The Million Dollar Question
The Gazette reports from Colorado. “Another month, another record number of single-family homes for sale in the Colorado Springs area. The number of homes on the market jumped to 7,065 in July, the third straight monthly record and an 18 percent increase over the same time last year, according to figures released this week by the Pikes Peak Association of Realtors.”
“For the first seven months of the year, foreclosures totaled 2,006 in El Paso County, according to a report Thursday by the county Public Trustee’s office. Last year, foreclosures totaled 1,483 during the same period.”
“Stuart Scott, a longtime Colorado Springs real estate agent, said the Springs’ housing malaise mirrors that of other cities: Too much money was loaned to buyers who weren’t necessarily qualified, while builders constructed too many homes.”
“But Scott said he’s confident the housing market will rebound. ‘We’re coming back,’ Scott said. ‘I don’t know if it’s tomorrow or a week from Friday or two years from now, but we’re coming back.’”
The Rocky Mountain News from Colorado. “About 300 Colorado homes will be going on the auction block, an attempt by lenders to cull the growing stockpile of foreclosed homes in the state and metro area. ‘I’ve been to auctions before, but not of this magnitude,’ said real estate broker Tom Reed.”
“Colorado was one of the first states in the country to experience runaway foreclosures during this real estate cycle and is on pace to have a record 37,000 foreclosures this year.”
“‘Usually, (there are) no great deals to be had,’ said broker Bev Meade. ‘They’ve generally been available through the MLS for a while now and you could have been bidding on them all along.’”
The Arizona Republic. “Sales of existing homes in Maricopa and Pinal counties has tumbled from 51,256 in the first half of 2006 to 35,267 this year, a decline of 31 percent, the Market Letter reported.”
“The resale market will start to recover as soon as the homebuilders sell their surplus inventory, said Karl Stauffer, an associate broker. ‘Yes, it’s bad medicine but it’s medicine we have to take in order for the patient to get healthy in the long term,’ Stauffer said.”
“There are close to 50,000 listings of existing homes now but Stauffer wonders how many of those homes are truly on the market at a realistic sales prices, or if sellers are holding out for a higher price because they owe more than the house is worth.”
“‘Maybe they’re waiting for the market to catch up with their price,’ he said. ‘But what if it continues to decline?’”
“How far will the market fall before it comes back up? ‘That is the million dollar question,’ Stauffer said.”
The Review Journal from Nevada. “Nearly 100 Las Vegas homes will be sold at auction Sunday, but don’t expect to get some kind of unreal deal just because banks are anxious to rid their balance sheets of carrying costs.”
“Nevada had 3,173 preforeclosure filings in July, up from 2,867 in June, bringing the year-to-date total to 19,044, according to Foreclosures.com. With 746,973 households, that’s a per capita rate of 2.55 percent. Florida is second at 1.76 percent and Colorado is third at 1.49 percent.”
“Frank Nason, president and broker of Residential Resources in Las Vegas, said MLS listings are up nearly 2 percent in July to 29,325. Current listings represent 489 days of inventory, or about a year and four months.”
“Vacant listings make up 44 percent of single-family dwellings, 56 percent of condos and 48 percent of townhomes, Nason said.”
“Listings categorized as ‘repo’ totaled 1,107, an 18 percent increase from the end of June. The category is not a ‘required’ field in the listings, Nason said.”
“‘I receive some lender lists of preforeclosure and foreclosure units and the MLS seemingly understates the number of units that are distressed,’ he said.”
The Salt Lake Tribune from Utah. “Construction of new houses along the Wasatch Front has plummeted this year ‘almost entirely’ because of a decline in affordability, according to a new report from Wells Fargo & Co.”
“In 2007, builders have taken out permits to build 6,875 houses, down 29 percent from 9,707 permits during the same time period in 2006, according to Construction Monitor.”
“‘It’s not an economy problem or a mortgage rate problem,’ economist Kelly Matthews said at a news conference. ‘It’s a pricing problem. We have seen a tremendous decline in affordability.’”
“As an example, he points out that a family with an annual income of $51,000 in 2003 could have purchased a house valued at Salt Lake County’s average sale price of $187,000 with a 5 percent down payment. The buyers would have had a monthly payment of $1,300, with interest rates at the time in the range of 5.4 percent.”
“In the second quarter of this year, a family would have needed an annual income of nearly $90,000 to purchase a house priced at Salt Lake County’s average of $298,000 with a 5 percent down payment. The monthly payment would be about $2,250, Matthews said, with interest rates of 6.5 percent.”
“The problem is that most families did not nearly double their incomes over the past four years, he said.”
“Matthews said a drop in new-home construction this year is only the first sign that affordability is becoming a big issue for home buyers, particularly those buying their first home.”
“‘At some point, [the decline in home sales] will be accompanied by a decline in prices,’ he said.”
“Sterling Jenson, regional managing director of Wells Capital Management, said tighter lending standards are also contributing to the affordability dilemma. In the wake of the nation’s subprime lending crisis, in which lenders made too many loans to high-risk borrowers, who are going into default in record numbers, borrowing standards have become more strict.”
From KCPW in Utah. “‘The banks and the lenders upped their standards and stopped doing sub-prime mortgages,’ says Wells Fargo investment analyst Sterling Jenson. ‘So there are people who just don’t qualify anymore in today’s realm of realism. Banks realize this risk shouldn’t have been extended in the first place.’”
“Unless housing prices go down in Utah, Matthews says new home building and purchases will continue to decline. Even still, he adds the slow-down in Utah’s housing market is mild compared to areas like San Diego and Phoenix where prices have climbed so high that sales have fallen dramatically.”
The Deseret News from Utah. “With average prices nearing $300,000, Utahns are finding it harder to afford the houses they want. ‘Utah’s housing sector is facing a serious disequilibrium,’ said Kelly K. Matthews, economist for Wells Fargo.”
“Utah’s hourly wage remains above the national average, Matthews said, but that isn’t necessarily good news for homebuyers. ‘In no way have (wages) kept up with the housing price situation,’ he said.”
“However, Utah isn’t alone. Decreasing house affordability can be seen throughout the West, especially in Phoenix, San Diego, Las Vegas and Boise.”
“Utah’s housing…sales are slowing and inventory across the Wasatch Front is growing, according to a new report. With 2,585 new vacant houses from which buyers can choose, inventory is still at a healthy level, said Eric Allen, director of Metrostudy’s Utah/Idaho region.”
“‘It is a great time for a homebuyer right now because they do have more options out there,’ he said. ‘They have choices now; they don’t just buy the first thing they see.’”
“Still, the number represents a 112 percent increase in the number of finished vacant homes compared to this time last year. That should be watched closely to make sure Utah doesn’t follow the pattern of troubled housing markets across the nation with too many empty homes and not enough buyers, he said.”
“The price of new houses continues to grow, according to the report. Houses priced below $200,000 accounted for just 17 percent of new home production in June. Two years ago, 48 percent of new homes were in that price range.”
“At the same time, production of new houses costing $300,000 or more grew from 23 percent to 49 percent of the market.”
“High inventory in St. George has become a significant concern, however. A second Metrostudy report released this week noted a 50 percent decline in new house closings in the area and a 5 percent increase in total inventory in the past 12 months.”
“‘I think the bottom line is, there were too many homes built in that market, so now we’re going through the process of slowing production,’ Allen said. As a result, he said, house prices in and around St. George and Mesquite, Nev., have dropped notably. ‘It’s become very competitive down there.’”
Why do they keep on talking about subprime problems and AHM in the same sentence. Surely they know that AHM did not do subslime.
It doesn’t really matter because spinning the info will only get you so far. At some point reality becomes reality again. No matter what now, the market will continue to go down the toilet, both RE and Stock market. The smart money is already on the side in gold, gov bonds, treasury, waiting to scoop up cheap houses and stocks.
I think panic is setting in now.
http://www.cnbc.com/id/15840232?video=452808336
Yikes!
Next Monday will be the true black Monday then?
Wow. I love the disclaimer at the end. LOL.
Now there’s talk of a FED bailout already. Please, somebody, lets get a class action lawsuit against the FED if they bailout the CRIMINALS of the CDO market. I will donate money. I’m sure lots of moral people will. The FED is the biggest moral hazard the earth has ever known. Don’t tell me the FED is protected from a lawsuit because they are a branch of the Treasury! tsck, tsck.
The Fed is not any part of the government, it is a privately owned bank.
That’s why I said “don’t tell me”
“But Scott said he’s confident the housing market will rebound. ‘We’re coming back,’ Scott said. ‘I don’t know if it’s tomorrow or a week from Friday or two years from now, but we’re coming back.’”
There’s a fallacy named after this sort of thinking, but I can’t recall what it is other than perhaps “general stupidity.” Anybody know the name?
Assuming the conclusion? Prices will be back, as soon as infaltion devalues the purchasing power of the dollar enough to bring prices back up…. Assuming inflation, of course.
I was focusing more on his implied limiting value of two years for a housing market rebound. Heck, we all know that will happen some day, the question is when it will break even relative to inflation, as you pointed out. I favor a decade as a rough guess; it’s certainly not going to be two years, unless HeliBen and his financial cronies can somehow defy the odds and reflate this bubble.
They would have to re-inflate confidence… I think we may be beyond that!
I tend to agree, Dan. Then again, after the dot com debacle, I never thought the Fed could pull another bubble out of its hat and avoid a recession. I was wrong, obviously.
Ahhh… False Dichotomy fallacy!
It will be 2 week or it will be 2 years. Not 2 weeks, therefore, 2 years.
Lowering the rates won’t help. They will have to bring back the toxic teaser no-doc loans that inflated the bubble.
Ah, here we go… http://en.wikipedia.org/wiki/Appeal_to_probability
Because the housing market could bounce back in two relatively short years despite rational economic reasons to the contrary, it almost surely will do so, right Scott ol’ bean? Good luck with that RE career.
Faith Based Speculating?!
I can tell Scott when it is most likely the market will come back: 2015. Yes Scott, that house you purchased in June of 2005 should just about be worth what you paid for it in June 2015.
Of course, had you rented a similar house, and saved $1500/mon in payments for 120 months, you would have a greater net worth by $180,000, plus interest, which adds another $49,500 at 5%. And if you take inflation into account, the house will acually be cheaper to buy in 2015.
Keep the faith, Scotty.
‘ Anybody know the name?’
POLLYANNA will work.
LOL. I like it…
Yes, Scottie, you just keep mumbling that a couple million time over there in your cold, dark, dank corner….
By the time it comes back, Stuart Scott will be shining shoes at the Broadmoor Hotel and telling his customers of the glory days of housing in Colorado Springs from 1994-2006.
Utah — one of those last hold-out areas where the locals bleated that they’d avoided the crash of other areas. Glad to see it taking a hit.
Makes sense, doesn’t it? That’s what I was trying to tell the AP.
Ben thanks for the Utah update. It’s a little harder to find good RE news articles there. I have lots of relatives there who have believed the kool-aid drinkers and think I’ve just been sour grapes the past 3 years. They claim they haven’t overbought or taken out any HELOCs when I asked them - I hope they’re not just telling me that.
IMO Utah has no excuse for this garbage. Several years ago the LDS prophet warned the mormon membership to get out of debt and not use unconventional mortgages. But how many listened?….
“the LDS prophet warned the mormon membership to get out of debt and not use unconventional mortgages.”
I’m not a big fan of Mormons (don’t like most religions actually), but if that’s true good for the LDS. At least they were giving out practical advice.
Only the same number who actually don’t drink coffee or alcohol or have sex before or outside of marriage. As a former local, lets just say there seems to be as many or more Starbucks in Utah as there are here in San Diego and SLC has tons of great dive bars.
We had a good discussion on the Utah market on the local news stations blog.
http://www.ksl.com/?nid=148&sid=1579270&comments=true
Well, glad to see that someone on the KSL blog pointed out how all those Californians will come and prop up the prices.
Yep, assuming they can sell their home on CA.
The Deseret News from Utah. “With average prices nearing $300,000, Utahns are finding it harder to afford the houses they want. ‘Utah’s housing sector is facing a serious disequilibrium,’ said Kelly K. Matthews, economist for Wells Fargo.”
“In the second quarter of this year, a family would have needed an annual income of nearly $90,000 to purchase a house priced at Salt Lake County’s average of $298,000 with a 5 percent down payment.
- Don’t most Utah households have three or four wives? They should be able to ’swing’ these prices.
Maybe not wives but definately kids….Kids gobble up the cash real fast….
Actually, my observation is that children have come to be more expensive AFTER they leave the home than they ever were while still at home. Children at home don’t need help with college tuition, college living expenses (=money for partying), down payments on condos, making the payments on the condos, making the payments on the car, and paying off the credit cards.
Children at home actually aren’t expensive if the medical care is from an employer-provided plan, if the food is made from scratch, if it’s three children to a bedroom, and if it’s nothing but hand-me-downs for clothing. But I had a wonderful childhood anyway :).
Utah’s problem is that there is a severe gap between actual income and cost of living for the recreational lifestyle. What Utah’s reasonable-looking $50k median income masks is that that income is really two incomes, sometimes three–Utah, despite being a “traditional” state, has *more* two-income couples than the national average. Typical Utah wages are not $50k annually, they’re $20k-$30k annually. Utah was already very high on the bankruptcy and foreclosure list–and then came the housing run-up. Of course, the house price inflation has headed off bankruptcies and foreclosures–and we all know how that is ending elsewhere. Utah, unfortunately, is on the exact same track.
Isn’t it funny how they say that wages have not kept up with housing prices ? The statmentt should of been in essence ,”Housing has not risen in price due to wage stagnation “.
Since housing rose in price ,in spite of wages not rising in the last 5 years ,how did this happen ?
In other words, why is lack of affordability being reported as not keeping up with the rise in housing . You got it …….They gave people loans they couldn’t afford .
The problem is Utah has never had much of an economy. Wages have been lower than average because kids don’t want to move away from family when they grow up, leading to a labor glut. When I pointed out that wages don’t support housing prices to my relatives they counter with “all the Clowniforians are moving here”. I doubt it, and I think Utah is toast due to the high percentages of shady mortgage products being used.
I remember having a number of friends whose fathers had to work in CA to support their families back in SLC. This was during the 80s and I wouldn’t be surprised if it happens again.
The overall tide of Californians has been coming and receding for at least 25 years. The pattern is that California gets too brown/crowded/expensive then the Californians move to Utah. Then they miss California and for the next five years say “We just moved here from California,” and then they move back to places like the OC. Then in the OC they get all misty-eyed about how great it was in Utah despite the snow, inversion and low pay.
I live in OC, I have never heard anyone say they miss Utah.
;) 
Utah is great as long as you like outdoor activities like rock climbing, mountain biking, skiing, hiking and so on. If you don’t do activities like that on a regular basis you probably wouldn’t like it here.
And don’t forget that you’re LDS.
The truth………….
I really hate to throw fuel on the anti-Utah fire, as I love the place, but you’re right. Utah has a severe problem with young people, often young married couples, who won’t consider looking outside the state for work (because, of course, all their family lives in-state, etc.) So they end up scratching by with multiple miserable hourly jobs, like working at the call centers or at restaurants. Throw a too-expensive “starter” home (twice as large as what they really need), and it’s a recipe for financial disaster.
Quite simply, there are way too many recent college graduates for the number of real entry-level jobs available. The situation is much better for jobs requiring real (twenty years plus) experience, and of course it’s a great place to retire, but financially it’s a very difficult place for young people.
Given that I love those outdoor activities, Utah is a wonderful state (despite its politically “red” status). The southern portion of Utah contains some of the best natural scenery in the entire country. However, last I was there, I remember making a stop for a quick bite at St. George. Just a routine meal except that a lot of young adults were hanging out, loitering around the parking lot. When I was heading back towards the car, they had stopped doing whatever they were doing - talking, horsing around - and just gazed at me. Some of them smiled. At that very moment, I glanced at their mouths and saw that most of them had their teeth missing.
Nothing like the sight of endemic meth mouth to draw homebuyers/investors into that area.
from the Vegas article:
TOP 10 PREFORECLOSURE STATES
State Filings Per Capita
Nevada 19,044 2.55 percent
Florida 111,250 1.76 percent
Colorado 24,045 1.49 percent
Illinois 52,984 1.35 percent
New Jersey 37,250 1.22 percent
California 132,101 1.15 percent
Arizona 20,669 1.09 percent
Utah 5,773 0.90 percent
Texas 46,595 0.81 percent
Georgia 19,382 0.75 percent
SOURCE: Foreclosures.com
If you back out the population of Florida based upon these numbers you get 6,321,022 total population. The actual number is approaching 17,000,000. I think it’s the percentage of outstanding mortgages?
“They have choices now; they don’t just buy the first thing they see.”
The inventory numbers suggest they haven’t bought the second thing they’ve seen either - or the third, or the fourth, or the fifth…….
they have choices now..
yeah they do. Buy a declining asset or, instead, buy a declining asset.
Of course if they’re very careful, they might be able to buy a declining asset.
I finally get Jim Crammer’s “Just walk away” comments. He’s been screaming for the Fed to cut rates for 6+ months. He’s convinced… Let me correct that. He is SAYING that a rate cut will save housing, turn around the foreclosures, restore liquidity, etc.
1) I think he’s wrong. Housing is unaffordable and any liquidity flowing into the market would go somewhere else. In those video clips, he showed a good enough understanding of what is going on to know that an interest rate drop won’t save housing. Too many houses.. plow them under…
Besides, treasury rates are falling, but that isn’t helping housing. The spreads are rising much faster!
2) That may be what he really wants. He’s a stock guy, and he’s hoping, begging, demanding, and now blackmailing the fed to lower rates. Lower rates, or else I’m going to keep telling people to just walk away.
What a sleeze!!!
What happens when people can’t afford the payments at 0 percent interest? That is what will happen if they cut rates.
Oh, they’ll be fine at 0%, at least during the interest only period.
ROFLMAO
They’ll always be a spread. Even if fed goes to 0%, treasuries will be at least inflation rate, and mortgage rates will be above treasuries.
What would happen? Stock market would go 1997-2000….Which is exactly what Crammer wants, and is pretty much DEMANDING!
Banks aren’t going to loan at 0% interest, period. I can see it being as low as 3% fixed if the feds are at 0% but the problem is houses are so expensive that the principle is the problem.
My parents could give me a 0% interest loan and I wouldn’t come close to being able to afford a house. There is property taxes, HOA and insurance.
I agree. His calling on the Fed to reduce prime by one % was not to save housing but to bouy up the stock market to new highs. We don’t need a rate cut with companies making money hand over fist and buying back their own stock. At some remotely future date, maybe; but even then, companies need to practice good marking to stay in business and not expect their surrogate father (Uncle Sam) to save them.
Do people actually listen to him?
He’s employing disingenuous overstatement to contrast the fear of an outright housing market collapse against his solution. Money was loaned for free/below inflation for several years so there’s bound to be an impact when it’s no longer free. His solution is to run the tap half on instead of shutting it completely off. Don’t try to slow inflation from where it now stands, just keep it under control. He’s stated that he prefers a bull market environment to a bear environment.
Not that I agree or disagree, just the messenger here.
I don’t watch him all that much, but even I thought he was very agitated today. Ya think he’s personally got himself incredibly leveraged?
DOW down almost 300 points! WOW!
People are running around my office building almost in a panic right now… Can sheep stampede? If so, I’d better take off soon and work the rest of the day from home.
ROTFLMAO!!
Sheep can stampede, but they are difficult to shear. Best to keep them unawares.
Hey, didn’t anyone here see “Babe.” He could steer ‘em. “That’ll do, Pig.”
It would be down more if people really figured out that all the people unemployed that are associated with RE don’t even collect unemployment. Most are independent contractors and do not pay in or collect.
Truth be told, I was in kind of a news void last week.
Translation: I was on vacation. And no Internet and no news was VERY nice. Among the people I met, NOT ONE mentioned the stock market meltdown. And the stores and restaurants I went to were doing a brisk business.
Gonna be a while before this really impacts Main Street.
I agree, it is a Wall Street event for now. It won’t be a Main Street event until they need a new credit card, need to ReFi, or they finally max their HELOC.
This is not even close to a “meltdown.”
So far it is just an ordinary market correction and smaller than the one of May 2006. It’s burning off those who were “certain” housing problems were contained in subprime. The US market has been relatively flat for years, as stocks around the world have stomped on the returns from the US.
For chrissake, the Dow is still 1000 points above the March lows.
Still, it’s like that line… “You’re dead, you just don’t know it yet.”
The meltdown is in the bond market. Spreads up 1.5% in a week?
The Review Journal from Nevada. “Nearly 100 Las Vegas homes will be sold at auction Sunday, but don’t expect to get some kind of unreal deal just because banks are anxious to rid their balance sheets of carrying costs.”
If they really did auction all 100 houses, with no reserves, there might be some real deals, but up until now we haven’t seen any actual high-price-takes-it-no-matter-what auctions.
You know when the MSM is starting to pay attention when editorial cartoonist start to notice.
http://news.yahoo.com/comics/070802/cx_stahler_umedia/20070208;_ylt=ArAWFVv8aDh6gjSsqWmiDFJJ_b4F
I thought this MSM Sunday comic was especially telling… http://tinyurl.com/yrc87f
Anyone seeing the stock market at closing. Has me worried. Comments on my blog (click my name). Or just wait for Ben to open a topic.
I posted on the bond comments of BS’s CFO.
Getting interesting folks. Scary too…
Got popcorn?
Neil
Thousand point drop in a week, Neil? Maybe…..maybe a 6000 Dow, a 8000 dollar truck and a 80,000 dollar house is more to my liking.
If this is deflation, let her rip, and I’ll shovel the coal into the boiler.
Liking the deflating popcorn already.
Rooting against the Dow is all well and good, but for better or worse, that’s retirement for a whole lot of people who actually are trying to save. Of course you have to diversify the 401k, but I shudder to think about what a dow at 6000 in the year 2030 will mean. I don’t think anyone is gonna have enough cash to survive decently. Short term, maybe. Real deflation would be scary as hell.
Housing’s a different story, ridiculously obvious that it needs to come down to anyone looking at it objectively.
Steve, Anybody looking at the stock market objectively or the bond market objectively or the art market objectively or (pick your bubble) would realize it was obvious that these were all over inflated and would need to come down.
Yes I am truly sad that many individuals entrusted their moneys to 401Ks and to the stock markets. The US stock market is up 800% in the last 20 years, but the US GDP is up only 250% in the same span. Is this not bubbly?
I hear you on that, but what’s the alternative? I’m not looking for the 25% yearly growth, I just want a nice 30 years of 5-7% on average.
What is right for me is not right for other investors. There are a lot of excellent alternatives available. If you are long the US stock markets through funds, look into bear funds. I move into and out of bear funds regularly. Go with a no load fund. One does not have to put all one’s moneys into a bear fund to hedge good stock long positions. The bear fund that I am currently in is up 7.69% today and over 25% in the last 2 weeks.
And it all came in the last hour……
Stocks are volatile. The recent market has been abnormally NON-volatile. No surprises anywhere.
Scary? Don’t worry, this just in: US consumers beginng to move toward a positive savings rate! People are now only spending every last cent they make and not a penny more! We should be fine.
this is what we call a balanced savings rate
Exactly, that sort of terminology should make everyone feel better about the negative financial news we’re seeing. Let’s continue to spin it and see if we can right this sinking ship: Consumer overspending is now “contained”.
For some crazy reason the wall street dudes like to encourage and pump up investing in foreign economies … I think that they are paper thin and will take a real whuppin. They are ‘emerging’ into the unknown.
Neil, having been a broker for Merril Lynch in the 80’s , i can speak with certianty that the worst is yet to come. Most stock traders are always bullish and trying to get them to think other wise is difficult at best. There are times to step aside and let the bull $hit run. I think this is the time!!!
“As a result, he said, house prices in and around St. George and Mesquite, Nev., have dropped notably.”
People I talk to seem to think the price drops we’ve seen have been significant. I disagree. When I suggest there’s long way down before we hit bottom they look at me like I’m nuts. They then say “Well, prices will never go back down to where they were.” I then ask, “Where they were when? What year?” I’ve yet to get a straight answer from anyone. Most people are still in denial.
I am starting the “dead cat bounce hedge fund”.
I buy beat up stocks that will bounce the next day. Annual returns are 1000 percent.
Anyone want to give me their money?
HAHA
In case anyone cares, the “real” correction may start August 15, according to Toddo on Minyanville. That’s the day which is 45 days before the end of the 3rd quarter and investors will notify hedge funds of redemptions. Then they’ll have to sell stuff to meet those redemptions.
Keep that in mind if you see a DC bounce next week.
But they won’t “have” to sell stuff if they suspend all redemptions, will they?
“Utah’s housing…sales are slowing and inventory across the Wasatch Front is
growingcrashing,… With 2,585 new vacant houses from which buyers can choose,”Quick, quick: jump at the opportunity to own a ‘zero bedroom’ in Park City for 325K. (That would be a studio, in the old days).
Just got a phone call from a buddy of mine that Centex laid of 5,000 people..walked in and got the “here is your last paycheck” deal…thanks..
Anyway to confirm this?
NovaStar Puts Some Loans on Hold
By Laurie Kulikowski and Mark DeCambre
Staff Reporters
8/3/2007 3:33 PM EDT
URL: http://www.thestreet.com/newsanalysis/banking/10372335.html
NovaStar (NFI) is suspending funding of some mortgage loans, according to a bulletin the lender sent mortgage brokers Friday.
A copy of the email message posted on several housing-related Web sites cites a “severe dislocation in the secondary market” for the decision. The move applies to “all loan transactions that have not been locked via a NovaStar Lock In Confirmation” through Tuesday.
The note says new loan applications will be accepted but will be put on hold till the suspension is lifted. NovaStar, which has been a leader in the business of lending to homebuyers in the hard-hit subprime market, said it will re-examine the decision on a day-to-day basis.
“This is not a long-term decision or change in strategy,” a spokesman told TheStreet.com, “only a temporary response to dislocation in the secondary market.”
NovaStar focuses on non-prime loans as well as Alt-A loans — the areas that have been hit hard by rising defaults and delinquencies. It does not originate prime or agency loans, so the credit quality of its products tends to be lower.
The news comes just over two weeks after NovaStar lined up some financing from investors led by MassMutual and Jefferies. TheStreet.com had earlier reported a deal was shaping up.
The suspension of mortgage funding comes as another big lender to customers with shaky credit histories, American Home Mortgage (AHM) , wound down operations Friday following a failure to meet margin calls.
On Thursday, Accredited Home Lenders (LEND) said it might be forced out of business should the market for mortgage-backed securities continue its steep decline.
Financial stocks were hit hard Friday after ratings agency S&P cut its outlook on Bear Stearns’ (BSC) credit rating to negative from stable, citing the firm’s exposure to losses tied to the imploding subprime and leveraged loan markets. Bear Stearns said in a conference call Friday afternoon that it has ample liquidity, but finance chief Sam Molinaro said the debt markets are the worst he’s seen in 22 years.
Shares of NovaStar fell $1 in heavy trading Friday to $6.19.
Good night, Novastar. Wow, it’s all unwinding very quickly now.
– Judge Smales
“You’ll get nothing and like it”
When I changed jobs back in Feb, I moved into a building where a NovaStar office is… (aside, someone had pulled off many letters of thier sign so it just had No Sta (No stay))
Anyway, in the 6 months I’ve been working there, I’ve never seen more than one person intheir office that could easily hold 1 dozen. Last Friday, there were movers in there packing up the last computer, the fax, printer, etc. and stacking desks in the back of the now empty office.
O/T but it gave me a chuckle for the day. I was just watching CNBC financial channel where the panel was discussing debt issues wanting the Fed to step in and save their asses. Some even admitted that this isn’t a subprime issue but all agree that they don’t even know who owns what or how deep it goes. Quote of the day, “we need to watch the price of the collateral and assume that someone owns it”. I can’t wait to see these ivy league suits crash and burn. Any bail outs will only mean more big yearly bonuses.
I saw that, too.
The consensus was that the Fed’s reaction will depend on if Helicopter Ben is an “academic” or an activist who will institute a “Bernanke put.” Leave rates alone, Ben. Let the market sort out the dead and wounded on its own.
– Judge Smales
“You’ll get nothing and like it”
I think we’re all delusional if we think the Fed will stand by and do nothing while their beloved too-big-to-fail banks begin to realize billions in losses. Ben and the boys will start dropping the fed funds rate in 50 point chunks.
I would love to see a link to the mormon prophet assertion. I watch the Utah market close and have never seen that in print. Also, Saint George and Utah County are two of the most mormon parts of the state and have the greatest use of sub-prime morgages so the advice clearly was not followed by the membership if it was given.
They’ve been saying this for years yet few listen.
80 years ago http://tinyurl.com/39auxo
“Let every head of every household see to it that he has on hand enough food and clothing, and, where possible, fuel also, for at least a year ahead. You of small means put your money in foodstuffs and wearing apparel, not in stocks and bonds; you of large means will think you know how to care for yourselves, but I may venture to suggest that you do not speculate. Let every head of every household aim to own his own home, free from mortgage. Let every man who has a garden spot, garden it; every man who owns a farm, farm it.” (Conference Report, April 1937, p. 26.)
20 years ago http://tinyurl.com/3b7zo7
“Now, when personal incomes are generally high, is the time to pay off obligations. I doubt that there will soon be again a more favorable time for Latter-day Saints to get out of debt than now. Let us use the opportunity we have to speed up repayment of mortgages and to set aside provisions for education, possible periods of decreased earning power, and emergencies the future may hold.”
http://tinyurl.com/36du2g
“Owning a home free of debt is an important goal of provident living, although it may not be a realistic possibility for some. A mortgage on a home leaves a family unprotected against severe financial storms. Homes that are free and clear of mortgages and liens cannot be foreclosed on. When there are good financial times, it is the most opportune time to retire our debts and pay installments in advance. It is a truth that “the borrower is servant to the lender.” (Prov. 22:7.)”
10 years ago http://tinyurl.com/2yooh8
“Be modest in your wants. You do not need a big home with a big mortgage as you begin your lives together. You can and should avoid overwhelming debt. There is nothing that will cause greater tensions in marriage than grinding debt, which will make of you a slave to your creditors. You may have to borrow money to begin ownership of a home. But do not let it be so costly that it will preoccupy your thoughts day and night.”
2 years ago http://tinyurl.com/38dzza
“My brothers and sisters, I’m appalled at some of the advertising I see and hear advocating home equity loans. Simply put, they are second mortgages on homes. The promotion for such loans is designed to tempt us to borrow more in order to have more. What is never mentioned is the fact that, should one be unable to make this “second” house payment, one is in danger of losing his house.”
“Avoid the philosophy and excuse that yesterday’s luxuries have become today’s necessities. They aren’t necessities unless we ourselves make them such. Many of our young couples today want to begin with multiple cars and the type of home Mother and Dad worked a lifetime to obtain. Consequently, they enter into long-term debt on the basis of two salaries. Perhaps too late they find that changes do come, women have children, sickness stalks some families, jobs are lost, natural disasters and other situations occur, and no longer can the mortgage payment, based on the income from two salaries, be made.”
“It is essential for us to live within our means.”
No problem. They all have jars of cash in the basement.
From the LDS General Conference, also included in the print edition of the LDS Church’s magazine; this is a very high-profile talk that has been heavily quoted and emphasized by other Church leaders since:
President Hinckley, October 1998
“I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years . . . We are carrying a message of self-reliance throughout the Church. Self-reliance cannot obtain when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others.”
Other quotes from Church leaders from General Conference:
Elder Worthlin, April 2004
“Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.
Some debt—such as for a modest home, expenses for education, perhaps for a needed first car—may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs.”
President Monson, April 2006
“We live in a time when borrowing is easy. We can purchase almost anything we could ever want just by using a credit card or obtaining a loan. Extremely popular are home equity loans, where one can borrow an amount of money equal to the equity he has in his home. What we may not realize is that a home equity loan is equivalent to a second mortgage. The day of reckoning will come if we have continually lived beyond our means.”
Sorry to say to the Utah Mormons, but they have been warned repeatedly in the clearest possible terms to avoid debt and not live beyond their means, and specifically as that pertains to housing.
Utah Mormon here…and renter. The “ward family” culture here has us all extremely involved in each other’s lives. There is a constant awareness of the fact that your every move is a performance and you are on display. Not just your moral conduct, but your social status. Our little subculture here is beyond keeping up with Joneses. It’s weird how we pick and choose which laws we want to obey.
There are always exceptions (like me!), but it’s sad that the majority of these suckers will just bend over and take the investor-set prices thinking that’s just how it is now.
Ugh, and Ikea just came to town. If I go there, I break the rules and go on Sunday to avoid the crowds.
I’m glad you mentioned the culture issue of keeping up with the Jones in the extreme because it had come up in another thread about Utah. Glad to see it confirmed by an on the ground Mormon.
As a side note: I was raised as a “sort of” Catholic in VT. People in the VT Catholic community have zero problems using birth control. Divorce isn’t too much of a problem either - you could still go to church, etc. (Just couldn’t be married again within the church doors.) It didn’t matter what the pope said or what the theology read. If your neighbors and the priest was okay with it, it must be okay.
It makes sense to that if the local Morman leadership and culture put a value on “stuff” how Utah could end up the way it is, despite the edicts to save for a rainy day.
‘I don’t know if it’s tomorrow or a week from Friday or two years from now, but we’re coming back.’”
maybe not today, or tomorrow, but soon
and for the rest of our lives
hyperinflation on the way?
I don’t understand the mechanism for hyperinflation. Is it just printing more money? I thought the fed and banksters create money via a fractional reserve mechanism that relies upon the borrowing of money to create credit. With this credit crunch happening, and tighter lending standards, won’t this be difficult to force hyperinflation?
Thoughts anyone??
Seems to me a credit crunch means money is more expensive, whereas inflation makes money less valuable.
Banks have been essentially given permission to print money by way of changes to the fractional lending rules along the lines of no fraction or minimal fractions required. This is why the Fed can’t reign things in unless it revisits fractional lending which is politically problematic at a number of levels.
Public debt, the government will have to be the “borrower of last resort” and the federal government will grow to be about 70% of GDP (it is currently around 50%). When Chile (or was it Brazil?) hit this point they quickly started into hyper-inflation.
The government doesn’t actually have to grow to hit the 70% figure if the rest of the economy shrinks…
http://tinyurl.com/34ff2v
“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.”
‘Alleviating a credit squeeze’ won’t fix this:
‘As an example, he points out that a family with an annual income of $51,000 in 2003 could have purchased a house valued at Salt Lake County’s average sale price of $187,000 with a 5 percent down payment. The buyers would have had a monthly payment of $1,300, with interest rates at the time in the range of 5.4 percent.’
‘In the second quarter of this year, a family would have needed an annual income of nearly $90,000 to purchase a house priced at Salt Lake County’s average of $298,000 with a 5 percent down payment. The monthly payment would be about $2,250, Matthews said, with interest rates of 6.5 percent.’
Still, it’s the question everyone is asking: Will the Fed lower or raise the rates?
My guess is that the rate will remain the same after the next Fed meeting, but subsequent meetings will be followed with increases.
Even if the Fed lowers rates, the secondary mortgage market is requiring higher rates to account for risk:
http://tinyurl.com/337w4l
from the MarketWatch link: “The mortgage market disruption will likely mean some home buyers will pay much higher interest rates to get a mortgage, Perry and SCM’s Chow said.
The cost of making non-agency mortgage loans is about 102 cents for every 100 cents of the loan, Chow estimated. But right now mortgage originators can’t sell the loans at 103, he noted.
To get selling prices up, loans will have to have much higher interest rates, he added.”
Yeah, but will the Gov’t guarantee the non-conforming loans? How much is outstanding? Regardless, this does nothing to fix the inventory problem.
Even these price-to-annual income ratios make me shudder, and they’re sane compared to what’s occurred over the past few years. The ratio was 1.25 (after 20% down) for my wife and I when we bought our current house, and that gave us heartburn because we thought it was too high. Just old fashioned, I guess.
The only thing they FED and gov’t could do is allow Fannie and Freddie to make 0% interest loans at 50 years. Can they do that?
Can the FED get in the housebuilding business? That’s the only way they can save housing. Build houses and give them away.
“Build houses and give them away.”
Nice thought Tom, but wouldn’t that make things worse?
Yes, I was being sarcastic LOL
I know and was just kidding - long time reader of this blog.
more political than effective. They can’t bail out owners who don’t qualify according to newly tightened guidelines, and they can’t bail out the lenders when no one knows who owns the loans anyway. It’s toast.
Agree. Bailout would ONLY help the lenders by converting the U.S. treasury into the bag holder.
Darrell, I think you nailed it on the head. “The US Treasury” means you and me… that gets the people who own this country off the hook. When hedge funds lose money, they lose. When America loses, they win. Tell me you disagree.
But hedge funds and subprime lenders have been dropping like flies for months and nobody has done a thing.
You are most assuredly correct Mr. Jones, the Federal Reserve cannot do anything to prevent this collapse. I disagree with most of the feds actions, but the gentlefolks that are the governors of the Federal Reserve are not bovine brains.
They can set up new programs all they want…
Its too late. Too many people don’t want to own unless the price is set to increase. Think about how &*%#ed that is.
We’re in for a credit crunch. I do expect an emergency cut in the Fed rate. That will only drive import inflation through the roof. Remember, China has gone from exporting deflation to exporting inflation. *Nothing* our government (or China’s) can do will stop that.
Got popcorn?
Neil
http://www.minyanville.com/articles/Fed-gold-dollar-crb-FOMC/index/a/13565
Can’t remember where I saw it (sorry), but companies that went hog wild to China thinking that they would have 10, 15 or 20 yrs of gravy train are now realizing that the wheels are comin off faster (costs are rising more than they thought, earlier than they thought) and the impact on US workers paychecks is worse, etc. That’s why you see so many sales at Walmart, mark downs every where, The big China, China, China mantra is a death song.
And all of these foreclosed homes that will not be auctioned off will just sit there, and lose more value, and get damaged, and lose more value…people who bought new in these neighborhoods (not for profit but to actually live there), honestly I do feel a bit sorry for them.
my willingness to live with zero monthly rent while maintaining an abandoned home has shifted to an attitude of demanding to be paid for the service..
One’s capacity for altruism goes only so far.
If you can worm your way into the position of being a caretaker for a neighborhood of unoccupied homes then you just might be able to pull it off.
These places will need someone to watch over them 24/7 just to keep the squaters and looters at bay.
The shills at CNBC look really, really, really scared… Of course they’re still cheerleading and saying the correction is “normal”, “good” and “temporary”… but watch the tone and the body language. They know things are about to get really B-A-D.
Pass the popcorn!
I like pill they were handing out yesterday: ‘The subprime debacle and the decrease in auto sales here in the USA is minuscule (billions of dollars) when compared to the world economy (trillions of dollars). Not to worry!’
You really have to admire these spin doctors as they really do buy into their own spin, all the way to the unemployment line.
Funny watching “Goldilocks” Kudlow crudding in his pants. Shouldn’t the Fed come out and reaffirm their role as lender of last resort to restore liquidity? Says Kudlow.
The discount window is open, says a guest. It would just require the investment bank to book the deal above the table, forcing them to book the loss. What they want to do is do the deals under the table where the deals aren’t “market” so they don’t have to make the rest of their portfolio to market.
Then he jumps on the St. Louis fed chairman that said the Fed isn’t going to drop rates just to prop up stocks. Isn’t that their JOB, asks Kudlow?
No responds the guests. They have many jobs including inflation, jobs, economy, stability, etc.
Now they are trying to talk up the jobs report. And talking about how great wage increases are compared to core inflation… Whatever!
ARG!!!!! I HATE Kudlow.
Fat banker duds says that the Schumer bill that places hard lending standards hard codes the housing collapse and people in ARMS won’t be able to reply. Other guy jumps in saying they market is ALREADY doing it. Kudlow cuts him off, and gives the fat banker dude chance to finish. Freddie and Fannie have been receving receiving tax payer money. They should open up the standards and let people refi to stay in their houses… cut to commercial!!!!
No chance for ANYONE to point out that he’s just transferring the burden! Hello, who is going to buy Freddie and Fannie bonds once they open the gates and drop the standards????
Back from commercial… Stocks at 6 P/E based on future earnings, that aren’t going away in the 3rd quarter.
Arg. Amazing how you can win an argument just by controlling who gets the first word and WHO gets the last word.
“Arg. Amazing how you can win an argument just by controlling who gets the first word and WHO gets the last word.”
…don’t forget “and by controlling WHO the guests are in the first place”…
You must not have noticed the devolution of public-policy (politics) over the past 15 years thanks to the 24×7 cable news networks or talk-radio.
Some more good news:
Sam Molinaro says fixed-income market condition could be worse than the 1980s stock market fall and Internet bubble burst.
http://tinyurl.com/3ypnvj
I wonder how realtors would spin this one. Then again, I guess you can’t really spin what you don’t understand.
Cocaine Larry says “It Ain’t 1929.”
http://tinyurl.com/2dtrvw
“Moreover, non-management wages are 3.9 percent above a year ago. This is well ahead of the inflation rate. It means the wallets of American workers are gaining real ground in real purchasing power.”
Puuuuuuke! I need to ask my boss what I’m doing wrong, cuz I didn’t see 3.9% And how far ahead of inflation is 3.9%?
No kidding. I got 1.5% and I was happy to get that! Who knows what inflation is running at these days? I’d argue it’s a lot closer to 10% than 3%.
85249, I agree. What is the inflation rate. Official rate is dishonest because it does not take into account home prices, oil prices or food! Where the heck are we supposed to put our savings if we don’t know the actual inflation rate, but suspect it’s 10%? CDs? Forget them, after you pay taxes on the gains.
Two more observations:
1. In the same vane as the post from Darrell above, isn’t this Kudlow piece supposed to be a blog entry? How come we can’t respond?
2. The Bush boom?? Is he kidding?
I think the lady doth protest too much.
Comments? On NRO? Surely you jest. You don’t think Bill Buckley’s Boys are going to let you rain on their propaganda parade, do you?
No one’s got the great “lines”, like Larry.
Cramer’s doing it again.
Cut the rates now! People are losing their homes…cut the rates. Bernanke will be the Hoover unless he cuts the rates… people are losing their homes.. cut the rates. Worst bond market in 22 years.. cut the rates.
He’s taken off the “sad clown” persona, no funny sounds.
Flat out begging the fed to cut rates.
Sad really.
Damn… beat me by less than a minute!
Cut the rates now! People are losing their homes…cut the rates. Bernanke will be the Hoover unless he cuts the rates… people are losing their homes.. cut the rates. Worst bond market in 22 years.. cut the rates.
I saw that also. He admitted to owning a couple of hedge funds and that he wouldn’t qualify for a loan because his credit wasn’t stellar.
So, he wants the bail out to bail him out personally? Noice?
What a buttface!
His “just walk away” comments are 100% correct. Where he has it wrong is in the “this will instantly turn around if the Fed just cuts rates 1%”. Sorry, but houses are way too expensive, and that won’t change with a 1% drop in interest rates.
HOLLY crud. He just did the “just walk away” line on CNBC….. Street.com is one thing, but CNBC???
Holy cow Cramer is acting SCARED. I”ve been entertained by this fool for a few years and have NEVER seen him like this.
“I’m not hitting any buttons, that’s not the point of this” - as he begs Helicopter Ben to lower rates.
“Ensuring Hooverville”
I’m a single renter working for a DoD contractor in IT with 100% of my 401k in emerging mkts as of two weeks ago… Even I’m concerned by this.
A brief history for those just joining the show:
1. Bubble Boomers decide to pile into stocks in the 90’s. This can’t miss financial maneuver creates a massive bubble, especially in tech stocks.
2. When this insanity starts to implode on its own weight, Corporate America starts screaming for rate cuts to keep the economy going. They even promise to do the heavy lifting when consumers run out of steam. They forgot to put this in writing, however.
3. Greenspan, always a willing shill, drops rates to the floor. The idea was to pump up housing so people would feel richer, and thus take out massive loans to keep Corporate America rolling in the cash.
4. Once the real estate bubble expands to insane levels, the media and our worthless government are instructed to provide “happy talk” to keep the casino going. Corporate America bought our politicians and they are going to get their money’s worth, damn it!
5. While this happy talk is being catapulted relentlessly, the bankruptcy laws are changed “just in case” the happy talk fails. And that WAS put in writing!
6. Meanwhile, CEO’s all across America are cashing in billions worth of stock options, so they can retire fat and happy, and watch the implosion from a safe distance. Looking good! Feeling good.
7. Like any ponzi scheme, this housing bubble starts to implode on its own weight. As new money (i.e suckers) begin to run out, and the previous suckers start to go BK, the entire scam begins to implode. The lenders start to wonder if maybe these AAA rated MBS are really more like AAA rated BS! Wall Street strikes again!
8. Next thing you know, one massive MARGIN CALL goes out, as the ability to get cash is replaced with the need to RAISE cash. This takes stocks, bonds, boats, collectibles, and everything else with it. The debt monster must now be fed. And this thing is SUPER hungry!
9. The Wall Street Gangsters try to stop the implosion with more happy talk (Subprime is contained!). When this doesn’t work, they decide to halt redemptions on some funds. This is a nice way of telling their investors “you lost all your money but we’ll be happy to send you a bogus happy talk statement while we can figure out which country to flee to!
10. Meanwhile Joe SixPack needs to refinance that suicide loan he got last year from his buddy over at [FILL IN BLANK WITH IMPLODED BROKER], but guess what Joe - the banks don’t want to change the terms of the insane loan you were stupid enough to take on. It seems the guy that told you that you could “always refinance” got pink slipped last week, so get ready to meet his replacement. His name is Ben Dover.
11. The Corporations see the train wreck coming and decides to start screaming to LOWER RATES again. We are talking about bonuses here! Ben “Burn the Currency” Bernanke, always a willing shill for his Corporate/Wall Street masters, gets ready to drop rates.
12. One problem Ben faces is how to drop rates without screwing up all the happy talk they been shoveling on the public. Seems like a contradiction, although Joe SixPack isn’t that bright so Ben and the boys aren’t worried too much.
Okay, you are all caught up now. What comes next? Real estate prices collapse, liquidity goes with it, Ben drops rates, the dollar takes a shit, and with it the US economy. That retirement most Boomers were counting on is imploding, so if you were counting on bubble homes and bubble stocks to fund your retirement, it might be time for Plan B.
Otherwise, enjoy living on Alpo…er…mac and cheese.
All that remains now is that “Soviet Union” style bailout these “free market capitalists” are crying for. And we all know this is coming.
Is this a great country or what?
You forgot a few. Pension plans that were underfunded are forced to seek above market rates of return. They plow money into the tech bubble, and all the money is transferred to venture capitalists that brought unprofitable companies to market through IPO. 401K and other retirement moeny also goes to the venture capitalists.
Pension plans, having taken losses in tech and now further underfunded and needing above market rate returns plow money into the riskiest venture (sub-prime mortgages) hoping for returns that make them solvent. People that took a 401K beating in 2001-2002, move out of stocks into bonds, which end up in MBS. The venture capitalists put their ill-gotten tech bubble gains into equity funds, that end up in MBS.
The money flowing into house mortgages ends up in the hands of consumers and RE industry which quickly spend it on good made in China. China needs to keep the exchange rate low to keep their prices cheap, so they lend the money back to the U.S. and it too ends up in MBS.
When the housing bubble collapses, everyone is the bag holder in some way. The people that were moving the money through the system got their cut, but unless they get it converted out of dollars, it isn’t going to be worth much.
This is so much fun. Watching everyone flip out on the financial networks is enormous entertainment. Maybe I’ll hire one of them when they get laid off.
This ain’t 1929,no kidding, it is like 1929
Well Utah was one of the last places to go “up” so it appears to be one of the last to go down. This is just the start of course. These remind me of the articles I read a few years ago in LV and Tampa. “Economists” predicting the “prices will hold, and appreciation will continue”, bubble proof and all that garbage.
Despite is eccentricities, Utah is a wonderful place. One of the things that HAD made it wonderful was it’s low cost of living. It’s not so appealing as it once was.
This will be interesting to watch from the sidelines, as I plan on moving back to SLC in the next 1-3 years.