Bits Bucket And Craigslist Finds For August 3, 2007
Please post off-topic ideas, links and and Criagsist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I am awaiting another phoney goeverment number today, to go along with the consumer confidence index. It will be amazing to see ‘positive job growth’ when I blind man can see that the housing bubble bursting has drained 100,000 + jobs from the economy.
I posted this over in the weekend topics thread, but it certainly applies to your post, Sniggle. Here it is:
Analysts. Highly paid cheerleaders who figure out ways to make stocks appear cheap
Bad news. Events that cause the Federal Reserve to cut interest rates so that share prices go up
Bears. Sad, lonely people who don’t appreciate why equity prices invariably move higher
Brokers. Specially-trained relationship managers who convert mere mortals into super-bulls
Bulls. Well-bred equity investors
Bond market. The place where stock market bears are sent out to pasture for their wayward views
Cash. Realized gains that equity investors spend on fancy vacations and assorted luxury items
Dividends. A positive influence on stock prices
Economy. An irrelevant side show to what happens in the equity market
Fear. An emotion that bulls experience when they are not 100% invested
Federal Reserve Board. A group of public officials who do their best to ensure that bulls are happy
Fundamentals. Anything that can help explain why stock prices rally
Greed. The only emotion that matters when it comes to playing the stock market
Hedge funds. Aggressive investors who use lots of leverage to ensure that stock prices eventually go up
Interest rates. A factor that occasionally serves as an explanation for why stocks rally
Leverage. The fail-safe strategy of using borrowed money to boost returns as share prices rise
Losses. The net result of selling short and listening to bond traders
Mutual funds. Investment vehicles that enable bulls to remain fully invested in the equity market at all times
Short-sellers. Dour individuals who scramble to cover bad bets as stock prices rally
Strategists. Highly paid cheerleaders who figure out ways to make stocks appear cheap
Wall Street. The place where bulls congregate and fawn over one another
I’ve never seen that before. Funny–and quite accurate!!
That was totally awesome, Palmetto. Thanks for the laugh!
Sniggle,
Yes, but if 95,000 of those people went back to Mexico, do we really have an unemployment problem? IMO, no, those that live here are busy working.
I had a talk with a realtor on Monday and her assumption was that everything was going to be OK once we get a new President. Of course there was nothing there to support the belief other than, “It can’t get any worse”.
Oh yes it can, just wait, we’re about to find out.
Lip
Moin,
funny BLS numbers….
The Birth/Death model is getting uglier month by month….
They are assuming that 26k jobs very created via the b/d model vs 21k in 2006.
for construction……
8k vs 4k
The major weakness in this model is that it is not able to get the turning points in the economy
The next revision should be the “mother of all revisions”
jobs in gov work(parasite) and “services”
the rest scked
gov work(parasite
Local rag ran a 3-part segment on public pensions here in Mazzholeland.
Work one day in the legislature and you’re vested.
Fired for any cause…you can immediately start collecting.
100% covered health care until you croak.
That’s 35 years of freebies for some toad who couldn’t make it in the private sector and had to rely on Uncle John to for a nepotistic job score.
Ya gotta say these people are lower than realtors.
Credit should be given where it is due. For example, government workers concerned about getting the numbers right came up with the “underemployment” concept and measure which is known to be more accurate. Politicians and the press prefer unemployment numbers anyway. Just bear in mind that humbled beancounters are not necessarily in a position to call all the shots no matter how much they appear to be in charge of this or that paper empire.
hd74man — “Work one day in the legislature and you’re vested.”
That is appalling — impossible for me to imagine. Even in the federal government, I understand that it takes (or took) 5 years to become vested in their retirement plan. I’m not hunky or hot — nevertheless, do you have any ideas how I can get hired by any such legislature for, oh, a week or so? Shucks, I’d even hang on for a few months or even a year or more, to get them kinda’ benefits. Mamma’d be proud, up there in her double-wide — I know she would.
I regret I didn’t run for office - and win, of course - years ago. What a scam!
OK once we get a new President
Yes with Hillary as Prez and Pelosi as Speaker of the House
it simply can’t get any better!
Hold on all you FB’ers.
The bleedin’ heart bail-out cavalry is on its’ way!
“Pelosi as Speaker of the House” yes, then we can have more of her expensive ’sleep over slumber parties’ to make them ‘feel good’ all the way to the poor house. If they ‘feel good’ it’s ok to sheer them.
Another explaination is those undocumented workers who lost their job recently did not get counted in the government data.
CNBC threw up a chart of housing starts to residential construction jobs. They were lockstep on the way up. Now housing starts are off 50%, but like 5% drop in residential construction jobs. Yeah, RIGHT!!!!
To be fair, job losses will lag starts. So if starts fell off a cliff 6 months ago and houses take 7 months to build you’ll see strong employment but it too will soon fall off a cliff.
Also, I know people in construction who are paid under the table and they’re certainly not counted in losses.
Lots and lots of 1099 workers in real estate. Many realtors, mortgage brokers, construction specialists and contractors, gardening services, interior designers, architects, etc.
Not to mention all the self employed Schedule C businesses, LLC’s, S and C corps and partnerships. If they go under no one notices. A whole lot of disappearing work that does not show up on unemployment figures because self-employed persons cannot claim unemployment.
From the WSJ, FINALLY a return to sanity?
Lenders Broaden Clampdown on Risky Mortgages
Jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records.
This worsening credit crunch threatens to put further pressure on the housing market, where prices are flat to declining in much of the country.
• The Trend: Nervous home-mortgage lenders are returning to more-conservative practices and are raising interest rates and cutting back on a category of loans between prime and subprime.
• The Issue: The worsening credit situation threatens to put more pressure on the housing market, where prices are flat to declining in much of the country.
• What’s Next: Economist Thomas Lawler said he expects the credit squeeze will make “the late summer home-sales season even worse than the dismal spring season.”
Lenders say they are being forced to raise interest rates and stop offering certain loans because mortgage-bond investors have lost their appetite for a broad range of mortgages considered risky. That includes those dubbed Alt-A, a category between prime and subprime that often involves borrowers who don’t fully document their income or assets, or those buying investment properties.
Lenders are tightening standards and “raising rates like crazy,” said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week. (Jumbo loans are those too large to be sold to government-sponsored mortgage investors Fannie Mae and Freddie Mac.) A Wells spokesman said rates are lower on loans made directly by the bank than on those through brokers.
The market for mortgage-backed securities is “very panicked,” Michael Perry, chief executive of IndyMac Bancorp Inc., another big lender, said in a message on the lender’s Web site yesterday.
Link
http://online.wsj.com/article/SB118609866621886776.html?mod=hpp_us_whats_news
With jumbo at 8% stick a fork in the sales of even modest homes in overvalued markets. Buyer’s will not be able to come up with 100k+ and closing costs to get it down to the conforming amount. Here in Metro DC tons of modest THs list for over 500k, so what was a starter, entry level 1st time home buyer purchase is now unobtainable. Sellers will be forced to lower it because people just cannot afford the jumbo rates!!
Count on the Government passing reforms to allow Freddie and Fannie to take on riskier and more expensive mortgages at lower rates to keep the train moving along.
Count on the govt to get lots of low income buyers to catch falling knives, and make sure the foreclosure crisis disproportionately impacts low-income communities to an even greater extent than it already is. Almost every bright young person of middle class status I have spoken with lately, whose household is at the point in the life cycle when a home purchase is normally made, is now holding off and renting. With a misguided policy of tempting low-income households into buying homes they cannot afford, Fannie, Freddie and the FHA run a serious risk of tempting many lower-income/lower-education households into bagholder status, and turning today’s owner-occupied lower income neighborhoods into tomorrow’s blighted ghetto areas.
GS~
More than that…Remember, with all the deferred maintenance, that commuter bridge (which in essence symbolizes all public infrastructure) in Minnie could be yours or mine.
Just another example of governmental bumblers not doin’ their job other than countin’ the days to retirement and figuring out ways to line their own pension and retirement nests to the exclusion of public safety.
It’s all fraud.
Instead of keeping our infrastructure up and running, our society spent the past 7 years paving over the planet with poorly built and overpriced McMansions and shopping malls. There will be a terrible bill due for this, as we are starting to see.
As for turning once decent neighborhoods into ghettos, I am starting to think that was part of the plan all along. Once everyone (aside from our rich masters, of course) is forced to live in a slum next to the gang-bangers, the crackheads, and other human debris, the middle class will vanish and what remains will be crushed by debt and have the very life drawn out by the horrible living conditions. A population like that is easy to control, at least until the violence breaks out, of course…
Even IF they did that it would take months to do it. No help to all those folks who were pending.
I agree with you. By the time any bailout patched together by Fannie, Freddie, the FHA or whoever is in full force, the falling knife will have gathered so much downward inertia that efforts to catch it will most likely result in stab wounds.
Yes lets let gravity do it’s work!
CRUNCH!
Notably, American Home Mortgage Investment Corp., which stopped making loans earlier this week, said late yesterday it would cease most operations, slashing its work force to about 750 from more than 7,000.
“It is with great sadness that American Home has had to take this action,” Chief Executive Michael Strauss said in a statement. “Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative.”
are they mostly in LI NY ?
=ugly
Lenders are tightening standards and “raising rates like crazy,”
well, apparently NOT: today my Dutch newspaper reports that there is a huge surge in no-doc, ARM and subprime loans (subprime = to people with bad credit history, not sure if this is the same as the US definition) in the Netherlands. And almost all of this loan volume is originating from American mortgage companies. Also, mortgage rates in Netherlands are DECLINING again with most of the banks and mortgage shops. This is happening in a market were home price increases have been far bigger than in the US. These guys are not panicked at all, they simply move to greener pastures on the other side of the pond (where government gives them a bit more help to fleece the sheeple). Wall Street deserves a FAR bigger trainwreck (but even then they will probably never learn …).
Well, do the banks over there know that these mortgages aren’t actually guaranteed by our government? Maybe our crash will precipate yours.
precipitate.
NHZ, that is quite interesting. I believe it has a lot to do with the belief in “containment”. There are investors somewhere in the world that are currently saying “American subprime? No way I’m buying that crap! Oh, you’re selling me Dutch subprime? Sure, I’ll buy some!”
It’s no surprise the American mortgage companies are originating the loans - they’re desperate for cash. The surprising part is that there is still a market somewhere for subprime MBSs and CDOs. I guess many feel that the US is going to go down in a ball of flames while the rest of the world carries on.
The 8% rate indicates that Wells Fargo is out of the jumbo prime business. Even Manhattan real estate, which has been spared until now, will take a major hit. What does this mean for all those savy prime borrowers that locked in low rates with 5, 7 or 10-year ARMS in 2004? Just maybe their sub-5% rate today will be substantially higher in the years ahead.
But it sounds like WF is still lending below 8% when the borrower goes directly to the bank rather than through a broker. To me, it sounds like they’re out of the brokered jumbo market, presumably due to a conclusion that documentation from brokers can’t be trusted.
My thought exactly. Stick a fork in the brokers… yeap, they’re done. We’re heading back to the day when you have to go directly to the bank or S&L, then submit to the financial equiv. of a body cavity search.
With the big lenders not taking in loans from outside this is going to cause many independent mortgage brokers to go out of business.
They’ve been advertising 40, 50 year mortgages on the radio here. Because people only care about “howmuchamonth”, perhaps slightly higher interest rates won’t matter if they can get the monthlies the same.
Of course the difference in monthly payment between a 40 and 50 year mortgage is surprisingly small.
(*I* paid off my 15 year fixed mortgage two years ago!)
(*I* paid off my 15 year fixed mortgage two years ago!)
Someday soon that will be the most effective pick up line in any bar.
The “Cash Back” spam blitz is on; I saw it it on Drudge and had a bunch in my inbox. I guess fraud is the only market left.
Also, can eveyone check a house on zillow in their area? I’ve checked in a few different locales and zillow no longer shows the last sale price.
Did they make this feature ‘member’s only’ or remove it altogether?
It’s got the last sale on our house (when we ran screaming 18 months ago).
Interestingly, it had our 30-day house value down $20k a week ago, and now it’s miraculously up $30k in the last week.
yeah my old house on Cape Cod sometimes sees big bounces up on Zillow’s monthly valuations. I was never sure what that was all about.
With some of the articles Ben has provided from CC, I would have expected lower than Zillow’s price which is not even 10% lower than when I started looking in Feb 06. $525k now instead of $575k.
The thing about that particular house is the new owner almost made it a duplex when he added about 30% of the sq footage to the home for his parents to stay there in the summers…only one kitchen though. Its by far the most expensive home in the neighborhood and we left because it was a tough neighborhood. I have a hard time believing he could get $525k right now.
Cape Cod insights anyone?
they have “tough” hoods on Cape Cod ? WTF
I’d expect 500k would buy into the Kennedy compound
Cape Cod has no affordable housing. Illegal, non-english speaking summer workers live packed like sardines in rent houses and bring plenty of crime with them. Young people have fled the high cost of housing on the Cape. Retirees resist paying more taxes for services and schools and libraries have been closed. The Cape is fully developed and extremely expensive. A fifty-year old fixer in a decent neighborhood will be well over $300 k, probably over $400.
flatffplan:
We moved shortly after finding out Hyannis had its own SWAT team. At the time, it was the domestic abuse capital of MA. Then there was the guy burned alive in the woods behind the CCMall. Yeah….good times.
We moved shortly after finding out Hyannis had its own SWAT team.
Of course there’s a SWAT team.
Mazzholeland gun laws are so strict only the Gestapo cops, gang-bangers, and major crime crowd can score a weapon for defense.
Had to look that one up.
“Mazzholeland gun laws are so strict only the Gestapo cops, gang-bangers, and major crime crowd can score a weapon for defense.”
Sorry to burst the bubble on your NRA rant but here’s what I found on a crime rate comparison chart: On 1-10
Syacuse rates 6 for violent crime, 6 for property crimes. Barnstable rates 5 on both. The overall US index is 3 for both. We’ve got plenty of homeowned guns up here yet our crime index is higher. So much for that theory.
I’ll give credit to Zillow on my home’s estimate. Its down 20% from the peak (I live in Boston).
I’d say there’s another 25% to go, easily, before this flattens out.
It’s there, you just have to dig around to find it. I guess they don’t want to makes things to easy for anyone that actually need some real facts on pricing outside from what they are saying.
It’s there, you just have to dig around to find it. I guess they don’t want to makes things to easy for anyone that actually need some real facts on pricing outside from what they are saying.
Yikes~
Our ex house in RPV we sold at the top of the market a couple of years ago, now zillows for $50k more than it did, a few months ago…
How does that work?
RPV=???????????
Rancho Palos Verdes
…what street in RPV?
Not far from Hesse Park…
Zillow.com is a total JOKE. I’ve never seen such bogus numbers. I’ve checked their value against many recent and not so recent sales and they’re way off. 95% of the time they’re high. A total joke. Zillow should be shut down, they’re info is not reliable.
I found them to be way off too.
You have to click on the chart, then manually copy the security number to get the sales history.
In my neighboohood, all of the recently sold homes went for WAY BELOW the Zestimate. The only one that I clicked through on just sold for LESS THAN IT DID IN 2005.
Yippee.
Quick observation from the past week or two of traveling. They apparently market homes a bit differently up in Nova Scotia because there weren’t any ads that we saw in the few newspapers we purchased while up there (we were interested in pricing but didn’t see any ads, just some price reduced signs). I did note that there was plenty of “for sale” signs posted while driving around although it is pretty rural so the signs were spread out quite a bit.
We spent the last couple of days in the Gloucester, MA area. I pulled up a MLS search of the area within 20 mi of Rockport, MA and the results were over 2,000 listings. I paged through the first 200 and they were all above 1million dollars listing price (with the first couple dozen being Mega Mansions well above a mill pricing) so I can only assume that this area is pretty ritzy. Anyone have any comments on this area with regard to RE pricing or outlook? Plenty of for sale signs in this area as well.
Heading down to the Cape later this morning for a few days and will make it out to either Martha’s Vineyard or Nantucket. I’ll post any interesting observations. Sorry for the lame post but have mostly been busy enjoying summer activities with my nieces and nephew traveling with us.
Don’t confuse ‘grossly overpriced’ with ‘ritzy’. That type of mistake has been a problem lately.
I heard there has been money pouring into the oceanfront properties. The CNY builder still building the sprawling homes in this town was considering picking up some oceanfront there for a while.
Gloucester, historically, had quite a past reputation of poverty and severe drug problems as I remember it from living in Salem in the 80s. Commercial fishing isn’t known for big paychecks.
However Hamilton and a few other towns on Cape Ann were known for Old Money. Not Old $ but Billy Joel owned a place in the area for a while when he was first married to Christy Brinkly (late 80s?)….created a big stir.
Wait until Al Bore’s “global warming” lifts all tides.
You sound like a non-believer. How can that be?
Bizarro Bill…
Believes in the sanctity of stocks
Doesn’t believe what’s happening in front of his very eyes
He hasn’t been trout-slapped by Heidi Cullen yet.
I think that all one has to do is use their observation skills, and some common sense that hopefully they learned in science class years ago.
We cannot pave over every green meadow and raze every forest without having an affect. The green meadow and forest have an albedo of .55 - .65. The blacktop has an albedo of .01 -.10. Also when the ice and snow melts on Greenland it exposes dark clored rock. Ice and snow have a very high albedo (.90+) - the dark rock is like the blacktop. This is all just basic 9th grade science.
Heh Heh! I hate Al bore. But I am an environmentalist. I think the only solution is to have smaller families. The wrong thing to do is to restrict us and use this global warming as an excuse to usher in gray drab socialism. The right thing to do is to get rid of all social engineering, all regulations, and all taxation (except tariffs, which I support). Government, especially a Republican-Party Theocracy such as ours, encourages large families. If we had an even playing field, We’d go back to 1000 square foot homes, 1 or 2 children per parents, etc.
See, let’s say we cut air pollution in cars by half. Well in 30 years the number of cars could double (if we still have internal combustion engines) as our population continues to increase. So even though we cut pollution from cars by half, the number of cars double, so we haven’t solved the problem.
The amount of waste piles up, more and more waterways become polluted, and all. We can cut dumping by half per person, but if the number of people goes up more than double, we’d be worse off. See?
I fear big government more than the terrible damage done by too many people on this earth.
The liberals know their cure is to have more control. The conservatives are too stupid and religious to want to discourage birth control. The public is too gullible and will sacrifice a lot of freedom for security.
environmentalism .. jeeze.. would you guys please lay off the religious topics??
Developing cleaner energy sources and engines increases the possibilities dramatically. Your distaste for government and collective action has driven you all the way to anti-market future-hating.
But Bill,
Procreation won’t double just because emissions halve. When I studied population dynamics, I learned that people in industrialized nations (such as the US) have fewer children than people in nonindustrialized nations. As a matter of fact, the population growth in the US would be 0 if it weren’t for immigration.
Also, people in industrialized nations (who have fewer children) consume a lot more and pollute a lot more than people in nonindustrialized nations. This happens because we’re richer.
My main take-home here is two-fold:
1. Population growth is inversely linked to prosperity. It’s not determined by how much pollution we have.
2. Population growth DOES NOT account for consumption/pollution. It is (once again) prosperity that we can blame.
http://en.wikipedia.org/wiki/Causality
http://en.wikipedia.org/wiki/Correlation
I am a strange environmentalist: I hate the pointless sprawl, the urban trashholes, the paving over of everything, and the almost exponential growth rate of the human population as if nobody is bright to realize that we have limited resources.
On the flip side, I despise the global warming nuts not because of global warming itself, but because they want to run my life. We all know how it will play out: vast government programs that produce nothing but higher taxes, all of the ex-middle class forced to live in dreery concrete boxes while trying to scrape by on our gas rations (or “carbon rations” or whatever nonsense they make up to control us), while the rich fly around in their private planes, go to their big mansions, and so on because they are “leaders” and shouldn’t have to sacrifice! BS! The global warming movement as pitched by Al Bore and the rest has nothing to do with the environment and everything to do with power and control of every aspect of our lives. Get the dang meddlers out of my life! I already conserve - far more than some shmuck like Gore who lives in a huge mansion, flies on his own plane, and so on - so they should just leave me out of their “brave new world.”
Given the growth of the level of corporate control of “consumers”, and government over the past three decades, I’m pessimistic to say the least about our populace regaining any reasonable measure of control over our lives. The “free market” schtick which has been sold to the gullible resembles no classic definition of a free market I’ve been able to ferret out. Free for whom? Freakin’ rigged game, and literally the only game in town.
On the plus side, this pendulum swing appears to be nudging the top of its apex. Interesting to see what the result of the reverse swing will be. Unfortunately, the power grabbers will remain, as will the sheeple. Sucks.
Augur-inn,
if you want to see the Nova Scotia market, try http://www.tradewindsrealty.com/. The site is big, has a web cam, etc.
May give you some info on the places you visited. So, did you like the place? When you have a minute, please post your reactions. Thanks.
Hey Spike, We had a good time and we really enjoyed the area. Hard to tell what an area is like when you are there for the really good weather but miss the bad stuff. A lot of the towns are clearly dependant on tourism but it looked like a great place to hang for the summer months at least.
We did a sea-kayak trip in the bay of fundy (fun and interesting with the tide swings) and spent a few days hiking and sight-seeing in the Five Islands area. Then we drove up to the Baddeck area of Cape Breton and did the Cabot trail gig. Great weather and decent hikes so all in all it was a very pleasant visit.
Just pulled into Falmouth area near the cape and getting our bearings before heading out. Plan a Martha’s Vineyard day and perhaps some striped bass fishing before heading towards NY.
As a side comment to hd74man below, the reason I asked was I looked up and paid a visit to an old (retired, 50yo) college buddy in Gloucester. He just moved into a house he built (11,000 sqft, 6 million) with a deep water dock out on a point in this gated community. I was kind of amazed at the display of weatlh in that particular neighborhood and wanted to know more about it. He has a deep water dock and fishing boat so the set up is great. Apparently not everyone there is a lobsterman :). I guess it’ll be interesting to watch what happens to this area over the next few years given your comments.
Go enjoy your vacation and have a great time. The only person on this blog not allowed to take a vacation is Ben. (Sorry Ben, but that would cause wide spread withdrawal and I think it would kill GS among others.)
Come back refreshed and ready to once again rally against the REIC!
Anyone have any comments on this area with regard to RE pricing or outlook? Plenty of for sale signs in this area as well.
Northshore and Metro West are easily the best suburban areas to live here in Mazzholeland. The big estates created in colonial times make you think your in farm country despite bein’ only 30 miles from Beantown.
Want in? Bring scads of bucks. Towns are rabidly anti-growth. Greatest Gen and old Boomers don’t want to pay for school-age kids, especially outsiders bringin’ in special ed needs.
The signs you see are probably this crowd and scattered FB’ers lookin’ for suckers to fund their retirement in a cheaper place
with a far superior quality of life.
However, Gloucester is a special case an exemplifies the decline of resource based industries in the Northeast.
The place was built on a domestic fishery that no longer exists.
The Russian and Jap trawler fleets cleaned out the Georges Bank 20 years ago, and it’s been downhill every since.
So now you have a complete community that’s runnin’ right down the crapper. Public infrastructure is a mess. You can see the streets crumble right before your eyes. Dope is huge, especially heroin.
For a community it’s size, it is isolated from contemporary employment.
Commuting is a bitch down a section of Rt. 128 which hasn’t been modernized since it’s construction in the late 50’s.
And WTF knows what you train a few thousand previous fishermen for in these days? More added to the lawn-mowing legions I guess.
Best analogy for Gloucester-It’s Northshore’s Detroit.
“Northshore and Metro West are easily the best suburban areas to live here in Mazzholeland.”
I just visited Westport, MA /Tiverton, RI this past weekend. I thought it was stunningly beautiful for the very fact that it’s lots were gigantic multi-acre affairs. Houses were older but well maintained and NOT over the top either. Kind of like Hingham only you could look at water during almost the whole ride.
hd74man, where you located? I’m former Glou/Rockport now renting in Danvers. I’ve been absolutely amazed at increased level of friendliness and civility outside Glou. Was guessing that had it had something to do with there inherent dislike of tourists in Glou.
FYI, do a realtytrac map of Rockport. The rats are jumping ship, or at least trying.
hey auger-inn, did you get any exchange on your USD in Canada? I just got back from spending some time on a lake in central Ontario and every time I spent USD (2 - 3 times) it was treated as par with CdnD. Cottage prices where I was are stratospheric and the prevailing opinion is still “prices will not go down”. I also spent time in Pittsburgh, PA and one day there were literally 7 pages of Sheriff Sale listings in the Post Gazette.
I had the same experience with the exchange rate. FYI
News on the radio this morning says AHM is laying off 6,000 of its 7,000 workers.
Although a miniscule part of the massive New York metro economy, this could be a significant hit locally. Essentially, Manhattan drives the whole region, but the commute from places like Suffolk County is long. Many people who live out there are willing to earn significantly less if they can get a job locally, especially if the other spouse takes the train into Manhattan. So jobs like these are prized.
Long Island has lost much of its independent economic base, oriented to tech and defense, since the late 1980s. It is increasingly dependent on taxes transferred from New York City for local government hiring for “middle class jobs.” Nassau County is next the city, but you have to get through Queens to get to Manhattan, and Suffolk is farther out.
The laid off will have a choice of the Manhattan commute or the mall.
Looks like they are out of business,
NEW YORK (Reuters) - American Home Mortgage Investment Corp plans to close most operations on Friday and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn.
http://news.yahoo.com/s/nm/20070803/bs_nm/americanhomemortgage_closing_dc_4
Bwhahahaha…. Another casualty…. NEXT!
Interesting line-up on the Sci-Fi channel.
Rags to Riches in Real Estate infomercial followed by back to back episodes of Tales From the Darkside.
Awesome.
A woman on Squawk Box just said, “Ben Bernanke must have been doing his research on Wall Street” when it comes to the subprime mess. This woman is hammering the subprime and Alt-A mess. You can sense the CNBC drones would like her to shut up.
She is also criticizing Fannie Mae and Freddie Mac and saying they are doing a “bailout”. She is railing against all of the fraud that has taken place. Kernan is trying to stop her. What a tool CNBC is. She will never get invited back.
‘She is also criticizing Fannie Mae and Freddie Mac and saying they are doing a “bailout”.’
Did she mention the utter futility of the effort, or how they are likely to encourage many low-income / low-education households into becoming bagholders? I wonder if that is part of Fannie’s and Freddie’s mission?
Is a Congressional bailout back on the front burner???
Apparently Dodd still does not perceive the problem with bailing out the lenders, while inadvertently encouraging members of one of the D-rats’ favorite constituencies (lower income folk) encouragement to catch falling knives in the process.
Will government bail out mortgage market?
Congress, Fannie and Freddie might provide only limited help
By Alistair Barr, MarketWatch
Last Update: 2:55 PM ET Aug 3, 2007
SAN FRANCISCO (MarketWatch) — The crisis in the mortgage market has increased the likelihood that the Federal government could intervene in some way to alleviate a credit squeeze.
However, Congress and government-sponsored enterprises like Fannie Mae (FNM :Last: 57.48-1.48-2.51% 3:17pm 08/03/2007) and Freddie Mac (FRE :Last: 56.61-0.02-0.04% 3:17pm 08/03/2007) might only offer limited support.
Some parts of the secondary mortgage market have ground to a halt in recent days as investors shun many types of mortgage securities that don’t conform to Fannie and Freddie’s standards. See full story.
A broker at Ace Mortgage Funding LLC, a leading mortgage brokerage firm, estimated on Friday that 90% (!!!) of these so-called non-conforming home loans have disappeared in the past three days, leaving home buyers with far fewer options. The broker declined to be identified because they didn’t want to be seen as exacerbating housing market problems.
The crisis in mortgage availability could prompt action from Congress, several mortgage market experts said.
“The chance of government intervention in the marketplace in response to current events has increased significantly,” said Andy Chow, portfolio manager at SCM Advisors LLC, a $14 billion San Francisco-based investment firm specializing in fixed-income and structured-finance markets.
Mike Perry, chief executive of mortgage lender IndyMac Bancorp (IMB : Last: 17.40-3.65 -17.34% 3:17pm 08/03/2007) said on Thursday that he got a phone call this week from U.S. Sen. Christopher Dodd, D-Conn., who asked whether Congress can help the U.S. mortgage industry in any way.
At a hearing in Washington D.C. on Thursday, Dodd said that he’d spoken this week with several mortgage bankers “to solicit their opinions as to what they thought was happening and what solutions may lay out there to try to deal with this seizing up of credit that is really getting rather dramatic.”
http://www.marketwatch.com/news/story/any-bailout-home-loan-mess-would/story.aspx?guid=%7B07CF1D1D%2DC6E1%2D4A01%2DAEE8%2D30CD0B81D772%7D
NYC, I was also watching this and Kernan was definitely squirming… but I think that it’s all an act. Everything on CNBC is produced, meaning not impromptu. After having become a regular viewer, particularly of Squawk Box, the pattern I see emerging lately is one of more accurate information being made available, only homogenizing it through the hosts… spoon-feeding us, if you will. The media in general is beginning to let the cat slip out of the bag, albeit s l o w l y.
We take for granted what we know and have learned about the economy and real estate, but remember, the vast majority of people don’t know what we know (yet), and don’t know that they don’t know. If the viewing public were to be made aware of the truth about what is happening all at once, their heads would explode!
I never miss a chance to send people to this blog!!
The truth is contained to HBB!
Ben, you should have this play every time someone clicks on one of your Florida links.
http://4filehosting.com/audio/53929/RFTCFL-mp3.html
Notes:
1. Sorry if the link/file is busted. I’m still trying to figure out how to work this.
2. It’s just a joke, please laugh.
If Jumbo goes to 8% and beyond, Urban SoCal RE will pull a Hindenburg. I have previously thought 20-30% nominal declines were the max here, if not optimisitic for HBBers. But all bets are off…
“I have previously thought 20-30% nominal declines were the max here, if not optimisitic for HBBers. ”
Why did you think that? The numbers are so obvious. I would say I would be surprised if the drop stops at 20 - 30 percent.
Expect the rest to be made up by inflation
Good point. My comment below should be interpreted in the context of real, not nominal, pricing, as I am pretty sure I hear the hum of a black helicopter brigade on the horizon approaching with cargo drops of liquidity in hold…
Inflation comes into play if you’re talking about a 5-year time frame. The domestic economy won’t see much for the next couple of years. Despite the best efforts of the Fed I might add.
Ditto. In fact, I maintain the drop in SoCal market value is already in the 20%-30% range, but does not show up in the data because sellers are not lowering their wishing prices to levels where their homes will sell. Hence thus far the drop has been in the rate at which homes are selling, rather than price. When stuck flippers and FB’s with broken ARMs cannot hold out any longer, the price drops will start showing up in DataQuack’s numbers.
“When stuck flippers and FB’s with broken ARMs cannot hold out any longer”
I notice that their knuckles are quite white these days…Linus, make room in the Pumpkin Patch & bring some extra blankets…I think it’s going to be very frosty this Halloween.
“If Jumbo goes to 8% and beyond, Urban SoCal RE will pull a Hindenburg.”
I think that is for a fully amortizing loan, no? I would assume that people could still get an Option-ARM, and hope for appreciation before it resets.
What will kill SoCal is the death of “stated income” and requiring people to qualify for the higher, “reset” rate.
Breaking News.. Unemployment is up! More people out of jobs this month that last month.
Surely that’s contained
Great news for Wall Street! Higher unemployment means that firms are becoming more efficient, and profit margins are sure to increase.
And the Fed now has scope for dropping interest rates. I expect a 100+ pt rally on the DJIA in response to the great news…
Maybe not so great after all? Volatility sometimes points straight down…
http://www.marketwatch.com/tools/marketsummary/
Plunge protection measures appear to already be underway… I guess another 100+ pt drop on a Friday would not be too great for Wall Street bulls’ confidence?
Expect more home lenders and hedge funds to report losses, it is going to get really ugly.
Stabilization kicked in big time when the DJIA hit 100 pts down. Gotta get Pavlov’s bulls back in the buying mood…
bulletin
DOW INDUSTRIALS DOWN 100 POINTS
U.S. stocks solidly lower after July jobs report
By Leslie Wines & Kate Gibson, MarketWatch
Last Update: 10:11 AM ET Aug 3, 2007
NEW YORK (MarketWatch) — U.S. stock losses mounted Friday after the latest employment report showed weaker-than-expected jobs growth and higher unemployment last month.
“This is not a positive catalyst for the market,” said Art Hogan, chief market strategist at Jefferies & Co. “I think people are going to be a little shocked that the unemployment rate inched higher last month.”
The Dow Jones Industrial Average (Last: 13,395.29 -68.04 -0.51% 10:26am 08/03/2007) was down 88.3 points at 13,375, with 27 of its 30 components trading lower.
There seems to be a very hard floor at -100 pts on the DJIA…
Is -100 pts on the DJIA the Greenspan Put strike price? I would think traders would be able to exploit this…
PPT boys are a comin’ to help clean up Dodge and get that NYSE up to 20,000 where Helicopter Ben and others want it.
“…up to 20,000 where Helicopter Ben and others want it.”
Buh, buh Poole said the Fed would not intervene in the stock market. Me confused!
GS et al.:
If you are true credit bubble believers, then surely you must not believe that the PPT can do anything to stop this crash. Have faith, invest in a bear fund, and you will be rewarded
Has the bull developed a case of epilepsy? Headline indexes appear to be having a seizure…
Just like nobody wanted to be out of the market over the weekend previously, nobody wants to be stuck in it over the weekend now. The bulls used to look forward to “Merger Monday.” Now they dread “Meltdown Monday” as the next financial blowup hits.
As of 3:07 pm, it looks as though another black swan dive is underway. I guess we should next expect a 150 pt rally by closing bell time???
Holy cow — the day ended with negative first and second derivatives on the DJIA, with a slope approaching negative infinity. It should be a fun weekend ahead for Wall Street stock traders…
That’s funny. I have noticed that every stock peddler in the nation is pretending as if the Fed really wants to reduce the overnight interest rate, and we can expect them to do so as soon as they get an excuse. It’s like, um, hello. Like, if they wanted to reduce rates, wouldn’t they already have done so?
Dorks.
Timing could be September meeting if the Treasury bond rates stay down. The Fed cannot defy the bond market without dire consequences so this can happen only if the Treasury yield curve is at or below the new Fed Funds target rate. If that condition is met, they might cut.
Here’s why I don’t think they will cut next week. There is a big get-together in Jackson Hole, WY every Summer sponsored by the KC Fed. This year it’s in late August and the topic is the housing market. Among the guest speakers are the foremost RE economists in the nation, including Dr. Robert Shiller, creator of the Case-Shiller Index. I doubt they will do anything precipitous before hearing from those guys. After that of course, anything is possible - Treasury market permitting.
I wonder what the bulls will do today in light of this morning’s/late yesterday’s news. Maybe the fact that a company so close to home is now dead will make them standup and take notice. Maybe this will end the talk of DOW 16000 and start people talking about DOW 10000.
Na…
This may be old news, but I couldn’t access the HBB yesterday and don’t have time to read all of yesterday’s posts.
Putting Home Sellers on the Couch: The Psychology of why Sellers Refuse to Lower Prices
http://www.marketoracle.co.uk/Article1709.html
“We purchased a wonderful condo in Orange County in 2001. Last year, homes in the same area were selling for $749,000 and quickly. These were horrible condos in bad condition. We have our place on the market for $779,000 since November and we’ve had no visitors. What gives? We have granite countertops and removed the popcorn on the ceiling. We were wondering what we could do. It seems the days on market (DOM) is hurting our negotiations and giving buyers the upper-hand. We were thinking of taking the home off the market for a few months and relisting it. What do you suggest?”
I’ll get to the advice offered to this women later but let us analyze what is going on here. First, we have the belief that peak prices will come back. Her belief that somehow her home is worth what a buyer was willing to pay last year is massively incorrect. The actual value of the home is whatever a buyer is willing to pay, today. And buyers aren’t willing to pay Pollyanna prices simply because she removed remnant 70s popcorn from her ceiling. You would think that this Trump wannabe would quickly take a survey of the market and ask herself the following questions:
1. Am I not marketing the property correctly?
2. Could it be that the price is too high for the current market?
3. What can I do to make it sell given the current market sentiment?
These questions don’t matter because the ultimate answer is something she does not want to hear. Lower the damn price! It isn’t the granite tops or the green Behr paint you added, it is the fact that the market has drastically changed. Sellers are no longer in the bargaining chair. In addition, many sellers last year were able to squeeze into the party by buying with risky subprime loans. The subprime market is now toast. Banks are becoming stricter on their lending standards. Need we point out that inventory is growing therefore giving buyers more choice?
The second point of contention is overvaluing basic remodeling jobs. It is the case in other states that sellers actually need to replace a roof/carpet, install ceramic tiling, and work on the garden simply to move the home. Not only that, the seller usually under prices these updates so the house can sell. In California, as demonstrated by this seller, they believe that adding granite countertops and doing a basic cosmetic update has made their home worth hundreds of thousand more. Can we say delusional? The great thing about the market once fraudulent credit is removed, no one will buy this place and that will be her outcome. The home will not sell until she reconciles her cognitive dissonance regarding missing the bus in selling the home. Sorry, the lights are out on this party.
So what was the advice given to this aspiring seller? Get this. Tap out your equity and invest elsewhere! So let me get this straight, we are in a national housing bubble and you want this person to lock in her overpriced asset and invest elsewhere? In effect, this will make her the buyer of her own home. Say she taps out $100,000 in equity from her house, she has essentially created a pseudo American Express agreement with her home for 10 years. And get this, she will need to pay that $100,000 completely back. It amazes me how so many people in the mainstream media see HELOC or home loans as your money. All you are doing is creating a relatively affordable loan against your biggest asset. Financially retarded in a declining real estate market.
I’m all for investing in real estate. But not at the cost of locking you into an overpriced asset and pulling a 2nd for leverage. Doesn’t make sense. Equity is only yours when escrow closes and you have a cashier’s check in your hand. Maybe they should wait for a year and save up to see how things are in 2008 and try to sell their home again. At that point, they’ll realize that they should have cut and sold in 2007 because some greater fool is still out there. I’m not sure about next year.
I see it almost every day people post here and say “just lower the price”. Well duh that sounds so simple. But did you think that maybe these folks are in debt up to their eyeballs? That when the closing costs are estimated that if they do not get X they cannot sell as they would have to bring money to the table that they don’t have? That is probably the biggest reason people do not lower the price.
“But did you think that maybe these folks are in debt up to their eyeballs?”
Yes. This is why it is taking so long for prices to realign with the new market reality on the demand side thanks to the vacuum left by the subprime implosion.
Good point. A mortgage can be like a vise with your nuts between the plates.
they can be up to their eyeballs all they want. as a buyer, subsidizing your f*****d up decision ain’t my problem. let the prices drop to the floor, imo.
I agree with your point in general, but this lady says she bought in 2001. She probably HELOC’d it though, so you’re probably still right.
Maybe the bank will short sell?
Ponzi schemes follow a well established, predetemined path. No attempts at influencing it are necessary. Let this one run it’s course.
I guess the key takeaway is that 50,000 less jobs per month were created in 2007 vs. 2006. That’s bad, right?
Industry Payroll Employment (Establishment Survey Data)
“Total payroll employment continued to trend up in July (+92,000), reaching 138.1 million, seasonally adjusted. Thus far in 2007, employment has increased by an average of 136,000 per month, compared with an average monthly gain of 189,000 in 2006. Over the month, employment rose in several service-providing industries and changed little in the
goods-producing industries. (See table B-1.)
Health care employment grew by 36,000 in July, with gains of 9,000 jobs each in offices of physicians and in hospitals and 8,000 in home health care. Over the year, health care employment has expanded by 377,000. Employment in social assistance continued to trend up
in July; the industry has added 99,000 jobs over the past 12 months.
In financial activities, employment rose by 27,000 in July. Credit intermediation and related activities added 11,000 jobs over the month, offsetting a decline of a similar magnitude in June. Over the month, employment continued to grow in insurance carriers and re-
lated activities (+6,000) and in securities, commodity contracts, and investments (+4,000).Over the year, these industries have added 42,000 and 32,000 jobs, respectively.
Employment in food services and drinking places continued to trend up in July (+22,000). Job growth in this industry has averaged 29,000 per month in 2007, about the same as the average monthly increase in 2006. Over the month, wholesale trade employment continued to increase, while retail trade employment was unchanged.
Within professional and business services, computer systems design and related services continued to grow, adding 15,000 jobs over the month. Business support services employment also rose in July (+9,000). Temporary help services employment continued to trend down (-7,000); this industry has lost 52,000 jobs so far in 2007.
In the goods-producing sector, employment changed little in both manufacturing and construction in July. Manufacturing has lost 175,000 jobs over the past 12 months. Since its most recent peak in September, employment in construction has fallen by 75,000.”
http://www.bls.gov/news.release/empsit.nr0.htm
(Temporary help services employment continued to trend down (-7,000); this industry has lost 52,000 jobs so far in 2007.)
This industry is a belwether BTW. First hired, before business gets the confidence to hire people full time and labor gets the confidence to demand a permanent position. First fired, as companies try to keep their permanent staff.
Washington Post finally acknowledges that the DC metro has waaaaaaaaay overbuilt condos. Yesterday in the VA thread, someone mentioned a friend who bought way up off 270 somewhere…. my gut feeling is that condos in anything but the most premium of locations are going to be around the $100k mark or less (in today’s dollars) when this is all said and done.
Little Kid on the Block
Glut of Condos Pits Private Sellers Against Developers
Shauntise Harris expected competition when she put her one-bedroom condominium on the market in April.
But she didn’t know how intense that competition would get. Not only was she up against some of her neighbors at 555 MassAve, a 246-unit luxury building in the District’s Mount Vernon Triangle neighborhood, but she also was competing with the project’s developer, the JBG Cos. Nineteen months after starting sales, JBG still had units to unload and was offering a year of no condo fees on one-bedroom units — an incentive Harris could not match.
“I’m like, you guys are still here?” she said.
No sound more distinctive than that of a clueless person waking up.
Oh, and check out the nice little graphic. 20217 condo units being actively marketed, but 1487 sold last quarter. By my math, that’s about a 40 month supply assuming the 2007 pace, which will almost certainly slow as these things continue to fall in value. And this math doesn’t include the 18867 units planned to come on in the next 36 months, although I am sure some won’t be completed (there’s one condo development planned about 2 miles from my house; been an empty lot covered with weeds for almost 2 years) and some will be converted into apartments. They will literally be giving these things away in the not too distant future.
But, wait! I thought everyone was moving to DC metro because of the good jobs and there was a shortage of housing!
At least that’s what I’ve heard from many people.
The truth is that, yes, the population has increased since 2000, but housing stocks (from condos in the city to McMansions in the exurbs and everything in between) has increased at a faster rate. In other words, in 2007, the ratio of housing stock to people is larger than it was in 2000.
Just one more argument against the irrational price increases.
“But, wait! I thought everyone was moving to DC metro because of the good jobs and there was a shortage of housing!”
Sort of…
If you have a better than basic security clearance you can move to DC and get paid double the going local rate for any given job.
Any who won’t be slurping the our tax money being pissed away by DHS has no reason to relocate here.
Unfortunately, I have recently become one of those people slurping up DHS money. I maneuvered for years to support agencies I could actually stomach (NCI, FDA) but since have been forced to do work for DOT, IRS, and now DHS. I’m ready to quit government contracting for good.
“But, wait! I thought everyone was moving to DC metro because of the good jobs and there was a shortage of housing!”
Sort of…
If you have a better than basic security clearance you can move to DC and get paid double the going local rate for any given job.
Any who won’t be slurping the tax money being pissed away by DHS has no reason to relocate here.
Trust me, even with a more than basic security clearance, you’re not making that much in the DC-Maryland-NOVA area to really get by here. Oh, okay: if you’re making above median household income AND married to somebody making above median household income AND willing to stretch or buy a real dump, you can make it, but that’s about it.
Maryland is the “Silent Bubble” - people here making $60K to $95K a year looking at fields of $300K to $600K starter homes while thinking, “Oh, that’s okay - everyone is rich here because all those government jobs in DC.” Right - next time a Senator happens to drop off a couple hundred thousand doallars on my doorstep while going on a drinking tour of the dismal areas in Maryland, I’ll believe that theory. Until then, prices need to come down.
Yesterday in the VA thread, someone mentioned a friend who bought way up off 270 somewhere….
Right, and I had a couple of choice tips for him: DON’T! He hasn’t bought the condo yet but (I think) is headed up there this weekend, pen in hand, to do something foolish. Specific location is Urbana, nice enough development, but up the cow fields. Reiterating my advice from yesterday about buying in Urbana:
Let me count the disadvantages:
(1) Dead, dead, dead nightlife and restaurant scene. On the good side of the coin, there IS a supermarket now. Yippee!
(2) Too much buildable land in Frederick, which can keep a lid on prices over the long run.
(3) I-270 is one of the worst commutes in DC Metro, and no plan to widen it for 15 more years or more.
(4) Frederick County people think condos are a weird way to live; that can affect any resale by removing lots of local yokels from the buyer pool.
I wouldn’t do it. A townhouse if he must, but never a condo. Not there. And certainly not for $300k.
Let me add that a friend of mine is renting a really, really nice townhouse with double garage there for $1700/month. Compare that to what kind of mortgage payment you would be making on a little condo — and don’t forget the Maryland property taxes!
“(3) I-270 is one of the worst commutes in DC Metro, and no plan to widen it for 15 more years or more.”
The 270/495 interchange is th 7th worst interchange in the COUNTRY according to Forbes.
http://www.forbes.com/2007/06/11/traffic-highways-interstates-biz-logistics_cx_rm_0611traffic_slides_8.html?thisSpeed=15000
No surprise there…. the question is what idiot thought that forcing two 4-lane highways down to 2 lanes each and then merging them was a good idea. Didn’t anyone every explain the term bottleneck?
Dumb bunnies…
The Coming Credit Meltdown
By Steven Rattner
Word Count: 1,257
The subprime mortgage world has been reduced to rubble with no lasting impact on another, larger, credit market dancing on an equally fragile precipice: high-yield corporate debt. In this fast-growing arena of loans to business — these days, mostly, private equity deals — lending proceeds as if the subprime debacle were some minor skirmish in a little known, far away land.
How curious that so many in the financial community should remain blissfully oblivious to live grenades scattered around the high-yield playing field. Amid all the asset bubbles that we’ve seen in recent years — emerging markets in 1997, Internet …
http://online.wsj.com/article/SB118212541231038534.html?mod=sphere_ts
http://www.pilkey.com/bookview.php?id=23
One thought: This could be an unintended consequence of ’subprime containment’ policy…
“The subprime mortgage world has been reduced to rubble with no lasting impact on another, larger, credit market dancing on an equally fragile precipice:”
Pictures of 9/11 keep popping in my head, as in the debt bubble collapsing like the twin towers (at near free-fall speeds).
Many financial fire-fighters will face financial death in the process while they assure everyone that the buildings won’t collapse and that they should return to their offices.
In the end everything will be “reduced to rubble”.
I’d rather not picture the “containment” workers as anything like the brave FDNY who were hoping to save the lives of others. The Wall Street PR machine reminds me of Baghdad Bob.
Buy-out deals may be on hold for months
By Peter Thal Larsen in London
Published: August 2 2007 22:08 | Last updated: August 2 2007 22:08
Leading bankers on Thursday moved to calm the global markets even as they admitted that the shockwaves from of the US subprime collapse could put private equity deals on hold for the next few months.
Shares in European and US banks have slumped in the past week as investors have fretted about their exposure to subprime-related losses as well as leveraged loans stuck on their balance sheets. Analysts estimate large banks have underwritten loans worth $300bn to finance deals not yet been completed.
Bob Diamond, Barclays president, on Thursday predicted the consequences of the subprime collapse could take more than a year to be resolved. However, he said the leveraged loan market should recover more quickly: “We would expect at some point over the next two to three months to see that market at more normal volume levels.”
Brady Dougan, chief executive of Credit Suisse, said: “There has been a back-up in pricing and probably in August it will be a bit quieter . . . our hope is that the market will begin to operate more normally in the short term.”
http://www.ft.com/cms/s/82c1eddc-4122-11dc-8f37-0000779fd2ac.html
“from of the US subprime collapse”
SIC from the Financial Times…
Bob Diamond, Barclays president, on Thursday predicted the consequences of the subprime collapse could take more than a year to be resolved.
More Joseph Goebbels inspired propoganda.
Credit Chill Freezes Leveraged Deals
By Victoria Howley, Kate Haywood and Marietta Cauchi
Word Count: 723
LONDON — The big chill gripping global credit markets has caused 46 leveraged financing deals around the world to be pulled since June 22, representing more than $60 billion in funding that companies had planned for mergers and acquisitions.
The number of deals pulled last year: zero.
The credit squeeze has slowed to a trickle the flood of debt financing that has driven the buyout boom for the past couple of years. None of the 46 pulled financings have led to the cancellation of takeovers. But with banks saddled with billions of dollars of debt they can’t sell to investors, …
http://online.wsj.com/article/SB118606585494786170.html?mod=hpp_us_whats_news
“But with banks saddled with billions of dollars of debt they can’t sell to investors,…”
Hint to banks: MARK DOWN YOUR WISHING PRICES TO MARKET VALUE AND YOU WILL FIND MYRIAD HEDGE FUND INVESTORS WAITING TO SNAP UP THAT DEBT AT FIRE SALE PRICES!
GS
They did exactly that with the Chrysler notes this week, which caused a bit of a relief rally in the junk bond market. Sold the auto division bonds at 95. Took a 5% hit on $7 bil of bridge loans - where the typical fee is 25-50 bp. So the loss on the sale was 10-20x the fee. Clearly this can’t go on.
The equity market rally was partly relief that a hung deal got financed and not cancelled. The idiots don’t realize that it got financed in a way that is totally non-viable and actually discourages futures deals and funding for same.
The banks are trying to get out of already committed deals, even offering to pay breakup fees. But the pirate equity firms, short-sighted as ever, want the deals to go no matter how big the losses to the banks. “DEAL FEES NOW!” is their motto. Who cares if the takeover target and the financing banks all go down in flames? The PE guys get paid. Scumbags!
Best we can hope for is some bank balks and the PE firms sue. Then the whole thing gets tied up in court for years and the deal dies of old age. With $300 bil committed but not yet funded, the banks can’t take 4-5% losses on them an stay alive. Something’s gotta give here.
I hear they were anxious to roll out…
The New PPT Cruiser
Flutter Happens
Remember that once you have pulled the pin, Mr. Grenade is no longer your friend.
“million Says:
August 2nd, 2007 at 11:33 am
Syron already said Freddie’s buying $20B of subprime, not even alt-A, they went straight to subprime. Ill-advised indeed, especially w/ their derivative losses mounting and their swing from a $2B profit this time last year to a $200M loss in Q1.”
This was a comment to the IndyMac letter I posted earlier. Does anyone have any details on this?
Behind the scenes bailout. Nothing the little kiddies need to know about. It’s for their own good.
Why does the govt think it is good policy to help low-income buyers become bagholders?
By the time a certain something hits the fan, a new administration will be in power and you can blame them for it.
6 months ago I might have agreed with you but I’ve been shocked by how fast this has been turning. By 1Q08 the fecal matter is going to be flying in all directions and even J6P is gonna notice. Our dear shrub is not going to escape his Hoover moment.
“Our dear shrub is not going to escape his Hoover moment.”
Shrub & Dick & Karl, et al…will have a nice private beach…to reflect upon their legendary legacy…the elementary schools ought to start replacing the portraits of Washington & Lincoln
A beach in Paraguay. No extradition.
Please folks. Check your history. Treasury bailouts of Goldman (Mexico bonds 1995, Russian Rubles 1997, Asian currencies & bonds 1998) and of hedge funds (LT Capital 1998) all predate the current administration.
In fact ignoring the illegal alien problem and “free trade” with totalitarian economies (China and Vietnam) all began under Clinton. The problems are longstanding and cross party lies. Bill’s Treasury Secretary was from Goldman Sachs, so is the current one. W’s prior SecTreas was from DLJ.
You talk of an administation as if the US were a kingdom.
Where is the congress? Where the Democrats that promised reform if only they were elected?
Didn’t shrub buy a 40,000 acre (hectare?) ranch in Argentina?
“Why does the govt think it is good policy to help low-income buyers become bagholders?”
Since when have low-income peons been anything more than political cannon fodder?
Mommy!
Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors.
New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication.
In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2182984.ece
Looks like the mortgage fallout has spread to Germany, where a large mutual bond fund has stopped redemptions.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ar2xfdz.XNPY&refer=home
“A lot of the subprime debt lies with European managers,” said Iain Beattie, a consultant at Watson Wyatt Worldwide Inc. in London who advises pension funds. “There could be more news to drip out on this.”
Good thing Americans won’t be able to afford to travel abroad anymore. Foreign investors might spit on us.
“A lot of the subprime debt lies with European
managersbagholders,”Centex’s corona office (Inland Empire Division) which was there largest division last fiscal year to lay off about a third or 100 people between yesterday and today. Division president was let go about 2 weeks ago.
For the last 3 years, I have had the distinct dipleasure of subcontracting with these mental giants. Someone let them know that the public works agencies are hiring in the IE. But they might be over-qualified for the posistions.
This one is a must read.
http://www.nytimes.com/2007/08/02/fashion/02cyber.html?em&ex=1186286400&en=99a2cb32f462eb6e&ei=5087%0A
Dumb writer who bought early in the bubble (2002) but way overspent (says her account told her not to do it) with a floating rate loan, obsesivly checks on-line RE price sites and gets told off by investment psychologist. It it priceless.
Maybe she was planning on writing the great American novel and becoming independently wealthy? So, how did that plan work out?
Oops, sorry. It was a marketing professor, not an investment psychologist. Is there such a thing. There is a throw away line about how most of the rest of her neighborhood is also dealing with huge floating rate mortgages.
Bearish outlook for BS…
Bear Stearns outlook revised to negative at S&P
By Alistair Barr
Last Update: 10:34 AM ET Aug 3, 2007
SAN FRANCISCO (MarketWatch) — Standard & Poor’s said on Friday that it revised its outlook on Bear Stearns (BSC : Last: 108.48-7.15-6.18%
10:23am 08/03/2007) to negative from stable because the investment bank’s hedge fund troubles have damaged its reputation and and could hurt its performance for an extended period. The bank also has material exposure to mortgages and mortgage-backed securities, which remain under severe pressure, S&P added. In addition, the bank is exposed to debt taken on from unsuccessful leveraged finance underwritings and has other significant underwriting commitments, the rating agency said. Still, Bear Stearns’ liquidity is strong and the bank should be profitable in the current quarter, S&P added. “The negative outlook reflects our concerns about recent developments and their potential to hurt Bear Stearns’ performance for an extended period,” said Standard & Poor’s credit analyst Diane Hinton. “We believe Bear Stearns’ reputation has suffered from the widely publicized problems of its managed hedge funds, leaving the company a potential target of litigation from investors who have suffered substantial losses.”
http://www.marketwatch.com/news/story/bear-stearns-outlook-revised-negative/story.aspx?guid=%7BAA827038%2D4A89%2D4BD0%2DB931%2D3E2F1EEF665C%7D
THAT’ll teach you to blame us for the subprime mess. Anybody else want a piece of us?
LOL
“…target of litigation from investors who have suffered substantial losses.”
No worries…Chris Cox is at the helm over at the SEC..he does everything possible under God’s green earth…. to protect the disadvantaged investor.
“We believe Bear Stearns’ reputation has suffered from the widely publicized problems of its managed hedge funds, leaving the company a potential target of litigation from investors who have suffered substantial losses.”
Really! Come on now all they did was lose about 3.5 billion.
“In Richistan there is a two-year waiting list for $50 million 200-foot yachts. In Richistan Rolex watches are considered Wal-Mart junk. Richistanians sport $736,000 Franck Muller timepieces, sign their names
with $700,000 Mont Blanc jewel-encrusted pens. Their valets, butlers (with $100,000 salaries), and bodyguards carry the $42,000 Louis Vuitton handbags of wives and mistresses.
Richistanians join clubs open only to those with $100 million, pay $650,000 for golf club memberships, eat $50 hamburgers and $1,000 omelettes, drink $90 a bottle Bling mineral water and down $10,000 “martinis on a rock” (gin or vodka poured over a diamond) at New York’s Algonquin Hotel.
Who are the Richistanians? They are CEOs who have moved their companies abroad and converted the wages they formerly paid Americans into $100 million compensation packages for themselves. They are investment bankers and hedge fund managers, who created the subprime mortgage derivatives that currently threaten to collapse the economy. One of them was paid $1.7 billion last year….
and so it goes..here’s the whole article yesterday from a former Treasury Secretary from the Reagan administration
“Return of the Robber Barrons”
http://www.counterpunch.org/roberts08022007.html
Recall that the era of the Robber Barons was followed by quite a backlash. I seem to remember a Republican fellow named Roosevelt who railed against the “malefactors of great wealth.”
Ah, but in those days a republican was much different from the republicans of today. If you could go back to the early 1900’s and listen to these republicans you would think they were democrats.
I also seem to remember a prevoius gilded age in france around the late seventeen hundreds where the middle class were pinched, and revolted quite massively leading to many heads rolling. It is quite obvious that the last thing a stable economy wants to do is turn on their middle class. After all they have the education, and contacts to make life miserable very quickly, and lead the poor. Most if not all revolutions happened after the middle class was squeezed either by their government or the upper classes.
Before anybody ctitizises the existing middle class as people that are greedy and foolish, remember that the current middle class has been decimated by corporate america, and the pensions that they were promised when they started no longer exist. The health insurance, and other “middle class benefits” are also starting to erode, and yet they see somebody that moved their jobs overseas signing with a pen that is 2 years salary, and that person just might lose it and buy a 35 cent bullet, and put into said guys head.
(I know that my brother after going to Q course in the army could possible disable 90% of the bodyguards that are “guarding” these people, and they would not even know who did it.)
Yes seeing as trained retired veterans make up a sizable portion of our countries homeless and just barely hanging on, there might be some room to worry. However, more than likely the angry among them seem to snap on the family and other innocents around them. However, if someone was to organize them… Now that could get scary for people in high places.
if someone was to organize them
They’re already here.
You call them local militia’s.
And they are out there.
Only thing which protects us from the coming totalitarian
dictates under the guise of Homeland Security to control damage when people find out their currency is worth squat is 180 million guns.
You can thank God for the Second Amendment.
Easy there, DHSers post here regularly.
You can thank God for the Second Amendment.
Amen to that.
This is great stuff…
Lower class in Richistan = $1m to $10m net worth
Middle class in Richistan = $10m to $100m net worth
Upper class in Richistan = $100m to the sky
Apparently the middle class in Richistan feel a comparable level of discontent to that felt by middle class on Main Street. It is as though Richistan is a parallel universe to the rest of the world…
Stuff like this really, REALLY angers me!
Okay, it’s fine to make money and spend it on some luxuries… Maybe a $100 pen? I don’t even know why a pen would cost that much, but you get the idea… but this is SICK! Waste for its own sake! If I had that type of money I would do something USEFUL and productive with it - something that would make the world a better place.
But as we all know, for the most, people with souls and who would try to improve the world never end up with that type of spending money. Sickening…
One Trick Pony Blow Back
http://wallstreetexaminer.com/blogs/winter/?p=962
Cry me a river…
“The end of Florida’s long-running, high-flying housing boom drilled a $1.5 billion sinkhole in state revenue projections for legislators to patch in a special budget-cutting session next month.”
From the Deseret News, Utah’s real estate market is slowing significantly:
Utah housing market slowing down
“An economic analysis presented Thursday by Wells Fargo economists shows a huge disparity between housing prices and incomes in Utah.
‘The problem reflects affordability problems, because home prices have increased twice as fast as income,’ said Kelly K. Matthews, executive vice president and economist for Wells Fargo. ‘Utah’s housing sector is facing a serious disequilibrium.’”
Utah’s housing market: Inventories growing, but prices holding their own
“Utah’s housing market remains among the strongest in the nation, but house sales are slowing and inventory across the Wasatch Front is growing, according to a new report.
While such a scenario would seem to set the stage for house prices to decline, the recent Metrostudy report indicates that is unlikely to happen any time soon.
‘We just haven’t seen a lot of price declines,’” said Eric Allen, director of Metrostudy’s Utah/Idaho region. ‘There’s other markets that are seeing big decreases in their actual home prices, but we’re not seeing that in Salt Lake.
‘There’s some incentives and whatnot out there for buyers, but prices are stable.’”
Yesterday there were some serious knife catchers all over Wall Street, but the most serious action was at the AHM post where some bought the stock at $3.00 a share. What were these fools thinking?
I suspect a few of the “fools” were thinking that they had already made big bucks by selling it short, and weren’t willing to take a chance on a last-minute buyout, and were more than happy to close out their position with a big profit. That’s the benefit of having short-sellers: they’re there to provide a bottom to the market when no one else wants to buy.
I happen to know the guy who earned $1.7 billion. He is about to launch 2 mega quant funds that may make him considerably richer than he already is.
But he is not the irresponsible looter type. Happens also to be a world-class mathematician and former Head of Math at Stony Brook University. He has given large sums to keep the Brookhaven National Lab cyclotron running, to improving math education, and to MIT. Before he dies, he will give a great deal of his personal wealth to good causes. I don’t think he is morally culpable because he found market formulae that worked incredibly well.
You think it’s a market formula that worked well? 1.7 billion? Where I come from people like him are called thieves.
You come from TrialLawyerstan?
I happen to know the guy who earned $1.7 billion. He is about to launch 2 mega quant funds that may make him considerably richer than he already is.
But he is not the irresponsible looter type. Happens also to be a world-class mathematician and former Head of Math at Stony Brook University. He has given large sums to keep the Brookhaven National Lab cyclotron running, to improving math education, and to MIT. Before he dies, he will give a great deal of his personal wealth to good causes. I don’t think he is morally culpable because he found market formulae that worked incredibly well.
Can anyone lend a hand in recommending how to buy a collection of foreign currencies?
Does anyone own MERKX (currency mutual fund), an Everbank currency CD, or any currency ETFs? Any other recommendations on how to hold foreign currency?
Thanks!
I have some ERO and JYN (Euro and Yen). Both are ETNs from Barclays. They’re not the most liquid securities in the world… though they’re becoming moreso by the day (they’re pretty new on the scene). Seems to me that those two in combination form a rather balanced bet against the dollar. Wish they would come out with an ETN that uses a basket of currencies.
Are you a US resident? I couldn’t find any information for foreign investors on the Barclay’s site.
You could open an account with Oanda.
Your account will not be FDIC insured but the company is very well managed. Unlike bucket shops, they do not take positions against their clients, but rather transfer transfer all exposure to interbank.
This is a currency trading site that offers 50:1 leverage.There is no need to do that as you can easily add subaccounts in other currencies: GBP, AUD, CAD, CHF, JPY, EUR and simply transfer funds between them.
They also offer Gold and Silver and position sizing as small as one unit.
I’ve had Merk (MERKX) and Prudent Global Income (PSAFX) for about a year and a half. They are both no-load, open-end funds. MERKX is a foreign money market fund, PSAFX goes out up to 2 years. Both can invest 10% or so of the fund in gold ETFs and I think gold miner stocks. What you get currently is a foreign, hard currency money market yield (about 4% on foreign government debt in Euros, Sterling, Krona, Loonies, etc.) plus dollar FX fluctuation. The annualized return over the last 18 months has been about 8% (half from interest, half from dollar decline).
I have been lurking on the Broker Outpost forums. I keep seeing references to “hard money” lenders. What does that refer to? My first impression is they lend in gold and silver, but I know that can’t be true.
Hard money lenders don’t lend in real hard money (i.e. gold) :). Instead, they provide loans at high rates for short periods of time, where traditional financing wouldn’t work. The most typical example would be a real estate developer, who needs some money to do a quick project, but who doesn’t want to go through appraisal and the formal bank lending process. The hard money lender lends out money for a short period of time (as in a few weeks or months) at a higher rate, based on the reputation of the borrower and typically limited to very conservative loan-to-value ratios.
It’s routine and completely legal, but be aware that there are a few scams which attempt to pass themselves off as hard money lenders. They offer the mark an extremely high rate of return (15% annually or more), but need the mark to put a large sum up front ($10,000 plus), then take the money and run. If you’re considering either borrowing or lending hard money, do as much research as possible before jumping in.
People who actually have real experience with real estate can probably offer more information :).
Another scam = hard money lenders ask for a huge deposit just to “underwrite” your deal - sometimes $30, 40, 50k. Then they spend a week or two looking at the deal and decide for whatever reason (LTV, prop type, etc.) they don’t want to do the deal. Or they lower the loan amount. They keep the deposit and you are left without a loan. Hard money lending is not regulated so borrower beware.
Hard money lending is scam city. Be very very very careful of newspaper or magazine ads touting investments in mortgages with rates of return about 10%. I was involved in a case where a ‘developer’ borrowed hard money from unsuspecting ‘investors’ and promised 40% returns in 12 months time after the property was flipped and sold. Of course, he was really stealing the money to finance his terrible coke habit and sophisticated lifestyle.
He’s in prison now.
Private money with rates at 12-16% with points at 5-8. Yep, I hear hard money is really ramping up right now. We will see how that goes. But your typical hard money lender does not lend above 65% LTV. In most cases they want to foreclose on you. In a rapdily declining market 35% equity may not be enough.
I know someone who works in commercial real estate, he says that hard money is used very routinely for short-term financing, and there’s not much risk. At the residential level, I wouldn’t be surprised if it’s much riskier and more speculative.
hard money lenders don’t care about your credit rating or any other such unreliable stuff.. they typically secure loans with solid collateral in a 1st lien position and rarely take a loss.
try
http://en.wikipedia.org/wiki/Hard_money_loan
for basic info..
as far as a scam, there are scams in everything from soup to nuts.. so do be careful.
Repost (didn’t post right the first time); Utah housing market slowing significantly.
Utah housing market slowing down
Utah’s housing market: Inventories growing, but prices holding their own
Small article but big milestone; as far as I’ve read, this is the first time there has been any public admission of “panic” in the real estate industry.
IndyMac CEO warns employees of mortgage market panic
“SAN FRANCISCO (MarketWatch) — Shares of lender IndyMac Bancorp Inc. (IMB 19.01, -2.04, -9.7%) suffered a 10%-plus fall early Friday after an e-mail by Chief Executive Mike Perry to employees surfaced that described the mortgage-backed bonds market as ‘very panicked and illiquid.’ As a result, he said in the note that the lender will have to make major changes to its underwriting and pricing guidelines. IndyMac Bancorp is the holding company for IndyMac Bank, F.S.B., which bills itself as the seventh largest savings and loan and the second largest independent mortgage lender in the nation.”
“Indy, Indy, o-oh IndyMac,
when are you coming back?
Indy, Indy, o-oh IndyMac,
you better hurry back.”
Rule 1: Don’t panic.
Rule 2: If you panic, be the first to panic.
Knife Fights:
Rule 1: Whack!….a solid kick in the balls!
Rule 2: There are no rules in a knife fight.
Paul Newman to Robert Redford:
Rule 3: “If he wins…shoot him”
Well, well. It looks like there may have been some Realtors pumping prices and taking kickbacks and such on LA’s West Side.
Brokers to Westside elite accused of fraud
2 Beverly Hills agents and appraisers are indicted in a scam that allegedly inflated home prices and loan amounts.
I’m shocked! Shocked, I tell you!
This was as early as I could make it to the blog.
I have 2 things:
1. Where is Housing Inspector Clouseau?
2. Do you guys think it’s time to have a Silicon Valley housing bubble party? I feel like I’ve gotten to know you all a bit, and I’m sad to think that we will never talk to each other again now that everything is settling out. We should at least go out and get a cocktail or four. How about next Friday? Loction TBD.
“Location TBD”
Bugs: “eh, Hey Doc…what with shadow goverments, PPT revival, terminated M3, deceitful CPI, manipulated unemployment, Domestic Citizen spying, and now FBI “filter teams”…things seems verrrrry looney around my rabbit hole these days.”
Daffy: “Cut it out Bugs…you’re scaaaaaaaaaaaaaring me!”
“The review of the Congressman’s paper files when the search was executed exposed legislative material to the Executive” and violated the Constitution, the court wrote. “The Congressman is entitled to the return of documents that the court determines to be privileged.”
“Officials have said they took extraordinary steps, including using an FBI “filter team” not involved in the case to review the congressional documents.”
http://news.yahoo.com/s/ap/20070803/ap_on_go_ot/raid_on_congress
“Housing Inspector Clouseau”
Maybe he’s busy…commute patterns must be thrown to heck with the Minneapolis bridge collapse. Sure hope he and his family are all right.
I thought HIC lived in San Francisco, no?
HBB friends, just closed on my dad’s house in W. Colo. Want to share with you a few things:
1. the 100% financing is still out there, that’s what this loan was, but it’s drying up FAST. I was really nervous about this, and rightly so. The loan officer shared with me that they’d gone through 3 diff. mort. co’s and each time “the bank closed, even though they qualified” - the company went under. We had delayed the closing 2 times. nerve wracking.
2. GetStucco was right, if you price a house right, you will sell it fast. Pricing it right has been discussed by a lot of people on this board. Don’t chase the market down, be aggressive. My brother and I underpriced every other house in this category/size by 20% and it sold in 4 days. Neither of us lived in the house (an estate), so we were motivated.
3. you can get a decent realtor who will go for a lower commission. We had a guy who charged 4% and was very competent. He’s pretty clueless about what’s going on in the general CDO and mortgage market, but was eager to learn. He was very surprised that mort. co’s were tanking. I’m telling you, this blog is light years ahead of the general public.
It’s been a long strange trip, but now I’m free of all RE holdings. I have my camper and truck (and dogs) ready to go, am heading out for the Utah backcountry after I write this. Thanks to Ben and everyone here. Ben, donation coming your way. What would we do w/o this blog? Thanks. Lost
“GetStucco was right, if you price a house right, you will sell it fast.”
Same logic applies to banks and hedge funds holding devalued paper on the books. I wonder if these lunkheads know this?
Congrats Lost. Enjoy your backcountry!
Lost,
congrats and have a great summer. Great anecdotal evidence that common sense and solid financial info pay off. all best.
thanks again, everyone!!!
Decreasing housing demand coming to a city near you?
LA Times
Illegal-immigrant crackdown looms
A plan to make employers fire workers with discrepancies in their records could snare many citizens and legal residents, critics say.
http://tinyurl.com/2mcoll
“In the coming days, the Department of Homeland Security is expected to issue a rule outlining how businesses must respond when they receive notice that there are discrepancies in a worker’s tax records.
Many businesses simply ignore such notices now. Under the new rules, employees would have a limited time to contact the Social Security Administration to correct the information, or face termination.”
LA Times
GOP bill focuses on border enforcement
The Senate legislation’s sponsors say it is meant to smooth the path to comprehensive overhaul.
http://tinyurl.com/2vhzek
“The bill would tighten enforcement on the border, in the country’s interior and at work sites. It would make it easier for agents to seize smugglers’ cars at the border, mandate jail time for individuals who overstay their visas — currently 40% of all people here illegally — and turn closed military bases into detention facilities.
The bill’s sponsors, who include both strong supporters and staunch opponents of the recently failed legislation, said the legislation was meant to restore government credibility on immigration enforcement and thereby smooth the path to comprehensive overhaul.”
Just another prediction to throw out there…prime lending (not subprime, not alt-a, but PRIME) will start to see major troubles above those reported by Countrywide. Reason: Option Arms (with their Negative Amortization component), and, to a lesser extent, Interest Only ARMs. Many PRIME borrowers in California wedged themselves into houses they could *barely* afford, or HELOC’d themselves to the hilt with “affordable” Option ARMs, and will soon be in a world of hurt as the ARM reset wave crashes against the shore (starting a few months ago, and ending perhaps 2-3 years in the future). I’m still looking up numbers for the % of prime mortgages made in my area that were option-arms, but preliminary data shows it was around 27%…I’ll have to verify to be sure. I remember that, at least in California during 2005 and 2006 that Option ARMs became a huge source of PRIME mortgage purchase loans and refinances, somewhere between 30% and 50%…I’m still looking for that data.
Mark my words…PRIME is going down, investors will flee prime as well, and the spread between safe bond investments (US Treasuries) and prime mortgages will go up.
Arroyogrande:
I agree with you that all tranches are doomed, but how can it be that 27% of all prime loans were option ARMS? I thought that prime, by definition, could not include any of these weird terms. It was explained a while ago on this blog that Alt-A is for people with good credit who want shaky terms (such as no-doc, interest only, negative amortization, etc.)
Can you please explain this one?
Prime = Good Credit Score
Subprime = Bad Credit Score
The term “Alt-A” means the is the same as the term “No Doc”
I/O, Neg Am, ARM, etc… have been available to all parties.
I’m a little miffed that all the lawsuits against the subprime mortgage lenders are from “investors” who backed the mortgages and people who signed up for mortgages they knew they couldn’t afford.
There’s a large class of people who have been victimized by the Subprime Mess. Trouble is, many of them are too foolish to know they’re victims. I’m talking about folks whose assessed property values have gone up, along with property taxes based on assessed value, because of the value was set from sales into the neighborhood to subprime borrowers.
A responsible person would never take an interest-only 110% mortgage with a teaser rate (with the exception of people who have the cash in the bank to pay off the mortgage in one lump if necessary). Only people with no savings and nothing to lose would: just declare bankruptcy if things don’t work out.
But because of this influx of funny money, and no shortage of people who only cared about “howmuchamonth”. house prices shot up….along with property taxes.
Sensible, responsible savers got screwed. (It seems like there’s a War on Saving in this country.) We know that one’s primary residence isn’t an “investment.” I don’t care one bit what the house I’m living in is “worth”, as long as it roughly tracked inflation by the time I’m ready to sell, if ever.
Nobody would feel good if some Billionaire decided to pay $2 Million apiece for 5 homes on your block, when the existing homes were selling for $400K, and all of a sudden your property taxes doubled because you now live in a $2 Million home instead of a $400K home. But when nearly the same thing happens over a period of a few years, with free money being handed to people with no means of paying back the loan, nobody bats an eye. Just replace “some Billionaire” with “investors who bought hedge funds”.
I’m hoping some smart attorney will figure out a way to identify those people whose assessed values were based on neighboring sales to people who filled out fraudulent “no credit check” applications, or got very speculative loans, and sue the subprime lenders for the extra payments caused by assessed comparable values based on nonsense loans. Especially the case where the comparable sale used to set value ended up in default!
The reason I said “many of them are too foolish to know they’re victims” is that people seem to like crazy home valuations. It makes them feel “rich.”
I have been mad for a long time about just what your talking about . Bubbles in real estate can’t be allowed because taxes and insurance are tied to real estate . Also ,creating a false demand market ( driving prices up ) by using unqualified buyers and speculators is not a true market or not a stable market .The people of the United States have grounds for alot of complaints about this fraud maket we have been in .
It occurred to me that if this were any other necessary product whose prices were being manipulated, let’s say “milk” for example, people would be angry.
The press is so biased that they consistently term falling r-e prices as a bad thing. Even though I own two properties (in FL and CA, each with no mortgage), I welcome falling real estate prices. I don’t sit and fantasize about my “wealth” by checking Zillow twice a day. I simply don’t care what the house I’m living in is “worth” to some theoretical buyer.
Interesting argument in regards the lawsuits for higher property tax rates based on fraudulent loan apps. I’m sure that if there is any meat in that idea, there will be some attorneys somewhere who try it.
The Dow is hugging 13400 much like that strange way it hugged 14000 for a day or two right before the Tank Week, FWIW.
Last week I repoorted a new work truck for sale near my house. Now, parked next to it is another brand new work truck, with the same phone number on both windshields.
Florida is crashing hard, and I’m enjoying every minute. We own some 20 acres in this area (which we bought for very little, and not as an “investment”, but to put 1 retirement house on, and a big wall to keep Florida out.)
Take a look at this map
http://www.flickr.com/photos/tppllc/998445269/
The red flags are the houses currently listed. The median listing time is 6 months, and many have been listed for more than a year. These are ticky-tacky Ryland homes, rows of identical ones sitting in identical swampland. You really can’t sell one if there are three identical houses for sale on the same street, can you?
If you drive through these two “red flag” neighborhoods, it’s like a ghost town. The houses that don’t have “for sale” signs have “for rent” signs. (I guess if you’ll just walk away from the loan when you finally can’t make the payments anymore you’re better off trying to collect some rent!) I don’t think anyone actually lives there as a primary owner….
I should add I was looking forward to this because when we priced our “build” several years ago, the prices were way too high. Now builders are begging us to get started.
Of course, the neighborhood may get to disgusting to want to live in.These houses will eventually fill up with Section-8 renters, etc, hooked on meth and oxycontin. (Don’t believe me? Look at once nice areas of the Bronx, Newark, NJ, etc.)
OMG.. check out Cramer… he is going OFFFF man.
Saw that; I’ve never seen him so mad. What’s really funny is I’m still not sure what his point was.
Point? He doesn’t have a point. It still looks smooth and shiny to me.
Roidy
P.S. I liked the yellow puddle on the floor when he was done.
The point is, he has no clue why it is all going wrong. The court jestor is pleading for King Ben to wind up the whirly bird and drop rates (money).
What happens if this happens? The markets ignore it and continue to raise rates. Bonds collapse. The dollar goes racing for the low 40’s. And he will just get madder and madder.
The next clip will have his head spining a 360. And then he will start channeling cartoon characters.
You are correct. Cramer really doesn’t understand credit bubbles. Lower rates? Will not work anymore.
Roidy
“Déjà vu”:
Daffy Duck’s…. DDD index:
Dow
Down
Done!
NYSE Volume: 4,000,000,000 + again today?
Bugs: “eh, could be Daffy”
Daffy: “Hey Foghorn, tell the Warner Bros. NOT to let Taz… get on the trading desk in the last 20 minutes anymore!”
Foghorn: “Uh, Daffy, see the Dawg over there, listen hear Son, he’s really a Rooster, a Rooster I tell ya, (whispering in Daffy’s ear)…now here’s what I want you to do Son…”
Wall St shaken by late-day market surges:
http://www.reuters.com/article/ousiv/idUSN0330753120070803?sp=true
“If they want to flood the market at the end of the day, they can, and it doesn’t require them to call someone up and have a conversation” with a broker, he said.
Electronic trading includes systems based on algorithms, complex mathematical formulas that quickly assess a large number of possible trades and execute orders in milliseconds.
“…and then is went dark”
Hey remember when the market “stop” trading awhile back…they blamed it on a “rat” the had chewed through some wiring.
Bugs: “eh, actually…it was Martin the Martian up to one of his tricks”
Wall St shaken by late-day market surges
http://www.reuters.com/article/ousiv/idUSN0330753120070803?sp=true
“If they want to flood the market at the end of the day, they can, and it doesn’t require them to call someone up and have a conversation” with a broker, he said.
Electronic trading includes systems based on algorithms, complex mathematical formulas that quickly assess a large number of possible trades and execute orders in milliseconds.
“…and then is went dark”
Hey remember when the market “stop” trading awhile back…they blamed it on a “rat” the had chewed through some wiring.
Bugs: “eh, actually…it was Martin the Martian up to one of his tricks”
Looks like the PPP (Plunge Protection Program) kicked in today:
http://tinyurl.com/2f6p2k
else the damage would have been worse!
“Déjà vu”:
Daffy Duck’s…. DDD index:
Dow 13,178.49
Down - 284.84 (2.12%)
Done!
NYSE Volume 4,059,321,000
Some housing news from Alaska…
“Home foreclosures in Anchorage and the Mat-Su Valley are accelerating, following a trend that began late last year, and experts say they don’t expect the numbers to taper off soon.”
.
.
.
“As of 10 days ago, we had 600 foreclosures in the state, another 300 are in the pipeline,” Johnson said. “And we expect another 300 before the end of the year.”
“She said Anchorage accounts for about half of the foreclosures and Mat-Su accounts for about a quarter.”
http://hosted.ap.org/dynamic/stories/A/AK_MORTGAGE_DEFAULTS_AKOL-?SITE=AKFAI&SECTION=HOME
Remember Sonny & Cher?:
“And the beat goes on…and the beat goes on…”
Or
Kurt Vonnegut:
“so it goes…”
“So it goes” is a phrase from Vonnegut’s novel Slaughterhouse-Five, or The Children’s Crusade. It’s an expression the Tralfamadorians — a race of four-dimensional aliens — repeat whenever somebody or something dies. It expresses a certain airy resignation about the inevitability of death. Vonnegut — who died Wednesday night at the age of 84…”
What American needs now more than ever…is a returning… one leg, one armed Iraqi National Guard Reserve veteran… who signs a $$$$$$$$$$$ 10 million dollar a year BOWLING contract with Disney.
…Oh, for the love of Buddha:
Manchester United sign nine-year-old YouTube wonder kid
What was so unusual in Davis’s case was that his skills were brought to the attention of United’s youth scouts by the DVD submission, which could inspire other hopefuls, the spokesman said.
http://sports.yahoo.com/sow/news?slug=reu-englandunitedyoungster&prov=reuters&type=lgns
It’s confirmed, I’ve aged…all I hear is Melanie singing:
“Mmm child, things are gonna get easier
Oh child, things will be nicer
Ooh child, things are gonna get lovelier
Oh child, things could be brighter
Someday, gonna walk in the shade of a beautiful sun
Someday, when your head is much lighter
Someday, gonna put together then we’ll get it undone
Someday, when the world is much brighter”
OOH CHILD
Written by Stan Vincent
http://freespace.virgin.net/robert_ian.smith/Songindex/Songhdr.htm