is no different than a mafia scam .I think RICO could apply .
Okay, so where did my other post go???
look on page 2. ….just kidding
“‘We do not expect significant spillovers from the subprime market to the rest of the economy or financial system,’ Bernanke said in a speech.”
Bernanke is taking Greenspan’s advice: keep repeating the lie that
housing won’t hose the economy, and eventually people will believe it.
“It was boring, it was dull, it was repetitive, it was nonintellectual and it worked like a charm,” Greenspan said.
http://www.marketwatch.com/news/story/story.aspx?guid=%7B3587611D%2D7EE6%2D42C6%2DAF8D%2D3CD6E95A0810%7D&siteid=rss
Greenspan is now onto the new bubble, the illegals/H1B bubble.
I think they are playing “good cop/bad cop” now. Greenspan is out saying it sucks and is going to get worse, while Bernanke says it is no problem.
Make people wake up, without scaring the crap out of them. A nice slow move to consciousness.
you took the words out of my mouth
The broader economy is diversified and resilient. They are correct, the supprime meltdown will not tank the economy. However, the cumulative housing slump (as they are calling it now) will most likely eventually bloom into quite a problem for the broader economy as even consumers with prime mortgages feel the pinch of upwardly moving interest rates and drastically cut back on spending as a result.
It will not be subprime that hurts the economy, it will be the drastically reduced consumer spending that will hurt the economy. Don’t forget, the less people spend, the more layoffs there will be, the more layoffs there will be, the less people will spend, etc.
Let me put it this way, every time gas goes up a few cents, the fear of reduced consumer spending sends shock waves through wall street. Believe me, paying a few cents more for gas is nothing compared to paying several hundred more a month in mortgage payments.
Right. Subprime leads to tighter lending but I wouldn’t underestimate the gasoline factor here. This is starting to cause inflation in the food chain as well because of this questionable ethanol craze. Right now, I am seeing people with motorhomes
really balking at taking them out on the road much because of the $100 fill-ups. Travel industry must be feeling this some.
This diversified, resilient economy somehow went into recession due to a bubble in that little corner dedicated to tech stocks. How many people were directly employed by or invested in tech stocks???
Furthermore, it took housing (& massive government hiring and spending) to bring us out of the last recession.
Dot-com was only the intro; THIS is the main attraction. As Neil says, “Got Popcorn?”.
It’s too late for speeches. The housing market (HM) is in the toilet. Time is the only cure. The word is out. Housing is a bad investment. Permabulls need to wait for the next crop of fools.
How come Bernanke never mentioned affordability in his subprime speech yesterday? How about the difficult situation for first-time homebuyers? Shouldnt he at least acknowledge this side effect of the Fed’s cheap money policy and how it could damage long-term growth prospects?
I think he specifically avoided those. The foot notes on CNBC which were clearly prepared ahead of time, probably with bullets from Bernanke himself, specifically says “ability to pay not addressed”. That was coming up before the speach was half over.
Reading between the lines, I think they realize prices are heading down fairly far.
They just want everyone to keep shopping while they hope for the turnaround that won’t come until after the recession we are about to enter.
I think Bernanke said everything is ok and contained because he wanted to focus on inflation rather than the housing market. So look forward to another interest hike.
hike? not when recession plays out after stock market corrects.
A glimpe into AZ land prices…..
http://www.azcentral.com/business/articles/0518biz-landsale19-ON.html
“Newland Communities, the San Diego-based owner of Estrella Mountain Ranch in Goodyear, has purchased about 2,700 more acres in the master-planned development for $62 million.”
“At that time [2005], Newland Communities bought 3,750 acres of the 20,000-acre housing development for $250 million”
So, $70,000 an acre 2 years ago. $22,222 an acre now.
It’s the builder equivalent to averaging down I guess….
Reading again, the $70,000 an acre included 5 more options. I don’t know how much the options are. Could be the original $250 million was $150 million for land and $100 million for the 5 options, so maybe this $62 million was discounted by $20 million due to the pre-paid option.
Really, I guess there is no way to be sure HOW much the land has come down.