The Trend Is The Same All Over The Country
It’s Friday desk clearing time for this blogger. “Merrill Lynch & Co. has backed away from a threat to dump about $850-million of securities it seized from Bear Stearns Cos. hedge funds, according to people with knowledge of its plans. The decision, and the scrapping of a sale Wednesday by JPMorgan Chase & Co., diminished the risk that a large amount of securities would be liquidated immediately.”
“‘It’s an industry issue,’ said Brad Hintz. Mr. Hintz was chief financial officer of Lehman Brothers Holdings Inc., the largest mortgage underwriter, for three years before becoming an analyst in 2001. ‘How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?’”
“Foreclosure actions against Massachusetts homeowners continued at a high pace in May, and likely will remain so for several more months as rising interest rates and a sluggish real estate market leave delinquent borrowers with few options, according to real estate analysts.”
“The number of homeowners facing foreclosure auctions more than doubled in May compared with a year ago, according to (the) Warren Group. It was the eighth consecutive month that foreclosure notices topped 2,000.”
“‘The Bay State has not yet seen this problem peak,’ said Timothy Warren, CEO of Warren Group. ‘It becomes evident that homeowners are finding it difficult to refinance their mortgage or sell their homes before they reach auction.’”
“Anyone who has purchased a car is familiar with the trade-in routine. Now, with new-home sales in the doldrums, many home builders are encouraging trade-in options.”
“‘Right now, we’re seeing this in select areas, in communities where it makes sense,’ says California real estate consultant John Burns, who singled out Arizona, California and Florida as locations where the bulk of trade-ins are taking place. ‘The whole industry is full of copycats. If others see it makes sense, they’ll jump on board and do it, too.’”
“Compared with May 2006, sales dropped 6.7 percent, according to figures released Monday by the Greater Nashville Association of Realtors. The slowdown in sales helped push the number of homes on the market higher to 20,915 properties at month’s end. That is the most since at least January 2000, according to the Realtors association.”
“Local agents said that more offers come with clauses that let buyers back out if they are unable to sell their old homes. ‘They’re scared now,’ said broker Mike Cherry. ‘I recommend (to clients) that they get their house sold before they even look.’”
“Buying the average B.C. home this month requires $21,150 more in annual income than it did at the start of the year, according to the B.C. Real Estate Association. Kyle Liu with his wife Jenny, was able to jump in and buy a home in North Burnaby for under $460,000.”
“For him and his wife, however, there is a sense of relief from having gotten into the market when they did. ‘I feel for the people trying to get in again now,’ Liu said.”
“New Zealand faces a ’significant downturn’ in housing as three interest-rate increases this year threaten to end a 5 1/2 year real-estate boom, Finance Minister Michael Cullen said.”
“‘There’s a risk of what could kindly be called a technical correction or a significant downturn,’ Cullen told a parliamentary committee. Higher borrowing costs mean ‘many people find themselves in a negative equity position,’ he said.”
“Increasing interest rates is ‘probably not the optimal way of resolving the issue’ of demand, Cullen said. ‘Eventually the tourniquet will cut off the supply of blood, but maybe we need something less drastic.’”
“ACORN supervisor Adrienne Tissier, whose district includes Brisbane, Colma, Daly City and South San Francisco, said what the San Mateo County Board of Supervisors can do is hold forums to educate people what to look for and avoid predatory loans before contracts are signed.”
“‘In some cases, some people didn’t know what they’re doing,’ Tissier said. ‘Then all of a sudden, they have this huge mortgage.’”
“According to the authors of the book ‘Cities Ranked and Rated,’ Modesto is the worst city in the U.S. But what really hurt the city’s rating this time around, Sperling said, were skyrocketing housing prices, foreclosures and commute times.”
“‘Due to high housing prices, people have been driven out of cities, and a two-hour commute is no longer an anomaly,’ author Bert Sperling said. ‘In places like Modesto and other places in the Central Valley, there are a lot of speculators that moved in because of housing prices.’”
“This month started for Orange County (CA) real estate like the past 20 finished: In a sales slump. Fresh DataQuick figures show local home sales running 30.5% below last year for the 22 business days ended June 12. The last month where sales beat the previous year’s pace was October 2005.”
“Marc Lebowitz, executive officer of the Ada County (Idaho) Association of Realtors. said May was a lean period for his membership. He said that with more than 4,000 members, having 720 closings in Ada County in May meant some Realtors ‘didn’t do a thing last month.’”
“But he said the market is not falling as much as returning to stability after two years of ‘gross instability’ that produced the excess inventory now weighing down the market.”
“Associate broker Shaun Tracy said the market is being held down by sellers reluctant to drop prices on their home to attract buyers. ‘People will make every excuse in the world to keep from dropping their price,’ he said. ‘That’s why momentum is flat.’”
“Industry experts say sales numbers are approaching 2004 levels. That year is considered typical for sales of homes in the Valley. 2005 and the first half of 2006 represented a bubble, with fast-rising prices and a home-building boom.”
“According to the MLS, 1,028 Valley homes sold in May, off 7 percent from the 1,103 transactions in 2004. Buyers had many more homes to choose from than usual: 7,470 homes, or 76 percent more than in May 2004.”
“‘It’s not a bad market out there,’ said Lebowitz. ‘It’s just a different market. And the trend is the same all over the country.’”
A great week and an important one up next. My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
Every so often we come to Friday and I say to myself, “wow, this has been quite a week on the housing deflation front.”
Seems like I’ve been saying this EVERY week for the past couple of months. This blog kept me sane when everyone else thought I was nuts (including my wife, parents, etc…). Now we get to celebrate a bit.
Thanks for a great blog Ben…
“Merrill Lynch & Co. has backed away from a threat to dump about $850-million of securities it seized from Bear Stearns Cos. hedge funds,…”
you cant dump what nobody wants…..unless you just throw it out with the rest of the trash.
Similar to the situation faced by home sellers in many markets today, it’s difficult to sell something that is not priced correctly.
Those $850 million of securities… what are they really worth?
Does ML think that, as more borrowers default, those securities are going to be worth more down the road? Not likely; I don’t think they’re that dumb. So what’s the motivation?
first rule: never threaten.
If you are gonna do something then just do it. All this talk is just creating more buzz for the politicos to soap box the behind the scenes bailout scheme…..
As a great Roman slave once said, “Sieze this Honkus!”
“Those $850 million of securities… what are they really worth?”
They quickly came to the realization that they didn’t want ANYBODY to learn the answer to this question…. due to the Billions more they got floating around….
The value of those CMO’s is something Bear Stearns does not wish to divulge publicly for fear of pricing it to others similar in composition and rating.(buy it and hide it)
.50 on the dollar, just like the property that was bought with the $.
If there are a lot of the lowest tranche that suffer ‘first loss’ (100% wiped out by 10% loss on the whole tranche - then doesnt this mean the value of their portfolio could be much less than 50% of the original value? Impossible to say until the defaults pile up (which they are!)
Hot Potato…..
Bear Stearns is so fcuked. How can you sink in 3.6 billions to save one fund, and let the other fund die in to the tune of 6 billions? There is just no logic to this bs. If I were holding Bear Stearn stock, I would dump all of it now or better yet sell short. All this bailing out is just delaying the inevitable of the $1 trillion reset. All this loss and bail out talk is like spring rain; Katrina is around the corner.
Amy repo girl,
Well, Friday’s big NYSE drop means some of the “proles” have noticed it and bet a lot of calls went to brokers Thursday and Friday.
The evening Nightly Business Report on PBS trotted out a “happy face” PR man and basically stated that there is nothing to worry about Bear Stearns, subprime, CDO’s but buy Blackstone as soon as you can.
We are doomed.
You’ve really got to give it to these Wall Street types who for years have owed their living to the fiction that they are the high priests of finance, and a starry eyed public who could not see through the smokescreen. There is one thing though that you can’t take away from them which is that when there is rampant greed, they always find a way to service it. The only problem is that unlike most drug dealers, they frequently end up becoming addicted just like their customers.
yikes…
“‘It’s not a bad market out there,’ said Lebowitz. ‘It’s just a different market. And the trend is the same all over the country.’”
Sure. And Adolf Hitler wasn’t a bad leader, he was just a different leader.
On the surface I am sure 2007 looks much like 2003&2004. The major difference is that 2003 & 2004 is on the up swing part of the curve while 2007 is on a steep downward part of the curve.
‘It’s just a different market. And the trend is the same all over the country.’”
I thought all real estate was local?
where do they get these morons saying it’s just a different market?
Jim Cramer just informed his minions that the BS mess will be essentially forgotten by end of next week. It’s all good. Mission accomplished….for now.
Well, existing home sales is reported on Monday. New sales and Consumer confidence on Tuesday.
If those are really dismal, he might be right but for the wrong reason.
“Jim Cramer just informed his minions that the BS mess will be essentially forgotten by end of next week.”
yea, he must have inside info on an even bigger crisis for next week….
Exactly, the BS mess is peanuts !
Cramerass:
I wish he could lick his own…because if he could…he would…I would “pay-per-view” for Cramerass to lock tongues with Ann Coulter…if only, Dick Cheney could be the moderator, and Don King was in a thong, sputtering on about how wonderful America is…with commercials by the Carlye Group & Halliburton…wait, wrong blog, repeat: “It’s contained…it’s contained…it’s contained”
Have a great weekend Ben!
can you elaborate on the Jimbo’s statement?
I believe he helps his hedge fund fiends by spreading lies.
He said it at the beginning of the program. I didn’t wait around for a more detailed explanation that was to be forthcoming later in the program, given I can’t stand the self serving egotist.
BS will go by the wayside…
You have to make room on the telly for the next hedge fund near disaster, blow-up, siezure of assets, margin call…..
people please, sell in an orderly fashion, please.
Or there will be a big Paris Hilton update next week to steal the headlines - like she choked on a pea at the jail and is in the infirmary begging to go home to mommy and higher thread count sheets.
“…and higher thread count sheets.”
LOL.
“For him and his wife, however, there is a sense of relief from having gotten into the market when they did. ‘I feel for the people trying to get in again now,’ Liu said.”
How dumb is that comment..does he not think prices will have to come down if affordability is still an issue?? I would rather pay a higher mortgage rate if that’s what it takes for house prices to fall further..
LOL!
“For him and his wife, however, there is a sense of relief from having gotten into the market when they did. ‘I feel for the people trying to get in again now,’ Liu said.”
Liu is opening a Kool-aid stand.
“Anyone who has purchased a car is familiar with the trade-in routine. Now, with new-home sales in the doldrums, many home builders are encouraging trade-in options.”
This is starting to boarder on the obsurd.
“Head over to Highway 99, drive about 20 miles south and take a look around. According to the authors of the book “Cities Ranked and Rated,” you’ll be looking at the worst city in the U.S.
That’s right: Rock bottom on a list of 375 metropolitan areas — and beating out the previous 2004 edition’s bottom pick of Laredo, Texas — is none other than Modesto.
According to the list, Stockton can’t claim any bragging rights. It ranked close to the bottom, coming in 350th”
I haven’t seen list but I’ll bet the CA Central Valley is well represented at the bottom. But Hey, wouldn’t you want to live in Modesto if you could buy a decent house for “only” half a million?
at 0.50 per pound of strawberries picked….. you only have to pick, uuuuhhhhhhh 821 lbs a day (and thats a year yound number).
nuthin to it.
That reminds me of a joke:
Q: What do you call a cross between a Mexican and an octopus ?
A: I don’t know but man that thing can sure pick lettuce.
Yup, they will be giving me rental here in Stockton in 2012. Shit, paying me to take them. In the 90’s my Broker friend was buying them with 10% down with a 10% commission for 20-40% less than there rental value. Cost him no money out of pocket and bring in $100/mo after all expenses. After seasoning the loan for 2 years he went back to the banks pulled out $15k each and they still were cash flow positive!!!
What exactally is your return if you put nothing into the rental, pull out $15k and still make $50/mo after all cost? I am pretty good at math, but maybe one of you math gods can work a ROI% for me. I keep getting divide by zero problem.
Now to the above add the $100k plus in net profits you make selling into the next bubble? Just stirs my member thinking about it!!!
You have to count the opportunity cost of the commission and the opportunity cost of the effort expended to keep the places rented. You are right, the ROI is great, but there was still an investment.
The commission will be paid to me =).
I have handled rentals for years and that is little work for the returns listed.
Modesto sounded almost romantic in one of Merle Haggard’s early tunes:
“In downtown Modesto I was workin’ the Holiday Inn
I was sittin’ with a new gig that would last me throughout the weekend
I was playin’ a new song I wrote on the way into town
When she came through the front door and found her a place to sit down. . .[etc.]
But I guess Modesto and Central Valley has become thoroughly Rio Grande Valley-ized. Worse even than Laredo, McAllen, Brownsville (where you can at least still buy a house for $100K and walk across the border for cheap pharma).
“…Modesto……worst city in the U.S.”
Yep.. This place is gonna fall so hard prices will bottom out significantly below yer average city’s (I hope).
AMERICAN-STATESMAN STAFF
Thursday, June 21, 2007
Home sales in the Central Texas housing market were up slightly in May, with a 2 percent gain year over year. But the modest gain came on the heels of a 6 percent increase in April, possibly hinting that sales will be less than robust.
And June’s numbers — which typically show stronger sales — may be down, as pending sales for May dropped 5 percent to 3,125. The last time pending sales decreased was in December 2005, when they dropped 1 percent.
The greatest number of homes sold in May were valued between $200,000 and $399,000. The median price continued to climb, this time by 5 percent to $183,160. Median prices have been rising since January.
Sales of homes valued under $140,000 continued to drop, with decreases of as much as 30 percent from 2006. It’s becoming increasingly difficult for first-time buyers, especially those with a shaky credit history, to find loans, partly because of the shakeout in the subprime mortgage market.
It’s always the subprime markets fault there are no more buyers.
It’s always the subprime markets fault there are no more buyers.
You know, it’s just amazing to me how obvious it is that price is the culprit to us, readers of this (and other) blog(s), and how inconsequential it is to so many who write about real-estate.
It’s nothing other than price The price is out-of-whack. As soon as prices re-align with fundamentals, then subprime loans won’t be necessary because people making median/average wages will be able to afford median/average houses.
This is real-time, human drama on an incredible scale - daily tracking the erosion of the public’s mental inertia against falling house prices.
There must be a reality tv show in there somewhere. How about, “Sell this House”?
RE broker Randy Hawley, working out of Sacramento, commenting on RealtyTimes Market Conditions blog:
“It is still an awesome market for buyers and homes are still selling if priced right! What an awesome summer it is going to be.”
“…any buyer that can and does qualify is going to have the time of their lives, it’s like being a kid in a candy story…tons of homes to choose from and great prices. ”
“If you are interested, I would like the opportunity to share with you ” ‘the 10 deadly mistakes buyers make’… ”
(You’re going to have to give up your email to get those)
http://tinyurl.com/2lrns5
but is it gonna be TOTTALY AWESOME, I mean, like TOTALLY?
yeah, like I was gonna buy a house, but you know, its like scary and stuff, cause, like my friend got a house last year and she’s, you know, living with her Mom and stuff, after the stupid bank came and like took the house away.
Now, Voz, stop that. You’re making me, like, laugh uncontrollably.
bummer
Duuuude… you’re totally harshing my buzz, talkin’ smack like that.
10 mistakes!
http://tinyurl.com/2zvpo6
Get ready for IPOs for Equity Buy Out firms and Hedge Funds. Just another Exit Strategy while the pension funds and 401k’s get nailed.
Calling all Bloggers/Blogettes:
I’m interviewing out in the sunny IE town of Adelanto next week. Any insider info you could give me on good neighborhoods to rent (I will not be buying for a while!), neighborhoods to look out for, etc would be greatly appreciated. I would be working in the Adelanto/Victorville area.
Navyat1ret@yahoo.com
If looking for a home to rent, you might try the neighborhoods adjacent to and East of the golf course (I think Victorville Country Club). Stay away from the newer neighborhoods because I have a sad feeling that there will be lots of murder/suicide activity in the coming months due to the financial self-implosions underway in the high desert. Also, stay away from Bear Valley rd during peak traffic hours…
Here is the local newspaper http://www.vvdailypress.com/ and Crips and Bloods are pouring into the area.
Between Victorville/Apple Valley they have about 2000 in foreclosure. Just pick an EMPTY one, look SAD like you just BOUGHT IT and ENJOY !
“‘In some cases, some people didn’t know what they’re doing,’ Tissier said. ‘Then all of a sudden, they have this huge mortgage.’”
No sh*t Sherlock . Beer Me, Rich
CNBC reported this morning that AAA rated senior tranches of the CDO’s held by the belly-up Bear Stearns entity were bid indicated at 38 cents on the dollar.
These “AAA” tranches can be highly explosive as they are built of BBB tranches of ABS, often subprime.
Ouch… 38 cents on the dollar. Sounds almost like what the houses around here are worth! Yes, yes… I know that there is no real link between this sale and the actual price of a bunch of houses, but still, I find the similarities in numbers amusing!
I don’t know if there’s enough popcorn to keep us going through all this lunacy!
So what do you do when rents suck as much as buying? I guess I could move out of the city to the burbs and commute 2.5 hours a day … Boy that would just be awesome! *punches self in the head*
Dammit I hate DC sometimes … $2400/mo for a 820 sq ft 1BR apartment downtown w/parking … Plus utilities … Out of their damn minds … except that’s on the lower end of the scale for 1BRs that size … I’ve seen them for over $3k a month. 2BRs? $3500? $4000? $5000?
Don’t even get me started on sales … $450-500k for condos that size.
Did I miss something? When did DC become Manhattan?
RR:
I don’t know if you have to live in D.C. proper or not, but you can rent a SFH inside the beltway, easily, on the metroline, for 1900 or less.
You are getting hosed here unless you want to be in the middle of the city nightlife.
Even inside the BW rents are moderating in NoVa, ever so slightly.
Also, DC became Manhattan in 2001 when the lending standards went crazy here.
You are right though, it sucks. Do some searches on NoVa in good zips inside the beltway. You’ll find something much cheaper than 2400. If you get some roommates, even better.
Enjoy.
That must be what’s propping up RE values here, rents in WLA are through the roof.
A lot of those high rents looking like wishing prices from FBs. I’ve seen 1 bedrooms for $1200 - $1500 without parking. Look around Thomas Circle, Logan Circle, Capitol Hill
Trust me I’ve been looking … I missed out on a great place because I had a dog … 4 apps on the unit.
I’ll find something eventually. I just don’t think $2350 for a 1BR apt w/parking is a good decision financially.
DC sucks. Leave. When I moved to NoVA 5 years ago, it was pricey, but *just* affordable. Now it’s insane. There is no reason to come to DC/NoVA: move to flyover country, it’s much nicer.
I cashed out my chips this year, bought a bunch of t-bills, and started renting a place in Fairfax (where I work). If my fiancee and I can find jobs in flyover country, we’re gone in a heartbeat (both of us hate the crowding, traffic, bad attitudes, and asthma inducing air quality). Otherwise, we’ll rent and wait for prices to come to us. There are some nice modest 4br colonials in Oakton/Viena with 20,000 sq/ft wooded lots. But they want $800k for places that sold for $350k in 2000. And so we wait, debt free…
I just took a new job in the city so I’m stuck in the area for a while longer … I’m sure I’ll find something … It will probably just take a lot longer than I had thought.
RR:
The reason I rent in Falls Church is b/c I have a dog. I rent a 3 br/2ba SFH around the corner from the metro. I pay 1850 which includes trash. I don’t know if your DC pad includes utilities or not, but my total is 2250ish depending on how hot or cold it is. That includes all ‘other expenses’ including cell, power, phone and internet.
Keep looking.
For me, the burbs are great, especially if you have a dog. Good luck.
Bear Stearns woes seen raising chances of sale.
SAN FRANCISCO (MarketWatch) — If Bear Stearns Cos. loses a lot of money trying to bail out one of its struggling hedge funds, the bank could be acquired by a rival, an analyst at Merrill Lynch & Co. said on Friday.
http://www.marketwatch.com/news/story/bear-stearns-hedge-fund-woes-could/story.aspx?guid=%7B33C53D9D%2DF84C%2D4B92%2DB2BD%2DAA06B7C60517%7D
acquired? hhhahahahahahahahahahahahahahahahahahahahha.
I’ve noticed the ‘tip of the iceberg’ analogies lately. In the quest for a definitive sound-bite of the historic Housing Bubble, here’s my feeble attempt or two;
The financial (housing-related) industry is like a submarine; crashing into the iceberg deeply underwater.
Another one…
The builders are like pornographers; They have to keep on building or die, like their salacious brethren constantly producing new content in order to retain their jaded audience. (Something tells me that this won’t be a mainstream media quote!)
I don’t see how you can equate the two: one sells an honest product, while the other sells houses.
I don’t know if this showed up on any of the other threads, but I found it amusing, particularly the readers comments –
Realtors attend worship service to pray for better market
http://www.nwfdailynews.com/article/6725
Here is a Realtor’s (TM) comment on that link:
As a Licensed Realtor, licensed in two states who abides by a code of ethics that is more stringent than most any other business, and as a Realtor that is involved in community affairs,…blah, blah, blah…
So there you have it. Realtors (TM) abide by a code of ethics more stringent than most any other business. You heard it from a Christian Realtor (TM) , so it must be true.
Got 10% down?
They AREN’T praying in that picture. I just had a phony 6% check ON a STRING dangling from the ceiling
LOL
He said that with more than 4,000 members, having 720 closings in Ada County in May meant some Realtors ‘didn’t do a thing last month’
If buy some you mean MORE THAN 80% than, yes, I guess you’re right. Are we really this bad at math?
‘That’s why momentum is flat.’
Momentum? Flat? Clearly at least one child was left behind.
Real Estate has always shown to prevail in all markets in the United States since 1955. The fact is were going though the tough times once again -The sub prime market has also taken its bad PR but patience will prevail once again. William Steiner senior loan officer 1st metropolitan mortgage
This is a joke, right?
I mean, what does “prevail” mean? No one is this illiterate.
“Patience will prevail”….no one could possibly write something simultaneously both so meaningless and prententious as this and be serious, could they?
No, he’s attempting to use this site as a channel for his own Arizona blog.
Well, ma’am, you see, when a VP like yourself comes to Milain to do business, it’s customary for the company to send a gal up to the room, compliments of Great Lakes Feed & Grain. And, well.. since you’re a gal, the company sent me - Fred Garvin, Male Prostitute.
As if I can make this stuff up:
http://www.garvinappraisal.com/contactus
I guess CNBC was reporting that cantor was getting bids for 10-20 cents and they specifically called and said they didn’t lose any money. anyone believe that?
Cantor Fitzgerald completes auction of Bear assets
Reuters
Reuters - Friday, June 22 08:15 pm
NEW YORK (Reuters) - Bond broker Cantor Fitzgerald LP said it completed a “successful auction” of assets from Bear Stearns Cos. Inc. , a company spokesman said on Friday.
Bear Stearns on Friday said it would provide up to $3.2 billion (1.6 billion pounds) in financing for a struggling hedge fund it manages.
“We had a successful auction,” said Cantor Fitzgerald spokesman Robert Hubbell, who didn’t immediately have a figure on how much was sold. “We have no exposure to the Bear Stearns hedge fund. We have not lost a penny.”
http://uk.news.yahoo.com/rtrs/20070622/tbs-uk-usa-credit-cantor-4210405.html
So essentially Dollaterized Debt Obligations are worth 10% of their original value….no wonder “they” want to lock them away like the crazy uncle in the attic. If these are showed on the books for the value the real market has for them, most of the firms holding them are bankrupt, unless they can find another Arthur Anderson to dummy up some figures showing them as performing debt instruments.
I imagine the whole Wall Street/Bloomberg/CNBC regime is going to put as much lipstick on these pigs as possible.
“We have no exposure to the Bear Stearns hedge fund. We have not lost a penny.”
course our clients are broke, but hey, thats the fun.