Another Signal The Housing Downturn Has Not Hit Bottom
The Press Democrat reports from California. “Builders are putting up homes in Sonoma County at a sluggish pace and don’t expect a turnaround until next year, another signal the housing downturn has not hit bottom. Delco Builders’ projects in Petaluma and Santa Rosa reflect what developers are going through across California. Delco’s sales have picked up in response to price cuts of 5 percent to 10 percent, yet demand is weak enough that Delco is limiting the number of houses it starts.”
“‘We’re seeing that in a lot of places,’ said Greg Paquin, president of The Gregory Group. ‘We’re still in a period of settling. The new home market is trying to figure out where that balance is between pricing and sales.’”
“Sonoma County’s housing market has been in a slump since an eight-year run of strong sales that pushed prices to record highs nearly two years ago. Buyers initially balked at paying ever higher prices, but now are wary about paying too much while prices are still falling.”
“The moves to attract buyers and reduce unsold homes have boosted demand. Sales of new homes rose 10 percent in the first half of the year, compared with the same period a year ago. But the average price is down from $818,719 a year ago to $665,729 now, an 18.7 percent decline.”
“‘We certainly are selling houses, but not at the pace we would like. The psychology is a big part of that. People are sitting on the sidelines,’ said Rick Rosenbaum, VP of sales for Delco Builders.”
“Slow sales are not the only challenge to getting supplies in better balance with demand. At last count, there were 29 housing developments going in the county, up from 14 a year ago. Builders are going ahead, though at a slow rate, with projects on land purchased when the housing market was booming.”
“Residential construction in the county is at its slowest pace so far in more than a decade. The only slower five-month period during the past 20 years was in 1995-96.”
“Builders in Sonoma County anticipated a more favorable home sales landscape by this summer. ‘We really thought we were at the bottom,’ Paquin said.”
The Mercury News. “The traditional spring home-selling season was a bust for D.R. Horton Inc., one of the biggest nationwide homebuilders. The report provided more evidence that the housing sector continues to sink.”
“‘It’s going to be another year-and-a-half before we see stability or growth,’ said Leslie Appleton-Young, chief economist of the California Association of Realtors. ‘We certainly haven’t bottomed out yet.’”
“Horton’s June-quarter orders fell the most—53 percent—in California. Horton was building entry-level homes in Sacramento and other inland markets that emerged as affordable alternatives to the pricey coastal markets but are struggling now.”
“The inventory of unsold existing homes in California hit 10.7 months in May, well above the normal 7 percent range, according to the California Association of Realtors.”
“Edward E. Leamer, director of the Anderson Forecast at UCLA, said housing markets are probably weaker than statistics suggest because more homeowners would like to sell but have decided to wait out the slump.”
“‘Builders have made price concessions, but even at that they still haven’t cleared out their inventories,’ Leamer said. ‘We keep looking for some blue sky, some sign that the market is improving, but we just don’t see anything out there.’”
The Sacramento Business Journal. “In the six-county Sacramento area, D.R. Horton sold 182 homes January through May 2007. The homebuilder had sold 590 homes in the same period of 2006.”
“Homebuilders are struggling. Second-quarter figures are expected to be issued next week, but the early indication is that housing analysts will report dismal sales in the Sacramento market. That’s despite modest gains earlier this year and late last year; and this drop-off is hitting during the peak homebuying season.”
“The number of local single-family housing permits has fallen this year by 14.3 percent, according to the construction board. The current new-home slump is already two years old with no sign of a turnaround.”
“One sector that might not escape housing’s effects is retail establishments. Construction of stores and other retail-related buildings is 8.3 percent lower than it was at the same time last year.”
“‘I’m hearing from the Bay Area companies and some in Southern California about slowing on the commercial side,’ said industry consultant Robert Earl. ‘From a hiring perspective, the local contractors’ market has softened. It’s easier to find people.’”
“Other contractors reported competition for small construction jobs has increased, suggesting there is less demand at the lower end of the business. That might also be a sign of a slowdown.”
The News Press. “The number of homeowners who are behind in their mortgage payments reached a record high in Santa Barbara County during the first quarter, and foreclosures also spiked sharply. Default notices, or notices sent out by mortgage lenders to homeowners late on payments by several months, jumped in the first quarter of this year, to its highest level in 19 years, according to the Real Estate Research Council of Southern California at Cal Poly University Pomona.”
“The number of defaults recently increased to 401, a rise of 33 percent from the 301 in the fourth quarter of 2006.”
The Record Searchlight. “Investors played a huge role in the five-year real estate boom that hit Shasta County before fizzling out last year. In 2005, the Redding area topped a nationwide list compiled by LoanPerformance of the percentage of homes sold to investors. Nearly one of every five homes was bought by speculators.”
“It couldn’t go on forever, and home prices and sales have come back down to earth. Last month, the median sales price of new and used homes in Shasta County was 5 percent below what it was in May 2006.”
“Mike Neves of Access Mortgage in Redding said don’t expect Redding to become a hotbed for investors, at least by 2005 standards, until the market settles some more.”
“‘I think I am seeing a lot of investors looking but not feeling the time is right because we have not reached rock bottom,’ said Neves, president of the California Association of Mortgage Brokers Greater Northstate Chapter.”
‘ A total of 6,960 homes were sold at auction in June with a loan value of $2.83 Billion in California. Riverside County had the highest number of foreclosure sales at 1,093 properties and $523M in loan value. Los Angeles County was second in terms of volume, but after adjusting for population, ranked 34th in the State.’
‘Yuba, Sacramento and San Joaquin Counties ranked 2nd, 3rd and 4th highest respectively with Marin County having the lowest foreclosure rate in California. Foreclosures now represent 16% of all new and resale home sales in the state.’
‘According to Sean O’Toole, ‘Lenders are building a significant REO inventory. Since January 1, 2007, a total of 29,696 California properties have been returned to the lender for an astonishing total loan value of $12 Billion. This is unprecedented.’ In June alone 6,552 properties were returned to the lender for a total of $2.69 Billion. ‘
That’s a whole lot of inventory, the lenders will only be able to hold to out for so long before there is a mass dumping on the market. this gets more interesting by the day.
Any gut instinct on how long they hold out before they start slashing prices? Sep.? Oct.? Nov.?
Since the amounts are unprecedented in any history, I would say they will hold out until the bitter end, which will be when holding costs are chewing up other profits, i.e. CC interest from the sheeple, and/or the end of the fiscal year when they want to clear the books. Choose your poison!
The amount of losses they are gonna take is unfathomable. At the rates these REOs are increasing I am worried. I might just stash all that cash in the CD under the mattress. We are going to live through an economic crisis that has never been seen before and may not be seen ever again. Just think 12 bil is 1/8 of the state budget (see GS below). Ouch! Banks cannot afford this kind of hit and many small guys a re gonna go down. Sure, as Bill in Phoenix od Carolina says, Bank of America won’t die, but if my credit union goes under I do not want to be standing in a year long line waiting for an FDIC check.
What will probably trigger the unraveling will be a Bear Stearns-like attack. For example, I am a small S&L or credit union and I have a gazillion REOs languishing. Well, Joe bank manager at HQ starts calling in my debts, then I am in trouble. BS (funny acronym) was able to bail itself out, for now. How many small time banks are going to be able to that? Wait until Countrywide’s creditors come ‘a callin’. I would not want to be there when they knock on the door.
Mr. Mozillo, we would like our $15 Bil back. “But, but, we lent it all out.” So sorry, we’ll be taking over now!
Credit union deposits are insured by the NCUA not the FDIC. Anyhow, when an insured depository institution goes into receivership and the insurer decides to liquidate, depositors get their checks in a couple of days at most (I worked on many FSLIC receiverships during the S&L collapse.) Where you run into problems is if you have multiple accounts and the question of the extent of insurance comes into play. Many depositors don’t realize they have uninsured balances, the FDIC doesn’t pay them off, and then those depositors file claims. These are the claims, usually without legal basis, that take a long time resolve.
In any event, a liquidation is rare. Typically, the insured deposits of the failed institution are assumed by a healthy bank, the FDIC pays that bank at a discount, and the FDIC takes the assets of the failed institution. The insured depositor goes to sleep with a $nnn.nn account at ABC Bank and wakes up with an account in the same amount, same terms, at XYZ Bank.
I realize my mistake was stating FDIC. However, someone posted awhile back that the amount of money that the FDIC had in reserve was very small compared to the money deposited. My fear is the same regarding the NCUA. If 10 billion is lost, but the NCUA only has 3 billion, it will take some time, I have to think. And you do we think will make up the difference? The taxpayer?
You also use $nnn.nn as the amount. What about those pushing close to the limits? Sure, the bank will give me my 30 cents back gladly and wash their hands of it. But what about the close to fully insured people? Do you understand my fear. Also, if this thing plays out anywhere most of us on this blog believe it will, this will make the S&L crisis look like a picnic.
Yep…
And I have a feeling the way “helicopter Ben” will drop money is to boost up the deposits of ABC bank so that when the depositor wakes up with $nnn.nn at XYZ, it is $nnn.nn. To keep from having a run… I have a feeling they’ll insure fully (but not at first… only after the sheeple approach panic). Maybe quickly raise the limit to $250k?
OC Dan wrote:
We are going to live through an economic crisis that has never been seen before and may not be seen ever again.
Sadly, we have seen this before. 1929. From almost no unemployment to 25% unemployment. My grandfather had several friends starve to death. (Note: He worked hard, so he had a job every day. But it you weren’t 1st choice on the list… you went hungry.)
This is getting scary…
Got popcorn? Cash?
Neil
WaitingInOC-
To answer your question 1Q 08
I have wondered if the form of the bailout will be to essentially have the Federal Govt “print” sufficient money to essentially buy all of the foreclosed houses that flood the market. This would have the effect of keeping prices high and would in effect insure almost all loans (after the originator is bankrupted) and would keep prices high by eliminating the flood of foreclosed homes hitting the market. The homes would be left empty, and slowly sold. Of course an empty home slowly deteriorates and these would become mass targets of squatters, drug dealers etc, so I would see the law of unintended consequences played out here too.
It will be interesting. Hot weather browning the yards, hot weather heating up the interior of the houses, vandalism. All these add to cost. If you don’t pay the upkeep the value will plummet faster. November is tax time so my guess around the first of October. This past weekend I heard people talking about trying to get some debt paid down (money was tight) so that they would have money to buy Xmas presents. We are talking people with higher paying jobs.
If the homes auctioned had a combined loan value of $2.83 billion, I’m curious as to how much they sold for collectively at auction. How much of that loan (and prior ‘market’ value) just got wiped off the face of the earth?
Good question, I’m not sure it got wiped off the FOTE, but from some investors account as a margin call, or soon will be.
‘Lenders are building a significant REO inventory.’
I thought lenders tried to move REO quickly, not wanting to get stucco with declining value assets on their balance sheets. Didn’t they hear Bernanke and Paulson recently say “no bailout” (in so many words)?
It appears they are drinking the kool-aid while walking a tight rope. Assomeone said here before if they price to market and liquidate now they are admitting the market is toast which causes panic and makes the inventroy piling up and coming back worth even less. Combine that with the fact that most banks are not holding the inventory in portfolio and merely acting as a servicer for Wall Street you have a scenario that is best described as a clusterf*ck.
Since we’re back on the REO topic, and after having read previous discussions involving negotiations with banks about current disposal of REOs, I still have a Q for which the answer is not clear:
Assuming a buyer capable of going with 100% cash, how about a lease option with the bank for an REO?
They agree on a fair market option sales price, to be paid in full perhaps 1 or 2 years down the road.
In the meantime, the property is pretty much off the bank’s hands as far as maintanance etc., there is no “comp” affecting other properties.
And, i assume the REO is no lonoger a non-performing asset. (?)
As far as details like “rent” amount and option privilage, those can be negotiated and factored into the ultimate option price.. and, personally, i’d rather do this type of deal with a bank much moreso than with your average seller.
And of course the buyer would be represented by an attorney who’s intimately familiar with anything involving the deal .. tax reassessment, insurance repsonsibilities, loopholes to back out for either party etc.
Assuming a bank and buyer can agree on a discounted price and both have something to gain, i don’;t know why an option couldn’t work.
But maybe there are reasons either party would not want to do this..
I don’t see a bank doing this from my experience. I have had a few people try this when I was heavily involved the answer was always a resounding no however, they will do portfolio loans on the hard to move stuff sometimes at better rates than availble to the public. But as a general rule they don’t like to make loans on their own R.E.O. inventory.
“..they don’t like to make loans on their own R.E.O. inventory”
frorgive me but i lost ya there.. Even assuming a buyer capable of a 100% cash sale, must a lease option be considered a loan?
in any case, perhaps this is the right time to modify the structure of what’s commonly known as a “lease-option” and invent a new type of sales vehicle.. something that takes responsibility for the property off the lender’s hands without booking an actual sale and therefore a low-comp… while locking in a fair sales price.. along with a few other minor advantages.
Just to humor you, without taking anything else into consideration, and there are a lot of considerations as to why your idea is a bad one…
But if one is capable of cash, why would one be interested in paying an inflated price over time for the property when he can get a cash discount and refi out for equal to or an overage of his principal once the deal closes.
yeah.. humor me, please
Aside from the numbers and the wisest investment options, I’m just playing with one idea right now:
How best to approach a bank that, for various legitimate reasons, is very reluctant to dump it’s REOs right now.. today.. in current conditions where property values are falling fast.
No bank is reluctant to dump it’s R.E.O.’s maybe reluctant to drop price but not reluctant to dump. I would contact whoever is holding the title, the sooner the better after they have acquired it and fax them an offer. If they can net more from the offer versus holding it and going through the motions of cleaning, listing, and watching it accumalate book value. You have a good chance of being an owner. The most important number is the net.
Ex: If they take a property back for 500k and a Realtors BPO suggests it’s worth 300k and once the deduct commission, maint., and other expenses it may have a net value of 200k if you offer 250k you may earn the prize. The example is simplistic and every lender has their own formula. But the sooner you get too it the better. Because once they start putting it in the pipe it’s hard to get it ut.
‘Since January 1, 2007, a total of 29,696 California properties have been returned to the lender for an astonishing total loan value of $12 Billion. This is unprecedented.’
By comparison, the annual California State budget is $146b. Gulp!
http://www.ebudget.ca.gov/Revised/BudgetSummary/SUM/8867193.html
GS, Keep in mind the whole $12 B does not diappear. I am seeing the secondary lenders lose the whole 20% seconds ($2.8 B), but the first loans are settling out for $.75 on the $1.00. So only about $3 B of that is actually lost. Plus another 10% for carry and repo costs ($1.2B) So $7 billion? Oh, wow, that is over 50% lost in principal….and no return on the $12 B, which they expected 6% a year ($720 M). OK, Senator Dirksen, a billion here a billion there and pretty soon we’re talking about some real money.
Bunker was a Billionaire when there weren’t many…
“Foreclosures now represent 16% of all new and resale home sales in the state”.
And just think, the housing bust is just starting. 16% today, 25% by next May.
And the California Association of Realtors still denies there is a serious problem in Cali, the Golden State.
The state needs a new motto. What’s the Greek word for “I have lost my ass”.
How about a bad latin translation
ego defluo meus puga pyga
Yes I know the verb backwards >; )
Lost or take it in
‘We’re still in a period of settling. The new home market is trying to figure out where that balance is between pricing and sales.’
It’ll be hard to find that balance if they keep blithely building into a bust.
“The number of defaults recently increased to 401, a rise of 33 percent from the 301 in the fourth quarter of 2006.”
Real estate defaults always go up.
When the shills start talking all realistic like, all of the sudden…
“‘It’s going to be another year-and-a-half before we see stability or growth,’ said Leslie Appleton-Young, chief economist of the California Association of Realtors. ‘We certainly haven’t bottomed out yet.’”
This morning on CBC they had a Realty Check piece teased with “Builders still building. Are they hurting themselves”.
I yelled at the TV, of course they are, but they have no choice. They borrowed money to buy land, pay impact fees, and put in infrastructure. They have two choice: build and lose a lot, don’t build and lose it all.
I saw that and had the exact same reaction! They DO have to keep building, but what they are not getting is that they can build smaller, more affordable houses that people can actually afford to buy. They need to re-evaluate the value of those lots and keep the total package at about 25% land to total value ratio. For Manteca, (where the story originated), I would guesstimate lots should be worth about $25K, so they should be building homes in the $200,000 price range which would be in line with median household income for the area.
If a builder doesn’t build, what happens to their income stream? workers? They have to keep building.
Unfortunately, some of their previous land and material costs were too high to make the house ‘affordable’. After all, there was so much demand for both that the prices for both went thru the roof.
But slowly the price points may come down to a reasonable level.
good thing they didn’t do anything stupid, like spend their excess cash or even borrow money to buy back their shares at high valuations!
Yes and No. Master planned subdivisions and the infastructure beneath the ground is often laid out years in advance of actual construction. Changes as you suggest may be as impossible and more costly than the original baked-in losses due to a bust.
What many people don’t realize is that at the end of a real estate boom banks, eager to get business, make many poorly structured, non-recourse construction and development loans. They lend the builder all of the construction costs (hard and soft), all of the interest, and even some of the anticipated profit. The builder, in effect, makes money by building, and the lender gets stuck with the finished product.
The same apparently happens in the LBO market (toggle bonds, covenant-lite loans, etc.).
i am spitting nails…just got back from town’s economic development mtg. they want to a build big box and affordable housing. i actually told them all that housing will be affordable for savers very shortly. no need for 80% of median crap. anyone know anything about ‘1000 friends’ or some such housing org?
“1000 friends” gets a ton of google hits.. just pick a State.
In Virginia Beach there is some Workforce housing crap. The numbers were something like, current median household income is $60K, current median selling price is ?$500K? … so they want to carve out some tiny boxes in a new development and mark them around $150-$200K so firefighters and teachers can afford houses. It’s a load of BS, and the sheer numbers for the neighborhood are insane… most of the new neighborhoods are like a monopoly board, with everything stacked on top of each other. It’s dumb. But the real kicker is this mortgage ad that I saw in the paper today. I’m going to share it. Definitly.
Slow sales are not the only challenge to getting supplies in better balance with demand. At last count, there were 29 housing developments going in the county, up from 14 a year ago. Builders are going ahead ….
- We have a touch of ‘Vegas’ here in California … we are not afraid to ‘Double Down’.
“It couldn’t go on forever, and home prices and sales have come back down to earth. Last month, the median sales price of new and used homes in Shasta County was 5 percent below what it was in May 2006.”
Wow, that 5% reduction sure was a huge fall “to earth”, just wait till these whiners see what a real crash looks like.
Seriously…prices tripled and a 5% cut after the 200%-plus increase is “back down to earth”?! The people who wrote, and published, this garbage truly deserve the hard landing that is coming for them.
‘I think I am seeing a lot of investors looking but not feeling the time is right because we have not reached rock bottom,’
Like these so-called “investors” are a reliable source for the pulse of the market; most of them are bagholders that will soon turn in the keys to their other properties bought during the boom times.
When you no longer hear of people “investing” in homes, then it will be a more sane time to buy.
It will be a really sane time to buy when you hear of people who say you are crazy to buy a home, much less to invest in one.
BTW, this was the case the last time I bought…
When the sheeple try to persuade you not to buy… start shopping. They still say buy… so its not yet time.
Mortgages are still too easy to get. I’m waiting. Patiently…
Got popcorn?
Neil
“Edward E. Leamer, director of the Anderson Forecast at UCLA, said housing markets are probably weaker than statistics suggest because more homeowners would like to sell but have decided to wait out the slump.”
This always happens. What is different this time is that inventories continue to increase right into the bust (normally they shrink for the reason Leamer cited). This suggests that many who would rather not sell need to sell. The rising tide of foreclosures and news of massive increases in REO provide further evidence on this point.
“This suggests that many who would rather not sell need to sell. ”
During the last downturn, sellers could afford to wait it out because they had a fixed loan. Adjustable loans were a small segment of the market so folks just hunkered down and weathered out the storm.
What’s different this time is the amount FBs that used ARMs to get in the door. Subprime/ Alt A, it’s all the same. Those resetting loans pretty much mean people have to sell or toss the keys in the mail.
Looks like you and I had the same thought, but you were a little quicker to post.
Yep, the difference between this bust and the previous busts is the rampant use of ARMs (of all different varieties). During previous busts, people had fixed rates and just did their best to hold on and wait out the bust. This time, their mortgage payments keep going up and many simply can’t hold on. It will be interesting to see if this fact makes the crash happen quicker this time.
During previous times even those who busted were still likely more qualified by traditional lending standards. This bubble was filled from the hot air produced when the lending standards were reduced to fogging a mirror.
Good point. I was thinking about the type of instrument and completely forgot about the quality of the underwriting
The big difference is HELOC money that did not exist last time around. The pain will not be limited to recent buyers but to lon-standing homeowners that destroyed any equity in their homes and are paying for the “lattes” in 30 years.
yep, previous times there was a negative stigma to taking money out of da house. The goal of ownership was to actually be an owner and be able to burn the mortgage papers and owe nobody nothin’.
That was before Liareah and Applebrain-Young became the joint chiefs of the cult of the dumasses espousing Debt = Wealth and looked down their seriously long noses at those who would strive to live debt free.
They were really yukkin’ it up there for a while… bet they’re lookin’ for a place to hide out the coming red tide of FB’s.
“‘It’s going to be another year-and-a-half before we see stability or growth,’ said Leslie Appleton-Young, chief economist of the California Association of Realtors. ‘We certainly haven’t bottomed out yet.’”
LOL! so much for your moniker… Lets ask LAY what she said 2004-2005? what ever happened to ….the high demand in California and high paying jobs and this and that which was going to keep prices high and go higher in the future. The so called economist for CAR doesnt talk about the exodus of people and jobs out of the state. What a tramp! Eat crow LAY!
Sorry if this has been discussed in a different thread. Bernanke today says:
“If inflation expectations are well anchored, changes in energy (and food) prices should have relatively little influence on ‘core’ inflation, that is, inflation excluding the prices of food and energy”
I interpret this as:
“If we believe that there is no inflation, then there is no inflation”.
Does anyone else see it that way? What a great way to keep inflation under control! Just hire Tony Robbins!
Just think positively…and close your eyes…and repeat “There is no inflation, there is no inflation.”
let’s go and pray for no inflation like realtors.
It’s a complete joke that bernanke says that inflation is all about expectations, IT’S ALL ABOUT ALL THAT DAMN MONEY AND CREDIT YOU’RE CREATING!
Whip Inflation Now
From Agora:
The Fed is unhappy with the inflation rate. And guess what? They’re blaming you.
“Although inflation expectations seem much better anchored today than they were a few decades ago, they appear to remain imperfectly anchored,” Ben Bernanke glurbled yesterday in a speech before the National Bureau of Economic Research. “Undoubtedly, the state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability.”
Let’s unpack that a little: “Inflation today isn’t as bad the ’70s, but it’s not perfect, either. Today, public fear of rising prices is causing inflation of the money supply. That makes it harder for me and my friends to control prices and the economy.”
We’ve already seen record-high fuel and food prices this year. But why should that bother anyone? For now, Bernanke and company are sticking to the “close your eyes and picture lower inflation” technique.
One man’s trash is another man’s treasure.
Hedge funds profit from subprime bets
By James Mackintosh in London
Published: July 10 2007 22:16 | Last updated: July 10 2007 22:16
Hedge funds betting on falls in bonds linked to US subprime mortgages raked in returns of almost 40 per cent last month as they profited from the crisis that has engulfed rivals.
http://www.ft.com/cms/s/29f1691c-2f20-11dc-b9b7-0000779fd2ac,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
Well, getting rich off other’s misfortune is all part of the game!
That’s the way Wall St works. Fools fell for the scams the big boys set up, mergers to raise stocks, stock options sold, stocks take a dive as poor shareholders wonder what happened. Home buyers stand in line for big houses with “easy” credit as the big boys take their fees, bonus, etc and then easy credit disapears with home buyer wondering what happened. It’s tough game and the big boys are always one step ahead as they are the ones “who” sets the rules and know when the game is over, taking their profits and waiting again when the time is right for the fools once again will appear with open billfolds in their mouths running for the next great deal.
Darnit, howcome we didn’t do that?!
Because you are not rich enough to invest in hedge funds.
So, we couldn’t have done what this hedge fund did, directly?
Exactly - what, precisely, did they do? Anyone know better than the rest of us what bets they’re making?
I have no idea, I’m just a low end real estate investor, I was hoping someone here could enlighten me.
Whatdid they do? They were on the other side of the table for over-the-counter derivatives and other interest rate swaps, etc. based on mortgage performances and ABX index etc.
They shorted. We talk they uhm, walk. Why pay someone a commission: It is not a secret :
short stocks
buy puts especially where trend is your friend (my favorite).
Buy futures options (more complex account)
You can also buy ETFs: SRS was up 5% and SKF was up something similar today. ( These are expensive $85 and $75 per but I own them in my 401k so min trade amounts are waived). They are 2x inverse REIT and Financials indexes so be prepared for volatility. They’ll shake you more than Elvis.
“We talk they uhm, walk.”
Well, I guess they walk and they talk — to those at the top of the financial food chain who can offer the latest greatest information on which to trade before the sheeple or even half-interested bubble bloggers have even the faintest clue.
Kewl. I wish I would have known about SRS a few months ago. I’ve been shorting individual builders - been doing pretty well but it’d be nice to do it through a combo fund like that. I’m afraid it may be a little late though - most of the damage is baked in to the homebuilders prices I’m sure.
Funny thing is - when looking at writeups on SRS - I see our very own Mike Larson has one mentioning it on MarketWatch!
http://tinyurl.com/ywgd3p
“Shorting” the HB is NOT how the hedgefunds banked the subprime debacle. They have the big money to underwrite derivative contracts based on index performances, etc. This board is funny, on one hand, we all believe the derivative tower is a dangerous menace, then we believe the only avenue available to billion dollar hedge funds is to short stocks. Well, those derivatives used by banks, insurance companies, and bond funds need counterparties. Guess who’s the counterparty?
‘We keep looking for some blue sky, some sign that the market is improving, but we just don’t see anything out there.”
i could say the same thing from a housing bear view.
is he saying he wants to keep selling mcmansions for 850K.
is his blue sky my hell?
hey mr. builder, can you say lease pendings?
This one is for GS……….Sorry it is a bit long.
General Motors’ Market Leadership Has Come Courtesy of the Plunge Protection Team
by Eric Englund
DIGG THIS
Two hedge funds, managed by Bear Stearns, are on the verge of liquidation due to making highly leveraged bets on securities backed by subprime mortgages. Bear Stearns’ woes have investors worried that any negative developments in the credit markets will also drag down the stock market – which has become quite volatile since the bad news, from Bear Stearns, surfaced. To be sure, the ripple effects of the subprime-mortgage implosion will continue to roil the credit and stock markets. But is the subprime-mortgage bust truly large enough to drag down Wall Street, and its precious Dow Jones Industrial Average, with it? If the recent performance of General Motors’ stock is an indicator, the Working Group on Financial Markets (aka: the Plunge Protection Team) is answering this question with a resounding “yes.”
As Karen De Coster and I asserted in our essay General Motors, Market Engineering, and “Confidence” Protection, the Working Group manipulates General Motors’ stock in order to prop up the Dow Jones Industrial Average so as to maintain investor confidence in the stock market, Wall Street, and the economy in general. Indeed, based upon our assertion, General Motors’ stock definitely has big shoes to fill. In light of GM’s stunning performance, during the exact period of Bear Stearns’ hedge fund catastrophes, the “General” is strutting up and down Wall Street as if he is Sasquatch…with members of the Plunge Protection Team peering from behind the curtain in delight.
This past quarter – April 1, 2007 to June 30, 2007 – has been a barnburner for GM’s stock. Through this period, the Dow Jones Industrial Average was up by 8.5% while GM was up by nearly 23%; talk about market leadership. During the trading week of June 25th, when Wall Street was really feeling the heat of Bear Stearns’ meltdown, General Motors’ stock closed the week up by 6.6%. This isn’t just leadership; no, the General is fearlessly spearheading the stock market’s charge upward. And it gets even better; for during this hard-charging week, GM’s stock hit a 52-week high which tallies up to nearly a 43% gain from its 52-week low. General Motors’ stock, most certainly, closed this last quarter with a magnificent performance that served to steady a jittery stock market.
Interestingly enough, this magical week began with an upgrade from a Wall Street brokerage powerhouse. On June 25th, Goldman Sachs analyst Robert Barry put out a “buy” recommendation on General Motors citing his rather dull insight that “GM can make a compelling case to UAW members that material wage and benefit cuts are needed…And we suspect members and retirees are increasingly amenable to such cuts.” Although this won’t go down as an awe-inspiring recommendation, the reasoning is much less important than putting the prestige of Goldman Sachs’ name behind General Motors’ stock. And this is where, in my opinion, the heavy hand of the Plunge Protection Team has been exposed yet again.
So let’s connect a few important dots here. For openers, the four key members of the Plunge Protection Team (which reports directly to the President of the United States) are the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the Securities and Exchange Commission, and the Chairman of the Commodity Futures Trading Commission. Henry M. Paulson is the current Secretary of the Treasury. Before being sworn in as the Secretary of the Treasury last year, Mr. Paulson was the Chairman and Chief Executive Officer of – you guessed it – Goldman Sachs. Thus, Henry Paulson was once the aforementioned Robert Barry’s boss. In light of this, it is highly plausible that Goldman Sachs’ buy recommendation – regarding GM stock – was a political favor to help the Plunge Protection Team do damage control on Wall Street.
Now, let’s look a little deeper into the company whose common stock Robert Barry so uninspiringly recommended to American investors. Upon reviewing GM’s December 31, 2006 fiscal year-end audited financial statement, I certainly can see why Mr. Barry was so bland. To analyze General Motors’ 12/31/06 FYE financial statement is to understand that this once great company is likely heading towards bankruptcy. Here are the gruesome details:
* GM’s “as stated” net worth is negative $5.4 billion
* By fully discounting intangible assets, which includes deferred tax assets, GM’s net worth is arguably negative $48.5 billion (refer to Note 13 of GM’s 12/31/06 financial statement)
* GM’s as stated working capital is negative $3.7 billion
* By fully discounting current deferred tax assets, GM’s working capital drops to negative $14 billion
* General Motors’ total liabilities amount to a staggering $190.4 billion
* GM’s net loss, in 2006, was nearly $2 billion
In spite of the “General’s” ill financial health, Robert Barry proclaimed a 52-week target price of $42 per share. This target price was simply pulled out of thin air. Without earnings and without a tangible net worth, it is impossible to apply basic analytical tools – such as a price-to-earnings ratio and a price-to-book-value ratio – in order to derive a rational target price-per-share for General Motors’ common stock. Since most “investors” are financially illiterate, it is easy for Wall Street analysts to get away with making such absurd proclamations.
This is not to say that Robert Barry didn’t comprehend the gravity of GM’s financial condition. When Barry stated that “GM can make a compelling case to UAW members that material wage and benefit cuts are needed” he clearly understood the grim reality of General Motors’ financial situation. In essence, Barry’s “buy” recommendation is based upon the bizarre logic that although GM’s acute financial weakness may be a “strength” when bargaining for concessions from the UAW, that investors should ignore this extreme financial fragility – but the UAW should not – so go out and purchase GM stock today. After all, this company just may survive if its negotiations, with the UAW, go exceedingly well. And what if the UAW doesn’t give an inch? Heck, let’s not spoil the convincing case (wink, wink, nod, nod) made by Goldman Sachs’ star auto-industry analyst.
There is little doubt that Robert Barry “took one for the team”…the Plunge Protection Team that is. Typically, a “buy” recommendation is accompanied by exciting and positive developments regarding the company being analyzed. All Barry could muster was tortured logic intertwined into an insipid endorsement of a company teetering on failure. But the deed was done. Goldman Sachs’ endorsement, of GM, gave the Plunge Protection Team the cover it desired to continue pushing GM’s share price higher; thereby providing market leadership investors yearn for when instability is afoot.
As I see it, the intense manipulation of GM’s stock indicates that the Plunge Protection Team is frightfully worried about the damage subprime mortgages will inflict upon Wall Street. In the end, it is quite ironic that General Motors’ financial condition really isn’t substantially different relative to the financially-strapped individuals who are defaulting on the very mortgages that toppled Bear Stearns’ hedge funds.
Excellent post Luvs. GS will be vindicated on his assertion of the PPT. I think even the most skeptical knew all along. Look, GM is in the tank. Saturn is supposedly a non-money maker, they are no No. 2 in the world and the only dept. making money is the lending side. Heck, why do they still make cars? Just go into the finance business. Well, here comes the truth. I always knew something was up because even though I don’t run with Gates and Buffet, no one I know buys GM stock directly. Sure, they have retirement plans and so do I. But no one, no one I know is saying, “Hey, lets buy 1,000 shares of GM and hold on for the next 30 years.” What crap that this stock is worth anything above zero.
“GS will be vindicated on his assertion of the PPT.”
How can I possibly not be vindicated? Look at today’s market action as a case in point. A few major earthquakes hit the financial market (sliding dollar and announcements of subprime downgrades by Moody’s and S&P to name a couple) and the headline stock market indexes barely responded by historical standards.
Market volatility is controlled within narrow bands in a similar manner to the flow of the Mississippi River. In normal conditions, the Mississippi flows within the confines of man-made levees. But in severe floods, levee breaches (the hydrologic analogue of uncontained systemic risk) prove extremely destructive. And those who live in the flood plain believe the risk is contained until they learn in horror that it isn’t.
“And those who live in the flood plain believe the risk is contained until they learn in horror that it isn’t.”
Just like all those smart shoppers who bought homes in Natomas. These are folks who can potentially be wiped out by 2 floods once - ouch
Wouldn’t you love to be a fly on the wall in this meeting tomorrow?
Hedge fund hearing set
House panel to hear if funds pose risk to economy and financial system.
July 5 2007: 4:51 PM EDT
WASHINGTON (Reuters) — The U.S. House Financial Services Committee said Thursday it will hold a July 11 hearing into systemic risks to the economy and the financial system posed by hedge funds.
Chairman Barney Frank, a Massachusetts Democrat, said in a statement that senior officials from the Federal Reserve, the Treasury Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission are scheduled to testify.
The hearing will focus on efforts to monitor hedge fund risk being carried out by members of the President’s Working Group on Financial Markets, an inter-agency committee within the Bush administration.
http://money.cnn.com/2007/07/05/news/hedge_hearing.reut/?postversion=2007070516
be a fly on the wall? no thanks, I’m not stopping into the teleporter with the house fly. I think I’ll stay human and watch the streaming media circus.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr0705074.shtml
Excellent!
“…it is highly plausible that Goldman Sachs’ buy recommendation – regarding GM stock – was a political favor to help the Plunge Protection Team do damage control on Wall Street…”
This cannot possibly be legal, CAN IT?
What is this legality of which you speak? Who would prosecute the crime? The DOJ? Isn’t that just a wholly owned subsidiary of the same folks who run the PPT?
RICO. One size fits all.
GoIrish, I am in agreement with you wholeheartedly (and I won’t hold your name against you).
It’s easy to like the Irish as long as they keep losing. What is it, 5 in a row now?
When you beat us 11 in a row like we did to you before Petey arrived, you can can gloat!
Excellent point. Funny to think tht the DOJ once had a respectable reputation.
Nonsense. The Dow is not a capitalization weighted index like the S&P500. It is a price-weighted index. So, more expensive stocks constitute proportionally larger weights in the index calculation. Of the 30 DJIA stocks, exactly 25 are pricier than GM (only DIS, INTC, MSFT and PFE are cheaper). If you want to prop-up the index, you prop-up the most expensive stocks … not the dogs. Five stocks are currently selling for at least twice as much as GM. If the PPT is propping up the markets like this … they’re pretty stupid about it. I love conspiracy theories as much as the next guy, but if there’s any conspiracy here it’s that GS and it’s prime customers are front-running the analyst upgrade.
I just checked the futures on money.cnn and the Dow is down 155 points at 7:00 EDT.
Update on my situation. Have been renting a recently puchased (for 1.0-M) house in Manhattan Beach for 3,150/month for the last 11.5 Months.
Owner is bringing by realtor tomorrow. He wants to sell, is afraid of market. Has asked twice if I want to buy (”no”).
Anyway, wife is pissed, have to find new house before school for the kids starts. Pain in the ass moving after one year in a place.
The housing bubble sucks.
have him pay for your move
“or things may get seedy” so to speak
Can you stay if he can’t sell? You’d be doing him a favor; ask for a rent reduction and threaten to move. I’m sure he’s already running a negative cash flow unless he financed less than half of that $1M.
Manhattan-Hermosa-Redondo may be among the last to fall, but fall they will.
With the average mortgage payment in the Bay Area hovering a little over $3,000 a month, an additional $600 for taxes and about $200 for insurance each month it isn’t suprising the average family now needs to bring home about $135,000 a year to own a home here.
When things go really high….you always have alot further to travel down to find bottom…so when Leslie Appleton-Young says we still haven’t found the bottom of the market my response to her is: Be patient…..it’s there…..it’s just alot further down than you want it to be.
I guess she should have thought of that when she used all of her scare tactics to get people to sign up for more mortgage debt than they could afford long-term.
Maybe if we didn’t have politicians talking out of both sides of their mouth about affordable housing and at the same time relishing every increasing tax revenue from skyrocketing property tax revenue and commission based Real Estate agents making ever more money for not really doing any more for it we wouldn’t be in this mess……ah nevermind….the ship is taking on water and the orchestra is playing….anybody want to waltz?
Sorry, no time; I’ve still got to rearrange all of the deck chairs.
I saw that and had the exact same reaction! They DO have to keep building, but what they are not getting is that they can build smaller, more affordable houses that people can actually afford to buy. They need to re-evaluate the value of those lots and keep the total package at about 25% land to total value ratio. For Manteca, (where the story originated), I would guesstimate lots should be worth about $25K, so they should be building homes in the $200,000 price range which would be in line with median household income for the area.
Ummmm, you haven’t priced homes in Manteca lately, with all the commuters. master planned community being built right now about $450k.
ah yes.. Manteca. I remember many years ago..driving alongside it on the freeway and asking “Whew! ok..Who dropped a cookie?”
Once we realized what was happening, it was windows-up until further notice. Is that sweet potato processing plant still in operation?
What I always smell down the 99 are the dairies- bleh
dairies are another thing.. the swarms of flies can and do infect properties miles away..
anyone who buys in the valley should first rent for a while to fully grok the flavor of that particular area.
Lived in Manteca for 2 months and that was enough. I looked at the homes being built back in 2003 and by the time I looked at the models, the one I would have liked was gone (300K at the time). I couldn’t understand at the time how these houses where selling when you had to drive 10 miles to Modesto or Tracy to go to a mall.
They are now going for around 500-600K. They must have built a mall.
Manteca is a poor man’s Tracy.
Tracy is a poor man’s Livermoore
Livermoore is a poor man’s Danville
Danville is a poor man’s Oakland.
…
… and Oakland is a poor man’s San Francisco.
… so now I’m thinking about the poor men in San Francisco.
There’s something about the prevalence of the homeless in SF that makes that analogy really frightening.
Housing Market Downturn Query: Your Email Replies.
Interesting info from the trenches.
http://www.cnbc.com/id/19697791
From the above article, here’s a priceless email:
If I lived in Phx, I would like to meet Karl. Does he really exist?
Beat me to it. Karl is an a$$hat. He truly doesn’t get it. Prices are still waaay too high and sellers will not chiop 50% off. Get a freakin clue, karl.
Beat me to it. Karl is an a$$hat. He truly doesn’t get it…
Karl might not get it, but he is getting it.
Makes you want to find out what houses Karl is selling and take dumps in the living rooms. That’s what I think about your “sellers” — if it ain’t 50% off, it ain’t for sale. You’re just trolling for the last of the suckers.
I recon folks who do not already own, Have a 720+ FICO and have a top 5% income in their area and are looking for a home to buy are a rare animal these days. EZ Credit is quickly going away, and suckers may still bite, but will be turned away by banks in increasing numbers moving forward. I believe 50% off is a pretty good number in most areas to bring affordability back inline with incomes.
What a strange comment - “sellers are beside themselves with grief and sorrow…”. Why are they in this position? Is
Guido holding a gun to their head, forcing them to sell? If selling is so stressful, why don’t they just stay there?
Oh, maybe it’s because these sellers are actually FLIPPERS who are getting their a**es handed to them! I feel SO bad for them now!
“the same buyers are just standing there with their thumbs in their ears like imbeciles waiting for the invisible bottom to hit them in their thick skulls!! It is absolute insanity out there!!”
Even at the 5, 10, 20% discounts we’re seeing, these houses are still 20-30% overpriced. That’s why my thumbs are in my ears.
Wake up, Karl. Just because a seller MIGHT be able to sell at a 20% discount, doesn’t make it a good deal. Problem is, sellers need to do better than 20% to sell, they just can’t.
“buyers are just standing there with their thumbs in their ears like imbeciles”
How the phuc* did this guy last 20 years in sales with that attitude.. there’s just no way. I think maybe daddy owns the company and gives little Karl a job and paycheck while keeping him away from customers.
“And the true irony of the whole pathetic situation is the buying public’s reluctance to jump into this market and make the best home deals of their lives now that they have the selling public and homebuilders just where they want them - on their knees crying, begging, and pleading their broken hearts out!! My God, it’s unbelievable, Diana! Buyers have been moaning and groaning and complaining non-stop in past years about skyrocketing home prices and the greed of sellers and homebuilders, and now that these same sellers and homebuilders are beside themselves with grief and sorrow and are willing to do almost anything to sell their homes, the same buyers are just standing there with their thumbs in their ears like imbeciles waiting for the invisible bottom to hit them in their thick skulls!! It is absolute insanity out there!! The dreams of homeownership have been committed to the funny farm. It is now a field of tears.”
This guy, Karl, from the referenced article is a dimwit. He still doesn’t get it. There is no movement becasuse we either can’t or won’t pay 20% off 600K homes and sellers will not sell for less. They sure aren’t going into the 100-200K range, which is what we want.
Therefore, Karl, you dolt, you have no movement. I hope you never make another commission check as long as you live. Scumbag!
So, is Paul (another email from the link) one of the posters here?
“And from Paul:
“I have been a mortgage loan officer since 1992. Here’s what is going on in Chicago. Inventory is increasing everyday. I work in a community that had 12 homes in the 1.1 million and above bracket sell in the last 12 months…there are currently around 60 homes at this price point available in Elmhurst, IL…just five years of inventory. I just laugh when I see all the Wall St gurus who say we are close to a bottom in real estate…close? Again, five years worth of inventory on the high end homes.
“The people who are in my industry and are not delusional know we are far from a bottom. I expect home prices to continue to go down. I expect inventory to continue to increase. I expect for housing to go through a real tough time through 2009-2010. I also expect that what is going on with housing will ultimately trigger poor consumer confidence numbers and spillover to the entire economy. I expect a recession to occur…this is not going away anytime soon.”
Elmhurst? 60 homes above 1 mil in Elmhurst?
Elmhurst?
Yup. My daughter lives there. I’ve been thinking of moving there (and renting) to be closer to her and the grandchildren. As I’d been carefully monitoring the situation of million-plus homes in Arlington Heights (IL) for the last year (35 of them there), I also scanned the MLS for Elmhurst. At last count there were 60 — almost all new construction on teardown lots (which means they’re vacant — not lived in by rich people who can afford to wait forever to get their price).
Because Elmhurst has excellent schools and is an easy commute from downtown Chicago, it’s rapidly gentrifying — a very odd mix of homes and people of very different means.
“Builders are putting up homes in Sonoma County at a sluggish pace and don’t expect a turnaround until next year…”
HA HA HA HA HA HA….DREAM ON!!!!
This is gonna make the early 90’s CA crash look like an appetizer before the MAIN COURSE….
Builders are putting up homes in Sonoma County at a sluggish pace and don’t expect a turnaround until next year
I call BS on this. If you’re running a business and things are slow at the moment but you genuinely believe there will be a turnaround only a year from now, why would you even change anything?
PPT lowered the Dow 148 today.
Wonder what their plans are for tomorrow?
PPT does not lower the Dow. But some times, they find it overwhelmingly difficult to make the Dow go up.
Brad — You aren’t per chance familiar with the inner workings of the PPT, are you? Because your name reminds me of someone I know who used to work at the Treasury Department (well, in fact, it is the name of someone I know who used to work at the Treasury Department…). Just wondering…
Forgot to mention one thing: The PPT cannot keep markets from eventually correcting to fundamental value, or otherwise repeal the laws of economics. But they can do much to gunk up the markets in order to keep a crash orderly and spread out, instead of those unpleasant days like Black Monday of 1987 when the gap between bid and asked prices went so wide that liquidity siezed up entirely precipitating a 20% drop. My guess is that today’s various financial earthquakes would have at least merited a 2% correction were it not for plunge protection measures.
Yeah, well the PPT might get a real test tomorrow courtesy S&P.
‘It’s going to be another year-and-a-half before we see stability or growth,’ said Leslie Appleton-Young, chief economist of the California Association of Realtors. ‘We certainly haven’t bottomed out yet.
Maybe I’m hallucinating. Didn’t this very same woman, just a few months ago, go on record saying that prices weren’t going to fall at all in California?
I must’ve taken the same ’shrooms as you….
Does anyone know if inventory has risen in Venice…I just saw four for sale signs in a row on one street, not sure if that means anything for the area generally.
Does anyone know if inventory has risen in Venice…I just saw four for sale signs in a row on one street, not sure if that means anything for the area generally.
Even with owners beginning to rent, that in and of itself is becoming a risky decision. We had one owner openly admit that the house will most likely go into foreclosure, but still insisted on first and last months as a deposit. Take a hike!! They are not alone. This is just a horrible mess in SoCal. What a terrible experience living in LA. Love the weather, hate the living conditions. Had the unfortunate timing of moving out here in Aug 2002. I do not trust a private owner renting a house, and living all stacked up in a complex is just such a crappy alternative. This could all very well be like this in every major city, I just happen to live here in LA when all this started. I am even having issues with real estate agents/realtors who are just so in denial to the point of not wanting to be party to offers that are more than 30% off the asking price. Could they please go back to class and understand the basic principal that higher interest rates will lower the purchasing power of the exact same borrower they were screwing over two years ago. Also, they are just too greedy still. I used to sell real estate back in the 80’s in New York State - but couldn’t stand the feast and famine cycles - but out here, they are really inexperienced and have very little regard when it comes to someone else’s wallet. What I would really love to know is how many transactions involved a real estate agent/realtor who brought and sold property for personal gain and not between two other parties. What if they limit this type of ‘professional’ activity - would there have been quite the hyperbolic pricing going on? What if they could only profit on their primary residences’ that they lived in for at least 24 of the last 60 months like the majority of people? I just can’t help but feel that the realtors themselves are way more of the problem than what has been looked at. Just my opinion.
I totally feel for you, it’s an awful market for a buyer here, and renting a little box with tenants above and below really sucks, but if I were an agent, I wouldn’t write an offer for more than 30% off list either…those offers are like 10-12 pages, it’s a fair amount of work by the time they get your signature, fax it out and file it, and the chance of getting the thing accepted in this market are really low. I don’t know where you are looking, but as I posted above, it seems like there’s more for sale around Mar Vista/Venice, I even saw a few price decreases for under 750K, small 2 br. houses but it’s a start. If it were me, I would give it a time limit of 2 years max, then just buy the best house I could afford.
Sideliner,
If it were me, I would give it the same simple rent/own analysis you have obviously done to date, and wait out the timetable profiteers. Don’t buy until it becomes less than renting.
It will.
10-12 pages which takes about 10 minutes to fill out on their little template and then have the buyer initial each page? If this is considered a lot of work, then it takes a genius to work at McDonalds.
In Socal, you need to rent from someone who bought before 1998. They are cash-flow positive. Oh, and enjoy paying 30% of the equivalent mortgage payment of your neighbors. So far this year, prices have fallen 50K in comparables in this neighborhood. Far more than a year’s worth of rent. Throwing money away on a depreciating asset is for morons.
I am not so sure. I was talking to a coworker the other day and mentioned how my mom owns her house and paid it off like a normal person. And how I thought she should have sold a couple years ago and rent until prices come down. My coworker then asked if she ever took equity out? I said no, she paid off the house, what would be the point of taking on a loan? And she said no again, did your mom take equity out? I don’t understand what people think equity is exactly at this point. I couldnt believe when i heard people could take a loan out on their house based on a ficticious value.
HELOC - Don’t call it a loan
Trust me, the banks are going to clamp down on that real hard real soon now.
I have neighbors, probably in their 70s, they’ve refinanced and pulled money out about every year, the husband says “he doesn’t like to leave equity sitting around.”
“he doesn’t like to leave equity sitting around.”
Now that’s funny.
ask him how he reinvests the money .. might be interesting.
Paying 60% less than a mortgage for a home, and stashing that 60% in a savings account - that’s “building equity”, isn’t it? Next time you talk to a realtor that tells you renting doesn’t build equity tell him/her “it DOES, it builds SAVINGS ACCOUNT EQUITY”.
yeah well, don’t worry about because this deflating is going start happening a whole lot faster now
http://www.marketwatch.com/news/story/sp-finally-says-subprime-mostly/story.aspx?guid=%7BDFBA4993%2D031E%2D4E88%2D8F56%2D5B08FD9AA07D%7D
S&P Killed the Subprime Beast today, carnage will ensue for the rest of the week.
Neil, you better have a lot of popcorn ready pal……..
Dollar tumbles to record low vs euro on subprime fear.
TOKYO, July 11 (Reuters) - The dollar steadied after tumbling to a record low against the euro and stuck near a 26-year trough against sterling on Wednesday as investors feared that growing problems in the U.S. subprime mortgage market could spread to the wider economy.
The dollar’s broad decline accelerated early in the Asian session, especially against the low-yielding yen, as investors cut back on their exposure to higher-yielding but riskier assets.
http://www.reuters.com/article/topNews/idUKT6700220070711?rpc=44
“growing problems in the U.S. subprime mortgage market could spread to the wider economy.”
To quote Russ Winter, “the containment is spreading”!
Sorry if this showed up on another post; this is the first I’ve seen of it:
Moody’s downgrades 399 mortgage-backed securities
By Alistair Barr
Last Update: 4:41 PM ET Jul 10, 2007
SAN FRANCISCO (MarketWatch) — Moody’s Investors Service said late Tuesday that it downgraded 399 residential mortgage-backed securities because of higher-than-expected delinquencies on the underlying home loans.
Massachusetts set to announce $250,000,000 in grants to subprime borrowers facing foreclosure: http://www.boston.com/business/personalfinance/articles/2007/07/11/state_to_refinance_troubled_mortgages/
(Is that the sound of the final *pop* of the bubble in Massachusetts? Anyone want to finance a subprime mortgage in the Commonwealth anymore?)
The housing market is one of the most complicated parts of the economic platform that is available to us. There are multiple variables that we have to look at. First off, there are simply technical reasons why the housing market needs a rest from the double digit value increases year after year. For the good of all, we need this to have a correction. That will obviously help the potential buyers and will also help potential renters (as the rent is often established by comparing a rental rate to other options such as the costs to own a home).
Another component that is largely considered is the mortgage market, both by way of the rates and the foreclosure rate and what is a discounted sales price is created by the lendes. With lower rates, you obviously have a greater affordability for a higher priced house as the mortgage payment is lower. The lenders (most recent the subprime market and the increase in the adjustble rate mortgages) have helped caused problems for themselves along with glut of properties on the market visa via foreclosure proceedings. This will also help reduce the value of houses by way of supply and demand. The mortgage market needs an overhaul to help avoid this in the future.
One other important component is the press. The press helps the consumer (or potential house purchaser) feel the need to pay the price and to hurry and do so, or that the sky is falling in the housing market and wait or lowball the sellers.
In my home area of Beverly Hills and likewise in other high end areas in southern california, I can say that multiple high offers are in the majority and the bubble bursting does not seem, at this time, to affect many of the s. californial areas.