Homebuilders ‘Chase A Dwindling Pie Of Buyers’
Wall Street had some housing bubble news today. “FMF Capital Group Ltd. is a residential mortgage lending company that originates and funds primarily nonconforming or ‘nonprime,’ mortgage loans in the United States and sells those mortgage loans to institutional loan purchasers.”
“Based on financial results for the month of February, the Board of Directors has decided to exercise the company’s contractual right to defer the payment of interest on its subordinated notes..for the month of February. The Board of Directors expects to defer interest for the month of March and..in addition, no dividends will be paid on the common shares for the month February.”
“Legislation being weighed in the U.S. Congress to stiffen supervision of Fannie Mae and Freddie Mac must force cuts in the mortgage giants’ portfolios, a U.S. Treasury Department official said on Tuesday. Secretary John Snow said a fair analysis of the companies’ $1.4 trillion portfolios would show they are now larger than needed.”
“Credit Suisse issued its 2007 earnings estimates for the home-building companies which factor in slowing housing starts, selective price increases and a heavy reliance on incentives. The analysts wrote that the 2007 estimates ‘assume a soft landing scenario, as earnings declines are largely driven by the unfavorable land price to land costs dynamic with volume gains unable to make up for the difference.’”
“If the companies force supply on the market, ‘earnings could come under greater pressure than we presently anticipate with too much product chasing a dwindling pie of buyers,’ Credit Suisse added.”
“The broker said Pulte was one of the first builders to see margin pressure in the fourth quarter of 2005, while the company has a significant presence in decelerating Phoenix..the analysts upgraded M/I Homes on ‘an attractive valuation that more than reflects its greater than average exposure to troubled Midwest markets’…M/I Homes is heavily ramping its communities in Florida and the Mid-Atlantic.”
JP Morgan has this in a report on Barrons. “We observe that at the time of this writing, the weekly Mortgage Banker’s Association Purchasing Index (MBA-PI) is now down 11.7% as of the first week in March from year-ago levels. Second, we find that the average monthly observations of this index have now declined for three consecutive months through February 2006.”
“The last time that the MBA-PI monthly data declined for three consecutive months was during September 1999. One year later, (i.e., September 2000), housing starts had dipped by 5.3% on a year-over-year basis..the latest three consecutive monthly declines in the MBA-PI add up on a cumulative basis, to almost twice the overall decline observed in January 2005. Most importantly, one has to go all the way back to September 1999 to find another comparable period in which the average monthly reading of this index actually declined for three consecutive months.”
“With such compelling evidence in hand, we remain convinced that a 5% to 6% easing in housing starts over the next year appears to be a very reasonable expectation.”
“Forbes.com spoke about these nontraditional mortgages with Bill Emerson, CEO of Quicken Loans, the largest online mortgage lender, which closed $16 billion of home loans in 2005, compared with $12 billion the year before.”
“Forbes.com: You have said you don’t think there’s a housing bubble. Emerson: A housing bubble? No, I don’t think there’s a housing bubble. We’ve been talking about it now for three or four years, and I think if we talk about it long enough, sooner or later it may eventually happen.”
“Forbes.com: You have said you don’t think there’s a housing bubble. Emerson: A housing bubble? No, I don’t think there’s a housing bubble. We’ve been talking about it now for three or four years, and I think if we talk about it long enough, sooner or later it may eventually happen.”
Maybe if the real estate shills keep publicly denying the obvious, then they won’t run out of greater fools for another couple of months…
So it’s the “if you talk keep talking about it you will jinx us” argument.
What BS.
The second cartoon on this cartoon page, dated late 2000, illustrates the stupidity of that claim. Merely talking about a recession or housing bubble does not bring one on.
According to these fools, if you loudly proclaim that no bubble or recession is in sight, that should prevent one, right?
- David Seiders, Chief Economist of the National Association of Home Builders, July 2002
To be fair, and to David Seiders credit, that at the time he said this (July 2002), indeed he turned out to give advice that did not lead to the financial misfortunes of buyers who bought. In fact, buyers who bought in that time frame, probably benefited greater than any other buyer in that time frame.
Getstucco - As the group historian, surely you remember Greenspan’s “Irrational Exuberance” speech? Fall of ‘96, if I recall? This stuff goes on FAR longer than any thinking person thinks is possible!
The government should explicitly say ‘Fannie Mae is company that will no longer be protected or regulated by the U.S. government’.
Instead, by regulating them more, they will be opening the door for a American tax payer buyout. Fannie Mae execs will say “Hey, we couldn’t compete like a Citi Bank. Our hands were tied by regulations. Therefore we are entitled to a tax payer bail out.
That’s a good point. We can thank our gut-less congress and especially Richard Shelby for that. In spring 2005, when Shelby was heading a senate committee looking at the regulator matter, he was presented with a petition to cut the GSE’s out of any guarantees, implied or otherwise. He rejected it with one sentence and basically put us all on the hook.
Thats what republicans(republiCowards do best). A continual shift of government burden to wage earners so to bolster more corporate welfare.
It’s a bit trite to single out a political party for blame, there’s plenty enough to go around.
From Wikipedia, the free encyclopedia
Franklin Delano Raines (born January 14, 1949 in Seattle, Washington) is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton.
He served as associate director for economics and government in the Office of Management and Budget and assistant director of the White House Domestic Policy Staff from 1977 to 1979. Then he joined Lazard Freres and Co., where he worked for 11 years and became a general partner. In 1991 he became Fannie’s Mae’s Vice Chairman, a post he left in 1996 in order to become director of the White House Office of Management and Budget, where he served until 1998. In 1999, he returned to Fannie Mae as CEO,
On December 21, 2004 Raines accepted what he called “early retirement” from his position as CEO as U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities that may force Fannie Mae to restate some $9 billion in earnings.
aye aye aye. . Call out a republiCoward Senator and see what happens? Republicoward altar worshippers desperately throw up smoke and hold mirrors. Doesn’t work anymore kiddo.
Way to go grubner…. Facts are the best way to support an argument. Fortune did a great story about Fannie last year. I do not see why some are attacking parties especially when they are not well informed of the facts.
But that is what republicowards do. They attack the messenger when the message doesn’t suit their warped agenda.
Cripes. How many times do I need to say this? Fannie and Freddie were never, as in never were protected. Here I had to repost this again just this morning:
http://exurbannation.blogspot.com/2006/03/fannie-give-it-rest-lets-move-on.html
The Debt Securities, together with interest thereon,
are not guaranteed by the United States and do not
constitute a debt or obligation of the United States
or of any agency or instrumentality thereof other
than Fannie Mae.”
Fannie Mae, “Universal Debt Facility Offering Circular,” January 22, 2002.
http://www.fanniemae.com/markets/debt/pdf/udf_012202.pdf?p=Debt+Securities.
I agree, but why then do Moodys, Fitch and S&P say otherwise? I posted extensively on this last spring on the original blog.
Most “government bond” mutual funds have substantial “agency” holdings. The public sees the GSEs as government agencies.
The “guarantee” is implied. It is a “moral” obligation only. Broksters ten years ago sold Billions in REMICS and I/O bonds to novice investors and when rates backed up, the investors got killed and the broksters got sued.
A major wirehouse came out with a short term ‘cd replacement’ AAA GSE bond fund that lost almost 20% of value in the first 6 months. This wirehouse had to pony up almost a half billion in fines and payback the losses.
I have always said that no one- not even the ‘experts’ truly know how to price or model these mortgages. What Wall Street and the government has done is take a plain vanilla 30 year fixed rate and turn it into a money maker for themselves by repackaging it and selling it back to the public. However, the institutions take the best and least risky tranches and sell the crap to the public. IT is a trillion dollar business. They have essentially transferred the risk away from the GSE’s, back to the taxpayers as they are the majority holders of each other’s mortgages through the bond ownership. Talk about a Ponzi scheme.
Now that the troubles at FNMA and FHLMC are coming to light, this is going to make the S&L crisis seem like a walk in the park. I don’t know what is going to crush the Real Estate market more, the overvaluations or the GSE scandal.
That was pure unadulterated crap. For a man in his capacity to say such drivel is beyond comprehension.
MY follow up question to him would have been, ” So Mr. Emerson. EXACTLY what % of OPTION ARM loans that your company did in 2005 fit YOUR criteria for lending? That is 1.The applicant wants negative amortization. 2. The applicant know they are staying in the home “short term.”. 3. they have equity in the property.”
Do these people all have the same scripts?
If you’re weathy enough that an option ARM makes sense you don’t really need it anyhow.
Emerson: A housing bubble? No, I don’t think there’s a housing bubble. We’ve been talking about it now for three or four years, and I think if we talk about it long enough, sooner or later it may eventually happen.”
I bet he used to sell Amway a couple of years ago…
I bet he used to sell Amway a couple of years ago…
And with some luck he’ll be selling Amway again soon !
Hightly ironic for an online business to talk this way, given events just a few years ago. Perhaps the reporter could push the issue further, but I suspect many readers can detect an outright lie when they hear it.
oh please, please, please let there be a comedy writer who reads this blog…there’s enough stuff in the media that passes as real estate wisdom to start a sit-com:
“Emerson: A housing bubble? No, I don’t think there’s a housing bubble. We’ve been talking about it now for three or four years, and I think if we talk about it long enough, sooner or later it may eventually happen.”
Hahahahahahahaha! Really, I’m dyin’ here!
No folks, no trouble here…it’s just a frothy, easy, whipped cheese, soft landingish, re-balanced, creamy, dreamy souffle that WILL GO AWAY if we quit talking ’bout it!
so this guy thinks talking creates a bubble… and it has nothing to do with math?
Oh wait… he isn’t required by his profession to be educated? Math is not required? Really? And someone gave him a job in the mortgage industry? and let him talk?
good lord
I think that his last venture was selling NONI juice. With each passing day the guru postings are getting more outrageous. I can’t wait for March 23rd when we hide M3 to cover the ass of Fannie and Freddie, the hurricane season, the summer sizzle across the southwest, and the spring selling season in housing that doesn’t materialize. Just then maybe we’ll get a semblance of reality. Right now I suspect that you are seeing a lot of hopeful insider (realtor) selling, ergo the shill reports.
yet CFC and others stay up
WHATTHEFCK ?
Bad time to be using logic in the market. The government is buying stocks and bonds from their buddies. When they quit bailing them out it will crash. If you’re not on the inside you’ll never know when that will be. My advice: long term shorts on small companies with high P/E ratios. The corrupt big boys will eat a bear for lunch and then roast a bull for dessert. Long term sell options on those companies squeezed out away from the government trough and highly dependent on cheap shipping costs. Two years ought to be long enough. Not investment advice. P.S. I don’t know nothing about nothing.
“I don’t know nothing about nothing.”
You sound like you are a realtor.
There’s no saying that once the M3 numbers aren’t posted that the FED won’t start buying mortgage backed securities to keep the party going.
Bernanke is really correct. There is no saying that the FED won’t totally destroy the currency if they think it’s the best thing to do. All the folks who did the prudent thing and piled up cash reserves could still be very disappointed. It was wise to accumulate gold duing the late 20’s, but FDR stole it anyhow.
Being a bear is hard because you are almost certain to be early in the call (the fundamentals roll over way before the top), so anyone who listens to you will hate you while the party goes on, and once it becomes obvious that things have busted the ones who didn’t listen to you will hate too.
If they bubble guys can coax one more year out of this bubble I’m busted with my wife. She’s convinced I’m cheating the whole family by living in a house we can afford. If Bernanke does the inflation thing and destroys our hard earned savings I’m toast. My wife will kill me. She thinks prices always go up, it’s just what prices do.
No, I’m not a realtor, but I play one on t.v.
Wow. Pver the last few weeks we have had some wonderful quotes.
Learah- There is no housing bubble, there is a balloon. No, it is a ship. No it is a soft landing. No we have a nice increase in inventory.
Bernake- The housing market should stay strong. There is no bubble.
Poole- If you have a financial interest real estate, I can’t help you.
Emerson- Bubble? What bubble?
All I can say is:
This is your brain.
This is your brain on drugs.
Any questions?
This is your brain on drugs with a side of bacon.
see the increase in foreclosures in the last bust
Real Estate News Summary, Part 143, January 1993
Lenders now have an unprecedented inventory of foreclosed houses for sale.
There were 1066 foreclosures in the county in 1992, up from 667 in 1991,
157 in 1990, and 137 in 1989. In past robust real estate markets,
investors bought these homes at auction and quickly sold them for a
profit. But now they are going unsold and are returning to the lender.
The properties barely have any equity. If the legal owner could have sold
the property for more than the loan, he would have.[San Jose Mercury News]
Article about Bend, OR RE Bubble: The usual baloney statements in the top part of the article, then they actually quote some bloggers and the reality comes out. This article is the whole bubble bursting in just a few paragraphs.
Bend makes list of most ‘overvalued’ markets. Realtor disagrees; blogger says it’s worse than he feared.
FMF Capital Group Ltd. is a residential mortgage lending company that originates and funds primarily nonconforming or ‘nonprime,’ mortgage loans in the United States and sells those mortgage loans to institutional loan purchasers.”
I couldn’t even begin imagine the quality of the housing stock which constitutes the underlying collateral for the investments vehicles hyped by outfits like FMF.
Condemned Crack houses and and stripped Mob “bust-out’s” most likely.
Not only is it “unconventional” and “non-prime”, you can bet your azz most properties have been appraised by some number-hitter hack shop trainee, who has inflated the value number to whatever level his mortgage broker handler has instructed him too.
That this shite paper is even marketable is truely laughable.
NeuMann Homes in Chicago area, is dumping land like mad.. Public Auction. Why, the fat lady sang.