Housing Recession Reflected In Prices
Some housing bubble news from Wall Street and Washington. “The number of U.S. homeowners who face possible eviction because of late mortgage payments rose to an all- time high in the first quarter, led by subprime borrowers. ‘Housing is in a recession, and we’re seeing that reflected in prices,’ said Doug Duncan, chief economist for the Mortgage Bankers Association. ‘If you’re in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you’re in trouble.’”
“In the quarter, 2.58 percent of prime barrowers sent their mortgage payments at least 30 days late, according to the Mortgage Bankers report. The subprime share of late payments rose to 13.77 percent from 13.33 percent in the fourth quarter, according to the report. The percentage of total homes in foreclosure, the so-called inventory, also rose for both categories.”
From MarketWatch. “Duncan points to two groups of states for the rise in foreclosure starts and the foreclosure inventory rate. When it comes to loans entering the process, increases in California, Florida, Nevada and Arizona are to blame, he said.”
“‘Information provided to the MBA from a variety of sources indicates that the foreclosures in Florida, Nevada, California and Arizona are heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes. In addition, speculators in Florida are also facing much higher insurance bills,’ he said in a news release.”
“In terms of the foreclosure inventory rate, the blame for the increase lies with Ohio, Michigan and Indiana. The three states account for 8.7% of the mortgage loans in the country yet make up 19.9% of the nation’s loans in foreclosure and 15.0% of foreclosures started in the first quarter.”
“‘The level of foreclosures and foreclosure starts for those three states exceeded what occurred in Texas during the oil bust of the mid-1980s, and Ohio is the highest ever seen in the MBA survey for a large state,’ he said.”
The Chicago Tribune. “As late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit spiked to all-time highs in the first three months of this year, the Federal Reserve on Thursday considered reforms to crack down on lending abuse.”
“The Fed’s discussion comes amid new signs that the housing market’s downturn is worsening. The percentage of payments that were 30 or more days past due for subprime adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter, up from the prior quarter’s delinquency rate of 14.44 percent and the highest on record.”
“‘This is a moment of great concern in our economy as to whether subprime is going to pull us all down,’ Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School of Business said in an interview.”
From Bloomberg. “Bear Stearns Cos., the second-biggest U.S. underwriter of mortgage bonds, said earnings fell 10 percent, the first quarterly decline in two years, as mounting home-loan defaults reduced trading revenue.”
“‘Not only did they cite the challenges in the subprime market, but they also perceived a spillover into Alt-A,’ said Bill Fitzpatrick, who helps oversee more than $1 billion at Johnson Asset Management. ‘If there’s a crescendo effect there, that will be a major concern for Bear Stearns and some of its competitors.’”
From Reuters. “‘We’re certainly going to be impacted in a weaker mortgage market until the mortgage business turns back around. That’s going to be a little bit challenging,’ said Bear Stearns CFO Sam Molinaro.”
“The firm tightened its underwriting standards during the most recent quarter, which reduced the amount of loans to borrowers with weaker credit, Molinaro said.”
“Bear Stearns Cos. is liquidating holdings from one of its hedge funds after making money-losing bets on subprime mortgage bonds, said three people with knowledge of the decision.”
“Investors ‘may also call into question’ the asset values of other hedge funds, depending on how much Bear Stearns gets in the auction, said Josh Rosner, managing director at investment-research firm Graham Fisher & Co.”
“Combined delinquency and default rates on subprime home loans in bonds are at the highest since 1997, Friedman, Billings, Ramsey Group Inc. reported. A derivative index used to bet on defaults of pieces of mortgage-bond deals with the lowest investment-grade ratings and sold in the second half of 2006 reached a new low two days ago and has dropped about 38 percent since it was developed in January.”
“Lehman Brothers Holdings said yesterday it would merge two residential mortgage units, cutting 400 jobs. The investment bank, one of the biggest underwriters and traders of mortgage debt on Wall Street, said BNC Mortgage will be combined with Aurora Loan Services into a single residential mortgage business.”
“About 400 employees, or 24 percent, of BNC’s work force will be cut over the next two to three months.”
The New York Times. “Turmoil in the subprime mortgage market took its toll on two Wall Street investment banks today, as second-quarter profit at Bear Stearns dropped 33 percent and Goldman Sachs squeezed out a modest 1 percent rise in profit.”
“Both firms suffered from the implosion in the subprime mortgage market, as borrowers with poor credit histories defaulted on their loans in record numbers.”
“Goldman Sachs Group Inc.CFO David Viniar predicted that the U.S. subprime mortgage market, which has suffered rising defaults and generated losses for lenders over the past year, will get worse before it gets better.”
“‘The subprime business continues to be weak. We have not seen the bottom in the market. There will be more pain felt by people as it works its way through system,’ Viniar told reporters in a conference call on Thursday.”
The Associated Press. “State Banking Commissioner Howard Pitkin on Wednesday refused to issue a license for a new home mortgage company formed by former executives of the defunct Mortgage Lenders Network.”
“Pitkin, in a letter to an official at Middletown-based InHome Capital LLC, said he was declining the request for the first mortgage broker’s license because Mortgage Lenders Network did not release money for loans it signed off on late last year.”
The LA Times. “If you were confused by the disclosure forms your mortgage lender gave you, you’re far from alone, according to the Federal Trade Commission, which says the industry can do a better job.”
“A study released Wednesday by the agency found that the required disclosures were ineffective at explaining the costs and risks of home loans. The study found that when given the disclosures now used: Half the borrowers couldn’t correctly identify the loan amount. Nine in 10 couldn’t figure out the total upfront cost of the loan.”
“Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within two years. And 95% didn’t know how much that penalty would be. One in five couldn’t correctly identify the annual percentage rate, the amount of cash due at closing or the monthly payment, or whether that payment included charges for property taxes and insurance.”
“Some experts say better disclosure may not be enough. Initial disclosures sent to consumers are notoriously inaccurate and there’s no penalty for that, said Jeff Lazerson, president of Mortgage Grader. It’s not until lenders give final disclosures at closing do they make a concerted effort to provide all the necessary details. By then, he said, it’s too late.”
“‘They can make disclosures more clear all they want, but if there is no penalty if you don’t comply, what does it matter?’ he asked. ‘Until there is a penalty for being late or inaccurate, it’s business as usual.’”
“Freddie Mac, the second-largest source of money for home loans, reported its third consecutive quarterly loss after a drop in the value of derivatives it uses to hedge interest rate risk.”
“Losses from the investments and derivatives were $1 billion in the quarter ended March 31, compared with a $934 million gain in the same period last year, Freddie Mac said.”
“Freddie Mac reported that its credit-related expenses more than tripled in the first quarter, to $193 million from $60 million a year earlier.”
“The increase in expenses was largely the result of boosted provisions for credit losses as mortgages purchased last year moved more frequently from delinquency to foreclosure, the company said. It said it expects such charge-offs to increase in the future ‘from today’s very low levels.’”
“‘Worsening expectations’ for risk of mortgage defaults had an adverse effect on Freddie Mac’s financial results in the first quarter, the company said.”
‘U.S. mortgage rates jumped this week as a sell-off in the Treasury market pushed benchmark interest rates up sharply. ‘Higher mortgage rates may weigh on the housing market’s gradual recovery. While demand appears to have stabilized, inventories of new homes remain high, putting downward pressure on construction and home prices,’ said said Frank Nothaft, Freddie Mac chief economist.’
‘It’s just what the housing market did not need,’ said Bill Hampel, chief economist at Credit Union National Association. ‘It wasn’t on life support, but this will keep it bed-ridden for that much longer. When you’re already fragile, this is not what the doctor ordered.’
Whine , Whine , Whine. Wake me up when they are charging 9,10, 11 %
like I had to pay back in the early 90’s for nonresidential properties and yet I was still positive cash flow since no one was stupid enough to pay $400K for a one bedroom condo at that time.
“Bed-ridden”? Heck, most of the bloggers here are at the funeral home picking out the casket!
That’s only the rich bloggers. Have you priced burials lately? Might as well sign over your property. Better to contact the National Cremation Society and then go to Wal-Mart for an urn (no joke). The chain funeral homes have a pricing racket that would humble the mafia, IMO.
“‘Information provided to the MBA from a variety of sources indicates that the foreclosures in Florida, Nevada, California and Arizona are heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes. In addition, speculators in Florida are also facing much higher insurance bills,’ he said in a news release.”
Me confused. I thunk all the speculators had already left the market?
The specuvestors left the market…they just forgot to unload their property before they left
Oh contrair, mofraire……these POS abandonded homes are whats driving the market……driving it down through the NOD and then REO………..
They left the buy side, not the sell side. Do’h.
More like they moved from the buy side to the sell side…
More like they soiled their britches and are looking for a window to jump out of.
Exactly, GS. The sellers of today are largely the buyers of yesterday. This is why the wishing prices are still so outrageous. They don’t have wiggle room. While these parasites were happy to buy and sell to each other on the way up, it’s a whole different story on the way down.
These are the same people who would step on each other, heck even drive over each other, to be the one to get the house. It’s hard to feel bad…
“As late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit spiked to all-time highs in the first three months of this year, the Federal Reserve on Thursday considered reforms to crack down on lending abuse.”
Great plan: Crack down on lending abuse, trash demand, turn the slow crash into a fast crash.
That’s not fair to crack down on lenders. They are just doing the people a service. What next, down payments? I’m waiting for the lenders to compare the Fed to “terrorists”. That is when we will know that common sense has been injected back into the market.
Your are right!!
Now let us see how fast the crash will be. I give it 9 months
Resets in 2010 are fairly substantial, that might just keep this going me thinks.
Yeah, the people who think that we’re seeing the worst of things this year are in for a BIG surprise in ‘08, ‘09…
sean_from_NVA,
There is simply *no way* the housing bubble can unwind in a mere 9 months. Transactions take far too long (and foreclosures can drag out over months/years), option-ARMs/I-O loan resets vary greatly and are spread out over several years (see Credit-Suisse chart), and housing is very illiquid compared to securities. The last regional housing bust in CA took a full 7 years to hit bottom and slowly start ticking back up, and this bubble’s far larger. In Japan, it took 16 years to bottom. Even a 5-year crash would be lightning-fast by RE standards.
I expect at least five years, too, for the downturn. Maybe historic examples could give some guidance. You mentioned Japan and CA in the 90s. For fast busts, I would look to Texas RE. I read once that their house prices in the 80s deflated pretty fast. They were was also left to themselves to deflate, and foreclosure action can be fast down south.
It’s not going to take five years to hit bottom. Too much inventory coming back at an accelerated pace and Wall Street controls the strings unlike prior downturns when the banks controlled it. Wall Street is impatient and will burn off inventory like Paris Hilton burning through VD medication. Especially if someone can fiqure out how to cook the books and profit from it. I expect a quick and hard slide down and flatline for many years.
Out of 4 housing busts, the shortest bust in the US has been 43 months - the longest has been 57 months
some fairly recent examples:
Los Angeles in the early ’90’s was a 21% drop over 6.75 yrs
San Antonio in the mid ’80’s was 18% over 4yrs
This current bubble is not a recent event. It was called a housing bubble in 1999. People expected it to pop in 2002!
IMHO Peter T does not give it a long enough time span.
9 more years of declining prices.
“This current bubble is not a recent event. It was called a housing bubble in 1999. People expected it to pop in 2002!”
This is simply untrue for the majority of bubble areas. There wasn’t significant price appreciation until 2002 and later.
Hoz,
Great examples and I agree with your conclusions. However, your math was a bit off. 6.75 years = 81 months, not 57.
I know! But the other examples were more national than the
By 2002 there were blogs discussing the housing bubble.
Bantering Bear “This is simply untrue for the majority of bubble areas.”
Yes it is true for almost the entire United States and all the bubble areas! The collapse in real estate in 1993 was brought back to life by the Fed in 1994. It was so often discussed that the Fed had meetings to discuss it in 2002. What you and many others did not notice was an incredible run up in prices.
In Stockton in 1993, one could buy a house in the historical district for 132K by 1999 it was 175K and in 2005 was 450K. That the increase from 1999 to 2005 was ridiculous does not mean the price increase from 1993 to 1999 wasn’t just as ridiculous.
I do not call price appreciation of 40% over 6 years realistic.
But it did not make OFHEOs Boom list because it was less than 30% over three years. And nationwide housing appreciated by 40% over those 6 years.
Atlantic Aug 8, 2002
“Are we inflating a residential real estate bubble? ‘Yes’
http://tinyurl.com/332zss
Business Weeks Cover article 2003
Housing: Is It a Bubble If It Doesn’t Pop?
http://tinyurl.com/2×8s84
Greenspan said “The notion of a bubble bursting and the whole price level coming down seems to me as far as a national nationwide phenomenon, is really quite unlikely,” Mar 2003
I have the time factors, there are no surprises. We have been living in a bubble economy for 25 years.
“This is simply untrue for the majority of bubble areas. There wasn’t significant price appreciation until 2002 and later.”
California is the majority of bubble areas. Price runup began Q2.1997 and ended about now.
——————————————————————-
Annual Percent Change in OFHEO State-Level House Price Indexes through 2007 Q1
Year Qtr California
1976 1 14.72
1976 2 17.36
1976 3 20.67
1976 4 20.69
1977 1 21.08
1977 2 24.85
1977 3 26.64
1977 4 26.7
1978 1 26.23
1978 2 20.36
1978 3 15.62
1978 4 15.8
1979 1 15.57
1979 2 16.75
1979 3 18.31
1979 4 17.84
1980 1 17.85
1980 2 15.89
1980 3 14.32
1980 4 12.46
1981 1 10.58
1981 2 9.89
1981 3 9.45
1981 4 8.56
1982 1 4.41
1982 2 2.98
1982 3 0.32
1982 4 -0.64
1983 1 1.97
1983 2 1.12
1983 3 0.65
1983 4 0.95
1984 1 1.71
1984 2 2.27
1984 3 3.58
1984 4 4.17
1985 1 4.12
1985 2 5.03
1985 3 6.12
1985 4 6.39
1986 1 6.18
1986 2 6.74
1986 3 6.62
1986 4 7.97
1987 1 9.4
1987 2 9.9
1987 3 10.95
1987 4 11.36
1988 1 12.54
1988 2 14.4
1988 3 16.2
1988 4 19.24
1989 1 20.34
1989 2 21.28
1989 3 22.5
1989 4 19.66
1990 1 15.77
1990 2 10.73
1990 3 5.55
1990 4 1.8
1991 1 0.47
1991 2 -0.51
1991 3 -1.35
1991 4 0.02
1992 1 -0.45
1992 2 -0.85
1992 3 -1.03
1992 4 -2.69
1993 1 -3.66
1993 2 -3.49
1993 3 -4.12
1993 4 -3.78
1994 1 -3.26
1994 2 -4.81
1994 3 -5.44
1994 4 -6.31
1995 1 -6
1995 2 -2.7
1995 3 -0.09
1995 4 1.3
1996 1 2.03
1996 2 -0.33
1996 3 -1.71
1996 4 -1.04
1997 1 -0.54
1997 2 1.74
1997 3 4.07
1997 4 5.34
1998 1 7.04
1998 2 8.32
1998 3 8.94
1998 4 9.09
1999 1 8.39
1999 2 7.87
1999 3 7.39
1999 4 7.6
2000 1 10.58
2000 2 11.65
2000 3 13
2000 4 14.1
2001 1 13.66
2001 2 14.13
2001 3 12.71
2001 4 10.9
2002 1 9.55
2002 2 9.83
2002 3 11.63
2002 4 13.26
2003 1 12.88
2003 2 11.3
2003 3 10.83
2003 4 14.41
2004 1 15.43
2004 2 20.38
2004 3 27.75
2004 4 24.86
2005 1 26.42
2005 2 25.85
2005 3 20.37
2005 4 21.51
2006 1 19.27
2006 2 14.49
2006 3 10.01
2006 4 4.69
2007 1 1.19
http://www.ofheo.gov
Take a close look at the periods in the above numbers when CA prices were going up at double-digit rates.
1970’s bubble: Q1.1976-Q1.1981 (at least five years)
1980’s bubble: Q3.1987-Q2.1990 (three years)
1990’s and beyond: Q1.2000-Q3.2006 (six years+)
Not to suggest that there is any pattern there or anything…
Thanks GS, I posted to BB’s comment but it might have gotten lost in cyberspace or the additional links are blocking the posting.
The bubble was 12 years in making and will take that long to collapse.
“California is the majority of bubble areas.”
I’m not sure I agree with that either. Yeah, it’s a nice sized chunk, but not the majority. This is a big country. I don’t think the inflated prices in the 90’s was as much a speculative fever as it was post 2002. If you consider WA, NV, AZ, OR, UT, ID, and MT it’s obvious when the speculative fever began. I won’t argue that real estate wasn’t overvalued pre 2000, but I don’t think the massive speculation in all these states really took hold until 2002. JMHO.
Actually, the speculative fever began in the late 1990’s in Montana. By 2002, Bozeman RE had appreciated at double digits for a couple of years and was seriously overpriced relative to rents and income. We looked at Bozeman houses in the summer of 2002, and almost EVERY house we considered sold quickly then a few months later reappeared as either a rental or for sale with a new coat of paint.
In a nutshell, RE speculation was already rampant in Bozeman by the summer of 2002.
The areas I follow enjoyed quite healthy double digit price appreciation in the 90’s. Then again, the economy was humming right along with it. I haven’t chalked those gains up to rampant speculation and don’t think I will. While there was certainly speculation, there is simply no comparison to what transpired from 2001 on.
Don’t know about the rest of WA. Bantering, but the bubble started in Seattle around 1997. The 250K capitol gains deduction and all the sudden funny money from the dot coms and microsoft stock options nearly doubled the price of homes in the “desirable” Seattle neighborhoods in the space of about 3-4 months. (150/180K went to 250/280K in the space of ONE summer!).
It started with REAL money, young fools willing to overpay and outbid each other .
We ran out of newly minted millionares pretty quick so the realtors and brokers came down heavy on regular people and started the hard sell to convince them that it was in their best interest to pay more than they felt comfortable with. They did their level best to keep the party going.
By 98/99, people were already hightailing it to Georgetown, Beacon Hill, Columbia City, in search of homes they could afford. And rents had gone through the roof just about everywwhere.
The Seattle Bubble had a little slowdown when the dot coms crashed. But by that time prices had already way more than doubled in Seattle. then it was off to the races again, along with the rest of the country.
It really pi$$es me off thaty the REIC in Seattle keeps repeating this notion that the bubble in Seattle got started later than other places, as if that’s proof that we didn’t inflate so bad. In fact, it started EARLIER than other places and then slowed down for a year or so before resuming it’s destructive path.
Homes that were 180K in ‘97 are now over one million, 10 years and little wage movement later. That’s a humungous bubble.
I guess it just depends on how one chooses to interpret the data, and how they define “bubble”. There are many instances over the course of the past 50 years where cities experienced double digit appreciation in home prices over a period of several years. Are those all to be considered speculative bubbles? Where does real demand end, and speculative demand begin? The answer is subjective to be sure.
“As late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit spiked to all-time highs in the first three months of this year, the Federal Reserve on Thursday considered reforms to crack down on lending abuse.”
Do you notice that everytime the gov’t screws the proverbial pooch, they try to blame it on the corrupt people down near the bottom of the food chain. When silver coinage started disappearing (as the metal value exceeded the face value), the gov’t blamed evil ‘collectors’ for the problem. Hmmm, could the real problem be the fact that they inflated the currency and kept issuing silver coins like a bunch of cretins?
Same thing here. The fed could stomp the MBS market and admit that it systemetically encouraged the bubble. But instead they will make rules against predatory lending practices. As if most of those were not already illegal. In any event, lending abuse at the mortgage lender level was only a symptom of a system that was guarenteed, from it’s inception, to drive off a cliff. When the Fed says Mea Culpa, THEN I’ll know it’s not the same old BS…
it is amazing that these financial guru’s are just figuring this out now. i have been reading this blog for almost 17 months and most of what has been predicted by the long time regulars has happened and even faster then expected.
so if a bunch of bloggers knew why didnt they?
more bullshit from these crooks
They failed to rely on the principles outlined in this book:
http://www.randomhouse.com/features/wisdomofcrowds/
Money changes everything, especially when your paycheck comes from the real estate community. Clouds all rational thinking. This crash was so written in the history or bubbles you had to be a moron to miss it. Since most of these experts have degrees, their thinking was swayed by their paycheck.
“Since most of these experts have degrees, their thinking was swayed by their paycheck.”
Of course it was. It’s a shame that the general population cannot get the truth without digging for it. While I’ve always been someone who searches out the truth, most people don’t, and end up with the wrong information, distorting their perception of reality.
Please, they knew. Don’t you think? They were just shoveling as much as they could for as long as they could. No?
“hey were just shoveling as much as they could for as long as they could. No?”
Had to laugh. It reminded me of my best buddy in HS. He ended up as a commercial fisherman in Alaska for a while. One year salmon fishing was soooo good he just kept loading up the boat till it sank. You can’t ascribe malice to some who continually function with brain freezes.
they have agendas I believe, and after all this I have a new name for them Econogandists, seems like the serve another master besides the truth and spew propaganda for whom ever is paying the bill. Lies, damn lies, and statistics isn’t that how it goes? Now I understand how twisted this profession is, bunch of jaded crap.
What makes you think that people who make their living by spinning half-truths and lies don’t eventually come to believe the crap they spew?
I think most people come to truly believe it. It is really tough for most people to explicitly recognize themselves as a parasite.
There still has to accountability, however.
There is NO way they could believe that houses would continue to go up 20% a year forever. It defies all logical thinking.
GS, they don’t and/or they don’t care. Bottom line for these folks is the 10s of K commission checks every month. the MB/Escalade, the exotic vacations, etc. Once the money dries up, they all run for the hills or the Caymans.
“Please, they knew. Don’t you think? They were just shoveling as much as they could for as long as they could.”
The chief economists at the big brokerage houses were all on record at least a year ago advising their clients to reduce their RE holdings. Of course, this never made it to Time Magazine or USA Today, so J6P probably didn’t get the message.
The smart money got out.
I think thethe industry thought real estate would continue to go up for another 3 to 5 years and just level out rather than crash because of excess inventory and the sub-prime fall out .
By the way buiders were taking out permits you can see they thought the speculators would just keep coming .Nobody seems to be paying attention to how high the speculator/flipper short term demand was or how much fraud was raising prices . When I say fraud I also mean liar loans for the sub-prime crowd . Nobody considered how short term and unstable the demand was and how much people would need to dump or refinance out of toxic loans . The RE industry exhausted the demand ,overbuild ,and ran out of greater fools IMHO.
The RE industry exhausted the limits of mendacity and now they are caught in their own web of deception.
Wiz-
Nah, the greater fools are still out there in mass I know I just got off the phone with one and ben had an article up about one who didn’t have two months reserves in the bank a few days ago, it’s just they need 5% down or reserves now and most don’t have the discipline to save for a latte nevermind a house expecially at the current price levels.
As a homebuilder, even if you knew a correction/bust was coming you would still keep building and hope the mania would go on a little longer. I thought valuations in San Diego (my home town) were completly out of wack in spring of 94, but they kept going up for over a year after that.
It’s a lot easier to determine that a mania is going on than to determine when it will end.
Do you really mean 94, or was it 2004?
In 1994 the Federal Reserve Board meeting discussed the implications of the “new monetary policy”. One of the items discussed was that this “new policy” would result in “asset bubble formations”. One of the new policies was 0 bank reserves for home loans to 1.3M.
Federal Reserve Transcripts. (caution 63 pg pdf)
http://tinyurl.com/ptw3d
and from the FDIC:
Scenarios for the Next U.S. Recession
March 23, 2006
“Ms. Whitney’s research suggests that a group that includes approximately 10 percent of U.S. households may be at heightened risk of credit problems in the current environment. This group mainly includes households that gained access to mortgage credit for the first time during the recent expansion of subprime and innovative mortgage loan programs. Not only do many borrowers in this group have pre-existing credit problems, they may also be more vulnerable than other groups to rising interest rates because of their reliance on interest-only and payment-option mortgages. These types of mortgages have the potential for significant payment shock that occurs when low introductory interest rates expire, when index rates rise, or when these loans eventually begin to require regular amortization of principal including any deferred interest that has accrued.”
http://tinyurl.com/qm5rq
This is still an excellent read as Ms. Whitney’s analysis is holding true.
I use 1994 as the start of the housing bubble, 2005 as the end of the bubble.
I would agree that 2005 was the peak of the bubble, not the end.
You are right! Bad choice of words on my part….
Respectable German newspaper wrote in January 2006 about the real estate bubble in the US and an expected downturn. I would expect specialist in the US to have gotten the message earlier, not later.
There are plenty of articles looking down the road and pointing out the obvious, I have seen a bunch from 2004 and 2005, they can’t buy off everyone.
The best litmus test I ever saw was when the housing CEOs in all the major house building companies sold off BILLIONS in their own stocks. Now why would they do that, unless they knew the party was over and they needed to get their money out of the company? I always like to follow the money, it answers 99% of the questions you can ask, you want to know why we are in Iraq,…follow the money my friend….try anything yo wish with this formula and you will get to the answers.
When did insiders recognize the end of the bubble?
> when the housing CEOs in all the major house building companies sold off BILLIONS in their own stocks
I remember to see some graph of home builder stock with a distinct price decrease in the middle of 2005.
If you every have to ask “Why do they do that?” answer your own question with “Money!” and you’ll be correct 99.8% of the time.
We’re seeing in action what was discussed several months ago: rise in long-term interest rates and also rise in inflation. Can accelerating inflation co-exist with prolonged asset deflation?
The run-up in the asset in question has depended as never before on massive cheap credit. Inflation rasies the cost of credit. So general inflation + housing deflation seems possible.
Also wanted to post graph, see page 15 (it’s a pdf document, can’t link to a specific page).
Can accelerating inflation co-exist with prolonged asset deflation?
Yes. Someone else has stated it elegantly, so I will plagiarize.
“(price) inflation for the things you need, (price) deflation for the things you want”
to expand, however:
The problem with our current “economy” is that all of the central banks are creating too much money. (monetary inflation)
This money (monetary inflation) flowed into various assets (Real Estate, Gold, Silver, Commodities, Stocks, etc) over the last decade or so, inflating all of their prices (price inflation).
As their prices increased, it increased speculation, and thus it fed on itself causing more price inflation
Now, it takes more and more money creation (monetary inflation) to keep the game going (price inflation). as example, I believe in 1995 or so it took $1 created to increase the GDP by $1. Now it takes $7 created dollars to increase GDP $1. (the first date might be wrong, may not have been 1995)
Thus, early on you see a slowdown in price inflation (called price “disinflation”). Prices still going up, but at a slower rate.
Then prices start to fall. This causes price deflation of assets.
The issue however is that we are still creating money (monetary inflation) too quickly. Thus we get price deflation in SOME assets… but the money that is remaining gets funneled into other assets (often “safe” assets).
Thus, you may see price deflation in RE and cars and stocks and Treasuries (lower price means higher yield), while seeing price inflation in food and gold and oil as example.
the game is really at an end when people are afraid and stop borrowing. In this case money cannot be made (money is made by people borrowing). thus you get MONETARY deflation (less money). In this case, you will get across the board price deflation, except in a few categories (perhaps food and oil as example)
hope that made sense.
the game is really at an end when people are afraid and stop borrowing. ”
I disagree with this. People (especially Americans) will never stop borrowing. Just look at subprime; people did not stop borrowing, but the supply of money was shut off to them. Fed won’t ever shut off the spigot to the banks and banks have to lend or implode. Under the current FIAT fractional-reserve system liquidity is the only thing that is guaranteed. The future is not deflation but hyperinflation.
watcher:
I did not mean to imply that our current path leads directly to deflation, although rereading my post I see that it looks this way.
I only meant that EVENTUALLY the current cycle of inflation will likely have a deflationary result, although Hyperinflation may occur between now and the eventual deflation.
There is considerable excellent debate on whether the path is:
inflation-> disinflation -> stagnation-> deflation
or
inflation -> hyperinflation-> deflation/currency revaluation.
IMHO
inflation -> disinflation -> hyperinflation -> 15 yrs ?
currently in inflation/disinflation
How can the US have deflation when the world is awash in dollars and willing to pay any price for commodities? If it was just the US and the US manufactured anything, I would agree with you. However, we will still need food, fuel and sheltering and we will have to compete against a world that also needs these same basics, but a world that has more money than we do.
In order for the money supply to grow (which is inflation), their must be borrowing. How likely is it that people will continue to borrow? In my opinion, not very likely. Increasing your mortgage by $50,000 is not considered a big deal but taking out $50,000 in credit cards is. Borrowing against your house is done. People will cut back big time. This is deflationary.
The money supply is already out there.
A modest example might be a leveraged buyout firm acquiring a US listed company. The owners of the stock receive cash and must reinvest, but the number of available investment opportunities has been reduced. At this time there are 8.6 T dollars looking for a home. Much of this money is invested in US Treasuries, but between Japan and BRICS there are $2T available for investment. China is already over paying for anything, provided they can get it in quantity. When China buys Ore from Brazil, they are paying in US Dollars. These dollars need to be spent somewhere. It is a worldwide asset grab and the US cannot play because we are broke.
The money supply does not need to grow. The money is already printed and floating around the world.
It might be copper or iron or ?, but at some point some country that has a need for a raw material will find that Russia, Canada , Brazil or Australia will not accept US dollars for the sale. I do not think it will be over oil/energy.
Right Hoz. Dollar repatriation is the hyperinflation trigger.
Hoz, your comments and research are always informative and insightful.
Galbraith (echoing Keynes) would argue that the game needn’t end, provided that the government picks up where the consumer left off.
> People (especially Americans) will never stop borrowing.
Maybe the statement about the decrease of borrowing should be modified: For borrowing to happen, you need a borrower who is willing to borrow and able to borrow by finding a lender who is willing to lend to this borrower. Borrowing decreases when those who are able to borrow are not willing and those who are willing are not able.
> The future is not deflation but hyperinflation.
Hyperinflation is always a possibility in a FIAT currency, but it would end the power of the FED and decrease the power of the government. In other words, there are strong incentives for the major players not to hyperinflate.
> People (especially Americans) will never stop borrowing.
After the credit excesses of the 20s (introduction of payment plans), few expected spendrift Americans to curtail their borrowing, yet they did. The fear to loose what you have already bought on credit (house, car) can be powerful - strong enough to cut further spending.
After the credit excesses of the 20s (introduction of payment plans), few expected spendrift Americans to curtail their borrowing, yet they did. ”
But after the Crash of ‘29, people came into your home and reposessed furniture, and other items. Imagine watching your bed go out the front door (as the Studs Terkel non-fiction work on the Depression, Hard Times, reports)
Now, (except for homes and vehicles, maybe boats) you keep the stuff, claim bankruptcy, and start over again in just a few years. So where’s the pain and public humiliation of being left w/absolutely nothing?
Oh my credit rating is hurt….boo hoo. I’ll just have to hole up on my Lindsy Wagoner foam mattress on my $10k bedroom set. I’ll watch my widescreen for a few years. It’s sad to only be able to serve Spam and Ramen on my lovely new dining set but at least this way the Joneses won’t catch on I’m a screw up.
Its not exactly the streets, ya know?
You’re right, debtors don’t have to fear to loose EVERYTHING this time but houses and cars (boats are wants, not needs). Loosing your house and your car, however, is pretty bad and also difficult to conceal from the people around you. Better not to load up new debts.
Yeah, it is true many would be horrified losing those things but I’m not sure that applies across the board. It’s not really so much of a “bottom” anymore as a “set back”.
Sorry for the edge today. Kids home from school and testing meeeeeeeeee!
Asset prices are not subject to inflation or deflation. Rather they appreciate in value or they decelerate.
am I misunderstanding you GS??? or are you being sarcastic?
I would have thought you would agree that part of the reason why housing prices are so high is precisely because of monetary creation (inflation).
it is also the reason why every asset costs more today than it did 50 years ago.
PART of the reason housing prices are high. (obviously mania also had large part)
He is technically correct. Inflation refers only to the increase in the money supply, not to rising costs. However it is common to use terms like ‘wage inflation’, ‘housing inflation’.
watcher:
he did not write “increases or decreases of asset prices are not the same thing as inflation and deflation” (I would agree with this)
he wrote: “Asset prices are not subject to inflation or deflation”
i would argue that monetary inflation or deflation does directly affect prices. hence asset prices are subject to monetary inflation/deflation.
Inflation refers only to the increase in the money supply
Really now? So there is no such thing as “grade inflation” in the schools? The English word “inflation” just means something is getting bigger. Just like an “inflated ego”.
You can have monetary inflation, consumer price inflation, wage inflation, asset inflation, none of which necessarily track each other.
You are claiming, of course, is that “inflation” only means “monetary inflation” and nobody is allowed to use the word in any other context. Well sorry, you’re not the language police.
“am I misunderstanding you GS??? or are you being sarcastic?”
Just paraphrasing my understanding of the Fed’s position on asset prices.
ROFL.
I gotcha.
GS, next Fed Chairman!
MY bad! GS, I thought you were smoking some meth or ?
There are rumors floating about on this blog that I use meth. Just to clear the air, my only addictions are blogging and caffeine.
Who needs meth if you have Peet’s.
i really appreciate your “paraphrased position”…
People at work know I m screwing off when I crack a smile.
GS, you have hit the nail on the head. The problem is valuation and how to determine value.
At any given time investors (in anything) predict present value vs future value - this makes a market.
I disagree that “Asset prices are not subject to inflation or deflation”. Any asset becomes priced based on inflation concerns. When an asset becomes over priced and continues to rise in price, we call it a bubble. Whether it is a stock, bond, commodity or ?, it will be subjected to inflation concerns. Deflation is the easiest to prove, since the economics of the great depression show negative returns on asset investment for quite a few years. During the depression the present value of moneys was worth less than the future values of moneys as a result US T Bonds actually had a negative yield to maturity.
> During the depression the present value of moneys was worth less than the future values of moneys as a result US T Bonds actually had a negative yield to maturity.
Are you sure about the last part? Because if a bond would get me negative yield, I rather keep my money and have a better yield - zero! Incidentially, that would reduce money velocity further and deepen monetary deflation. The only risks would be being robbed or loose the money in an accident. The inability to issue bonds with negative yield seem to have been part of the Japanese problem in the 90s.
Yes, I am sure about the last part. One of the reasons was that banks were failing left, right and center. Not many people wished to have $1K or more in their home. As a result $1000 bonds yielding 2% were trading at $1300. A small loss for coupon clippers was better than a theft, fire, hurricane etc. that would wipe out the cash completely.
The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates During the Great Depression
“During the 1930s and early 1940s U.S. Treasury bonds and notes had negative nominal yields as they approached maturity. But since an investor can always hold cash, this is impossible. Any bond must have a positive nominal yield….”
Yes. See the 1970s
Stagflation.
Yes if the assets are traditionally purchased with credit.
No if the assets are traditionally purchased with cash.
“A study released Wednesday by the agency found that the required disclosures were ineffective at explaining the costs and risks of home loans. The study found that when given the disclosures now used: Half the borrowers couldn’t correctly identify the loan amount. Nine in 10 couldn’t figure out the total upfront cost of the loan.”
“Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within two years. And 95% didn’t know how much that penalty would be. One in five couldn’t correctly identify the annual percentage rate, the amount of cash due at closing or the monthly payment, or whether that payment included charges for property taxes and insurance.”
If you are so stupid that you do not know the most basic information abouy buying a house than you get what you deserve. Do we need some sort of test before people buy a house?
Do we need some sort of test before people buy a house?
How about an S.A.T.
Savings
Accumulated to
Twenty % for downpayment
“Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within two years. And 95% didn’t know how much that penalty would be. One in five couldn’t correctly identify the annual percentage rate, the amount of cash due at closing or the monthly payment, or whether that payment included charges for property taxes and insurance.”
The study failed to report that 42% couldn’t find their rear-ends with both hands and 68% couldn’t hit water if they fell out of the boat. “A really stupid group,” one researcher lamented.
Study also failed to say the same test was administered to an inner city 7th grade class and they aced it.
They didn’t know because they didnt care.
None of their own hard earnings went into the place
They would get rich when they sold it off in a few years.
Why then worry the boring details?
if this study is for real, which it most likely is……a sad statment regarding the financial aptitude of the monkeys punching those buttons randomly.
A Good Faith Estimate should be legally binding within 5% (e.g. it could not change more than that amount). The last-minute surprises are complete BS.
“A Good Faith Estimate should be legally binding within 5%”
Bad Idea
If someone had made that estimate on June 5, they would’ve been murdered. “Sure, I can get you 6.25, slam dunk.”
It would be interesting to learn what the law is regarding last minute bait-and-switch tactics.
“A Good Faith Estimate should be legally binding within 5%”
Bad Idea
Why? This alone would basically force lenders to properly pre-qualify borrowers, and eliminate the lion’s share of bait-n-switch tactics pulled at the closing table. How is that a bad thing?
After some thought, maybe not a bad thing but it would in reality have to have some exclusions. Because in reality things pop up that would change a Good Faith and not all are lender related.
How about “binding within no more than 5% OVER the GFE” (but more than 5% UNDER would be ok) AND it’s subject to the borrower passing a credit/income & criminal background check?
That way, if the borrower turns out to be a total fraud and liar during the background check (David Crisp, Casey Serin, etc.), the lender can easily back out of the deal or drastically raise the rates/fees to compensate for the added risk. If the borrower turns out be genuine, the lender also has the option of lowering rates & fees (and no one is going to complain about that).
I just did a little calculation on the difference in payment on a 350k loan at 6.25% and 7.%. It’s almost $175 per month more. I think that just might get some folk to pause a little before buying a house.
Why would that make them pause when spending 10 times their yearly income on a house doesn’t seem to make them blink? The only thing that might get through is when everyone they know are going through foreclosures and all the mortgage companies start requiring 20% down and documented income.
How in the bloody world is someone supposed to save up $70K for a downpayment? I’ve been at it for three years and I’ve only got about $40K. And, geez, $350K won’t even buy you a studio in Compton!
My husband and I are pretty close (within a few grand), even with wedding expenses and down payments on 2 new cars in the last 3 years. We live VERY within our means. We also don’t have children and both have well-paying jobs. That helps, too.
Ah, but cayci, you would be in the distinct minority, and culturally, we probably don’t want to assume that only DINKs can join the owning class…
Aaaarrrgggghhhh….. The whole point about the 20% downpayment, Central Valley Guy, is that the price of the house will come down far enough so that people CAN do it - EASILY!
The only reason they got rid of 20% DP is because almost NOBODY in this country can afford- or would want to - lay down 100K on a crappy overvalued 500K piece of property.
Now if that 500K overpriced POS comes down to 200K, well then your 40K downpayment MEANS something.
Sometimes I think even people on this blog who realize things are out of whack DON’t realize just HOW out of whack they are! Prices could be coming down a whole heck of a lot. So much so that your 40K starts looking like real money.
$175 a month should not be a big deal to somebody who can afford a $350K house. Which just goes to show that the problem is $350K (and up) houses being sold to people who can’t afford them.
“State Banking Commissioner Howard Pitkin on Wednesday refused to issue a license for a new home mortgage company formed by former executives of the defunct Mortgage Lenders Network.”
It’s going to be interesting to see what name New Century and others come back as, a common ploy during the last downturn was to go BK walk across the street and open shop under a new identity. Wonder if we are going to see a lot of that this time around.
New Century is still here, they just hired a new CEO and she is getting $600+ an HOUR!
Some things just don’t change.
I thought she was hired to liquidate by the BK court.
When a company goes bankrupt, attorneys, accountants, and court-appointed management make big bucks. Every stakeholder in a bankrupt enterprise has their own set of lawyers and accountants to maximize the amount that they get out of the liquidation.
No dispute there but this particular individual was not hired to bring New Century to their glory days but to liquidate the company. New Century is still here for liquidation purposes only not too come back to the market and offer product.
And it also doesn’t stop the principals of the company from getting a new license and opening shop a few floors below.
“‘They can make disclosures more clear all they want, but if there is no penalty if you don’t comply, what does it matter?’ he asked. ‘Until there is a penalty for being late or inaccurate, it’s business as usual.’”
How much clearer can it be… All the required disclosures are very clear if english is your first language and you made it past 8th grade english. On top of this at least in this state you have a 3 day recission period. So what exactly is not clear maybe I should ask that? Just a bunch of losers trying to get out of debt free methinks.
MIS:
although I agree with your overall statement, I do feel it is a bit sketchy when the mortgage lender puts out an estimate, and then on the DAY OF CLOSING produces the final offer which is drastically different.
This is a high pressure scenario, with buyer and seller sitting in a room not able to proceed without the loan.
This happened to a family member one time. got to closing, BAM the loan papers were totally different than the estimates. She took the loan because she was nervous and didn’t know what to do. I would have walked, but it would have been a disasterour situation.
Perhaps a rule so that the final documents be prepared at least 24 hrs in advance so the people can go over them before final closing?
Here’s the thing about that, most loan docs have a 10 day window and with refi’s you have a 3 day recission. If the final is out of whack with the estimate then walk or send them back. Most of the time these so-called “disasters” are just minor situations that can be overcome. I don’t buy into it. When I was really into selling sfr’s I would not hesitate to advise clients to send them back if they weren’t right and it would always cost everybody but my client. I don’t want to hear well I gave notice or any of that other crap. Because the time and money that maybe lost getting it right would be small compared to getting into a bad mortgage. Folks have to learn to step up and swing the bat and not get bowled over.
Right ,make a disclosure requirement that a truth in lending with final costs on the final loan has to be given to the borrower at least three days before they sign loan documents so they can scream foul if they want or reject a loan they didn’t bargin for .
Wiz how does that help if the loan docs already have a 10 day window and in the case of Refi have a three day recission. That’s just a circle jerk IMO
The problem is that so many people don’t read what you put right in front of their face. I can not tell you the number of times that I have sat with borrowers and they will just sign sign sign without giving a second glance at anything they are signing. If they sign a prepayment addendum at closing, how can they claim to not understand that there is a prepayment penalty. It isn’t like that document is hidden. It is clearly stated in BIG BOLD letters on the top of the page “PREPAYMENT RIDER” Also adjustable rate loans have an adjustable rate rider many times that goes with the standard deed of trust. I know another notary that was making big bucks signing 8 or 9 borrowers per day. SHe would meet people at their offices and sign them on the hood of her car! Who agrees to that?? Plus who agrees to that and then pays $150.00 for that? Come on, the borrowers are not innocent here. I don’t know that giving them documentation any earlier would help. Stupid people can not be saved from themselves.
“Wiz how does that help if the loan docs already have a 10 day window and in the case of Refi have a three day recission. That’s just a circle jerk IMO ”
I think part of the reason is that many people don’t know about this 3 day recission issue. (I know I didn’t know it until just right now).
It would be better for all for the final loan documents to be ready BEFORE closing day so that all parties could read them in detail before high pressure closing day.
On my closing day I read through all the papers, and it took forever. The entire RE team was put off about it because nobody evidently does this. I would have much preferred to be able to do it at my leisure at home.
“I think part of the reason is that many people don’t know about this 3 day recission issue. (I know I didn’t know it until just right now).”
Check the laws for your state, I know it’s law here in Ca. for refi’s on SFR’s.
In California, the borrower must sign the three day right of recission notice. They sign at the bottom that they have rec’d the notice and also initial(most of the time, although not all banks require this initial) next to the date that the three day right of recission will expire. Each borrower is required to sign a seperate notice and each are given two copies that must be signed and initialed as well, so it is signed three times by each borrower during closing. One copy goes back with the file and two are left with the borrower.
Or maybe a bunch of people who thought: just let me the sign papers so I can go get this place listed for 50K more.
“Lehman Brothers Holdings said yesterday it would merge two residential mortgage units, cutting 400 jobs.”
This 400 job loss is small but think about it. They are losing their jobs in a market where they cannot expect to gain reemployment at anywhere near their prior salary. They have to sell into a down market. They have to fire the gardener, stop taking clothes to the cleaners, stop eating out, stop getting the car washed, stop the fancy hairdos, stop buying non necessities and this will have a domino effect on how many other people and their livelyhood? This sampling just represents a small microcosm about what is to unfold.
When I did econ. development consulting (short career, boring), the multiplier was 1 to 4 or 5 - IOW, one producing job (say in manufacturing) had a spinoff value of creating 4 other service jobs. So what would the multiplier be if it’s only service jobs in the first place, no real producing job to multiply off of? BTW, how many people really have all the services you mention (gardener, etc.)? Maybe I live in the wrong neighborhood (LOL - my neighbors are antelope at this moment - just saw a doe with twins - what a treat).
…said Doug Duncan, chief economist for the Mortgage Bankers Association. ‘If you’re in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you’re in trouble.’”
No, Doug. If house prices have fallen below your outstanding loan balance, then you are NOT in a position to refinance or sell.
Actually Doug, the the lender is in trouble.
said Doug Duncan, chief economist for the Mortgage Bankers Association. ‘If you’re in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you’re in trouble.’”
No, Doug. If house prices have fallen below your outstanding loan balance, then you are NOT in a position to refinance or sell.
It’s funny to compare this version:
http://www.voiceofsandiego.org/articles/2007/06/14/news/02dqmay061407.txt
to the San Diego Union Tribunes version of the same subject.
“Dennehy confirmed that the homes that are selling are, for the most part, luxury or high-end homes, or homes that are “priced to sell” (less expensive than they were last year).
“What you can sell your house for two years ago versus today is probably about 15 to 20 percent lower,” he said. “The median is an extremely misleading way of looking at prices, because we all know that the market is now pretty disparate.”
“Despite the statistical quirk identified in the median price measure, analysts said it could sustain a larger drop if foreclosure activity continues to heat up month after month. Nearly 3,400 new foreclosure filings were made in San Diego County last month, according to foreclosure tracker RealtyTrac. That’s a nearly 30 percent increase over April’s filings, and is more than three times as many filings as were recorded in May 2006.
“With foreclosure activity on the rise still, that could tug [prices] down,” LePage.
Casagrand said not all sellers are greedy, holding onto dreams of yesterday for that extra $20,000.
“We need to understand: A lot of people now owe almost (as much) or more than they can get for their home, and they’re going to give it the good ol’ college try,” Casagrand said.
But, while he said he understands how sellers arrive at that mindset, it will just harm them down the line.
“It costs them money in the end,” he said. “I believe in numbers, and I think the worst you can do in any business is delude yourself about what’s really going on.”
“The more affordable the neighborhood, the more likely you are to see slower sales,” LePage said. Some of those entry-level neighborhoods were the last to heat up in the real estate boom and had retained more of that strength even into 2006, he said.
What neighborhoods are affordable in San Diego?
the one on the other side of that fence with all the gaping holes in it…..no little more south, ah ah ah…. just a little more south
thats the one, hey a Donkey Show.
how does this relate to 1991-92 on a weighted basis
The number of U.S. homeowners who face possible eviction because of late mortgage payments rose to an all- time high in the first quarter, led by subprime borrowers.
I guess maybe they did not compile statistics on this back in 1933.
“The LA Times. “If you were confused by the disclosure forms your mortgage lender gave you, you’re far from alone, according to the Federal Trade Commission, which says the industry can do a better job.”
Considering the savvy of most buyers, I’m thinking they will need to produce a customized coloring book: “My First Mortgage”. Or maybe one of those board books for infants: “A is for Adjustable. Which your mortgage is, you fool” “B is for Bankrupt, which you will be if you lied about your income” “C is for Correctional Institution…” etc.
LMAO!
The first little pig got himself an Option ARM. “This is so cheap that I can buy five times as much house” said the little pig. The next little pig took out a 1-year adjustable mortgage. He had to lie a little bit about his income to qualify, but that was OK, he could just re-finance in a year, the broker said. The third little pig was much more cautious; he got himself a 30-year fixed mortgage. Luckily he had saved enough money to pay 20% down, but he had to settle for a much smaller house. “You fool” said his brothers, “you should have bought a nice car for that money, and your kitchen doesn’t even have granite counters, ha ha ha, who wants to cook on that?”.
LOL
Awesome! Please complete the story, especially the part where the Loan-Reset Wolf blows down the first two pig’s houses.
LOL sadist
I was actually thinking that this is the level of complexity you’d need in a briefing for a member of congress? I’d add a few characters, such as the evil Mr. Greenspoon (”fixed mortgages are for losers”), and the Realtor, David Liar (or Dimwit Lereah?).
Actually the 3 little pig story was written during the great depression and was an allegory about losing homes, due to excessive debt.
That’s a good one, AKRon !
Nice to have some Freddie news, especially since it’s so bad.
Does anyone reading here have any idea as to the possibility of Fannie/Freddie collapsing under their own weight? Is there any possibilty that that could/would be allowed to happen? (Short of a total financial sieze up that destroys everything in it’s path I mean?)
“Does anyone reading here have any idea as to the possibility of Fannie/Freddie collapsing under their own weight?”
Who would know? They never publish annual reports. Maybe they are already gone…
From Yahoo Finance
Wall Street Rally: Day Two
AP - Wall Street rose for the second straight session Thursday after data showed that wholesale inflation, excluding energy and food costs, is rising at a controlled pace.
Mortgage Rates Soar to 11-Month High AP
Subprime Mortgage Foreclosures Hit All-Time High AP
Gas Prices Push Whole Inflation Rate Up AP
FOOLS, FOOLS, FOOLS
“…data showed that wholesale inflation, excluding energy and food costs, is rising at a controlled pace.”
What does this mean? Have the Wall Street backcasters (they tell you why the market did what it did, after the fact. How useful) decided to spout pure gibberish to see if anyone will notice?
Home foreclosures hit record
Mortgage lenders report shows problems with loan foreclosures, subprime lending are concentrated in Sunbelt, Midwest.
http://tinyurl.com/2sczuo
Apologies if posted elsewhere…….
I’m beginning to think that the great unraveling may take until this time next year. Which means another 12 months of this.
In NY in the late 1980s it took three quarters after the actual peak for the sold median to stop rising, and it was not until eight quarters later that there was a serious move to the downside. The same schedule puts the price collapse next year at this time.
It all depends on the number of people who HAVE TO sell.
But… but… but… consumer (credit card) spending was up last month, right? Right?
yup, right, they all switched cards and dumped the debt on the new card to delay payments one month - showed up as new spending