At The Core This Is A Healthy Adjustment
Some housing bubble news from Wall Street and Washington. “As the market corrects itself Standard Pacific’s investors are scared, sending shares of the homebuilder down to levels unseen since the last bubble.”
The Orange County Register. “‘We’re hearing they’re about to violate bank covenants,’ said Joseph Saluzzi, co-head of equity trading at Themis Trading LLC.”
“‘Standard Pacific stock is down because of talk of liquidity concerns,’ said analyst Frederic Ruffy. ‘We had a similar rumor on Beazer Homes last week. There is a general fear that the problems are spreading beyond the subprime lenders.’”
The Miami Herald. “WCI Communities said 17 percent of its condominium buyers have walked away rather than close on new units this year, the latest indication of trouble in the condo market.”
“WCI also said the company is not in default of any credit agreements. Still, the builder said it’s renegotiating terms with lenders to ‘provide broader latitude to operate during the protracted downturn.’”
“‘Buildings yet to close from now through the middle of 2009 will see progressively higher walkaways because they were contracted later in the boom cycle when prices were at the highest point,’ said Deerfield Beach real estate analyst Jack McCabe, who has long argued that too many condos were built.”
The Associated Press. “HomeBanc Corp., a mortgage lender and servicer in the Southeast, said Tuesday it is exiting the mortgage origination business.”
“HomeBanc has been unable to tap its lines of credit in order to fund new originations, which has led it to cease its lending business. The company said it had to stop funding all mortgages Monday because of the loss of liquidity.”
From MarketWatch. “Shares of Luminent Mortgage Capital Inc. slumped on Tuesday after the home loan investment company warned that it’s been hit by lots of margin calls as the secondary mortgage market ’seized up.’”
“Luminent said last week it was not really subject to this risk. It does not issue loans, but rather purchases loans backed by good credit. The company confirmed it still planned to pay its dividend and had enough cash to keep operating.”
“A week later, Luminent issued a news release some analysts said spells the company’s demise. Luminent’s markets ‘have deteriorated significantly and in an unprecedented fashion.’ Its lenders want their money back.”
“Joseph R. Tomkinson, CEO of Impac Mortgage Holdings, Inc. announces the following response to current market conditions: In light of the continued and widely publicized volatility in the secondary and securitization markets, we have suspended funding on loans previously referred to as Alt-A loans.’”
“Mr. Tomkinson commented, ‘We would like to remind our stockholders that these rapid changes are widespread in our industry and while we are continuing to assess the market daily and can not make any assurances.’”
The Houston Chronicle. “One of the nation’s largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers.”
“‘It’s a bloodbath out there,’ said Mark Cady, senior vice president of Market Street Mortgage in Houston.”
The International News. “A senior Bank of China executive on Monday said the US mortgage crisis would cause it to lose several million dollars from mortgage-backed investments, but the fallout would be minimal.”
“Zhu Min, vice president China’s largest foreign exchange bank, said that the bank had invested several billion US dollars in mortgage-backed securities and losses would amount to several million dollars.”
“Asia as a region had until June 2006, invested $226 billion in US mortgage-backed equities. Worth trillions of dollars, US mortgage sector has been buffeted by a national housing slump.”
From Dow Jones. “Borrowers in California, Nevada, Hawaii and Florida face the harshest drought if banks cut off the flow of some popular but riskier mortgages. A broker at mortgage brokerage firm ACE Mortgage Funding LLC estimated Friday that 90% of mortgages that don’t conform to standards set by Fannie Mae and Freddie Mac have disappeared in the last three days.”
“As one visual sign of banks’ cooling to a variety of mortgages they had introduced over the years, the broker’s morning loan rate sheet dropped to one page, versus 10 pages usually. The broker asked not to be identified.”
“California led the nation in originations of payment-option ARMs, with about 24% of all its refinanced and first mortgages falling into this category last year, according to data firm First American LoanPerformance.”
“These home loans, also termed negative amortization loans because they tack any deferred interest on to the back of the loan, represented about 17% of Nevada’s total mortgages last year, followed by just under 15% for Hawaii and about 13% for Florida.”
“‘You’ve seen growth in the states with high home-price appreciation,’ said LoanPerformance spokesman Bob Visini.”
From Bloomberg. “Fannie Mae, the largest source of money for U.S. home loans, asked its regulator for permission to take on more mortgage assets and help ease a crunch in the credit markets, a person with knowledge of the request said.”
“Fannie Mae officials approached the Office of Federal Housing Enterprise Oversight in the past few days, seeking to have restrictions lifted so it can hold more home-loan assets in its portfolio, said the person, who declined to be named because the discussions were confidential.”
“‘At our conforming limit, the $417,000 mortgage will buy you a very nice piece of property in most of the country,’ Freddie Mac CEO Richard Syron said in an interview. ‘In Boston, New York, San Francisco, it won’t. So I think that is something that has to be taken into consideration.’”
“Participants in financial markets shouldn’t get their hopes up that the Federal Reserve will intervene to alleviate the current market turmoil, a former Fed governor says.”
“”I think it is too early right now to think about any kind of intervention by the Fed,’ said Susan Phillips, now the dean of the George Washington University business school in Washington.”
“Phillips said that the financial markets’ volatility is a painful but healthy ‘reality check’ and that this has led to an overdue repricing of risk. ‘We’re in the middle of that process,’ Phillips said. ‘The Fed wants the market to find its own right place,’ she said.”
The New York Times. “The end of cheap credit may be overdue. In the last few years, Wall Street has taken advantage of cheap money to make loans and finance takeovers that may not have made economic sense, said Robert DiClemente, chief United States economist for Citi — formerly called Citigroup.”
“‘At the core this is a healthy adjustment,’ Mr. DiClemente said.”
“Ed Yardeni, the president of Yardeni Research, said he had little doubt what choice Mr. Greenspan would make if he were still in charge.”
“‘Under Greenspan, my guess would be that the Fed would be already talking about priming the markets for a possible easing,’ Mr. Yardeni said — through lowering of interest rates. But Mr. Greenspan is not in charge anymore. Mr. Bernanke is, and he appears to be more inclined to allow the credit crunch to play out on its own, Mr. Yardeni said.”
“‘The definition of a crisis in the Greenspan era was any market environment preventing a trader from getting 100 percent of his bonus potential,’ said.”
“Bernanke is trying to wean the market from that form of life support. It’s a slow process, and during times of stress, old habits reassert themselves.”
“At times like these, it’s important to remember that ‘Greenspan is no longer Fed chairman,’ Bianco said. ‘It’s a dirty little secret that not too many people know.’”
From Reuters. “The U.S. housing downturn may be the first true test of Ben Bernanke’s leadership at the Federal Reserve, but many on Wall Street say the dilemma has its roots in the legacy of his predecessor, Alan Greenspan.”
“During his 18 years at the central bank, Greenspan unleashed the greatest credit boom in recent memory, bringing interest rates to their lowest levels in a generation. The result was an unprecedented lending bonanza.”
“‘Years and years of easy monetary policy under Greenspan created a tremendous amount of excess liquidity, which caused a total mispricing of risk,’ said Frank Hsu, director of global fixed-income at Fimat. ‘Now we’re getting payback.’”
“Indeed, rising default rates in the U.S. subprime mortgage industry, which targets borrowers with sketchy credit, have begun to jeopardize asset prices worldwide.”
“Analysts trace this debacle back to Greenspan, who not only cheered on the Internet boom but also battled its bust with yet another dollop of cheap credit.”
“‘He got carried away, caught in the ‘new economy’ hoopla,’ said Alan Ruskin, chief international strategist at RBS Greenwich. ‘That’s ultimately proved quite problematic.’”
“Throughout all of this, central bank officials have remained sanguine, insisting the housing downturn was contained and would not have a broader impact.”
“Many believe officials will have to acknowledge the seriousness of the situation in this week’s policy statement, although they must carefully balance any such remarks with positive comments on the economy, if only to prevent the markets from whirling into a tailspin.”
“But even this trap of perennial optimism can be traced to Greenspan’s legacy. By embracing ephemeral fads like the ‘new economy’ and ‘innovations in home lending,’ the former Chairman made it harder for Fed officials to face reality without unsettling markets.”
“‘The U.S. housing slump was totally predictable, but the Fed remained in denial about it for a very long time,’ said Bernard Connolly, global strategist at Banque AIG in London. ‘A lot of the problems we see today stem from Greenspan’s term in office.’”
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Greenspan is going to lose his mind and say something to drive all of WS crazy when he reads these quotes.
Remember how upset all the talking heads got when he used the R word?
Wired: ARMaggedon
Tired: Granite countertops
Expired: Pay-option mortgages
Inspired: Renters and savers
Desired: buyers (of credit or houses)
Retired: Complex financial Instrument Investors
Greenspan, the same guy who tauted the subprime loan as a good financial tool, the same guy who said ‘irrational exuberance’ and in the same breath created more ‘ultra-rational exuberance’, should be hanged for his idiocy.
Robert Schiller is a genius. He called two bubbles. Darn good.
An excellent record, Schiller has. I guess it takes a genius to look beyond groupthink and see the obvious. Moreover, unlike myself, who only sees the obvious and not the groupthink, he got the timing of the peak pretty well too.
The tarring and feathering of Greenspan has begun. I expected this would happen but not so soon.
BTW, GS was correct when he talked about ARM’s. The problem was the MSM who took his quotes out of context, and extrapolated it to mean everyone should buy houses using ARMs. What GS said was that a savvy investor could have saved a lot of money in the past by using ARMs instead of fixed-rate mortgages. He didn’t say to go out and use an Option only ARM to buy the biggest house you can make the negative-am payment on.
Dream on. The banks/lenders “pushed” arms, toxie loans as that was where the big fees were. Qualify at a lower teaser rate to get the loan approved for the home buyer was the goal and turn the loan over after 30 days in many cases to someone else who would take this smelling garbarge. Could care less if the buyer at a later date after loan adjustated could make the payments. Fees, money are what the banks/lenders wanted and that’s what they were rewarded.
Scam is now coming to light and Greenspan or others for him can’t spin it any differantly as the hook was set and the fish swallowed the bait and hook big time. The rest is history!
“He didn’t say to go out and use an Option only ARM to buy the biggest house you can make the negative-am payment on.”
********
You’re right.
Though the problem was that right after those MSM-adjusted comments made by AG in February 2004, nearly every single realtor and mortgage lender here in the Alt-A Bay Area went out of their way to jam potential clients into some form of an exotic mortgages.
Besides intimating “see, even the Maestro endorses them…” they also did this by scaring many of the local intellectual lightweights into believing they’d be “priced out forever” because the FFR was due to go up, as it finally did in June of 2004.
We may all pay a price for this stupidity for a long time.
“‘It’s a bloodbath out there,’ said Mark Cady, senior vice president of Market Street Mortgage in Houston.”
It’s armageddoning out there. It’s armageddoning real good!
Gotta love those Texas boys, George Bush all the way down to the realtor, the car dealer. They all think and sound the same, from foreign policy to selling real estate to selling cars.
Amy, you’re generalizing. I didn’t vote for George in either election. But a bunch of non-Texan idiots in this country did - hope you weren’t one of ‘em.
Austin, Texas?
Sweeny, Texas - pop. 3,472. Go ‘dogs!
Just another tid bit in my email box, among dozens of cancelled programs, it’s a bloodbath out here:
“To: All National City Home Equity Origination Sources
RE: Suspension of Approving Loan and Line Applications
Date: August 7, 2007
Effective Monday, August 6th, 2007, National City Home Equity suspended the acceptance of new applications and the issuance of preliminary approvals on previously submitted loan and line applications.
Is there anyone left out there?
No one left. IMPAC…”we have suspended funding on loans previously referred to as Alt-A loans.”
IMPAC was the funding source for all the USHomeAuctions.com financing. Gone. Of course the auction allowed shill bidding by the auctioneer on behalf of the foreclosed lender.
It looks like we may be getting back to Abolute All Cash Auctions………………then the action starts for us!!
Here in the Alt-A Bay Area within the last hour or so, KCBS radio (San Francisco) interviewed a Finance dept academic type from Anderson (UCLA) on this National City suspension.
The interviewer/announcer/host (24 hour newsradio station) kept trying to interject, several times, with “but it’s the subprime… right?”
The Anderson guy patiently explained what National City was doing and what it meant. He then moved on to problems in the secondary market (”packaged securitization”) and how Fanny and Freddy might soon be allowed to pick up Jumbo’s to aid in keeping the house lending market from seizing up completely. He said things occurring now would “dampen” home prices in California.
It finally dawned on the interviewer that very many California mortgages are jumbos (”prime borrowers?”) and that the subprime problems may no longer be contained. When informed that OFHEO regs would have be changed to allow Fanny and Freddy to buy jumbos, all the host could say was “well, let’s hope for the best” - as if envisioning levitating house prices would indefinitely defy gravity for infinity in all of coastal urban California.
It looks like the banking crowd got use to the “Greenspan put” couple of decades when things went south even a little. This time they cried out to Cramer for help who reacted like a buffoon on Friday on CNBC.
A few bankers don’t make money or lose their shirt…cry me a f’in river !
Bernanke would be wise to function more like Paul Volcker than Greenspan.
Fed leaves rate unchanged, Financial’s stocks are up after the announcement. What were they all crying about anyway? Get back to work on making a better banking product, or go out of business. Volitility sure does expose the hacks. JIM CRAMER, I’m am talking to you!
“Bernanke would be wise to function more like Paul Volcker than Greenspan.”
*******
Or, as I would prefer to say to Chairman Bernanke:
“‘Do the Volcker’ and drain the liqidity cesspool before we all drown!”
His policies remind me of hard-core domestic violence without intervention… it’s right in front of your face but it’s so completely over the top and out of your normal contextual experience that you almost don’t even see it…. you certainly don’t do anything to stop it.
“‘At our conforming limit, the $417,000 mortgage will buy you a very nice piece of property in most of the country,’ Freddie Mac CEO Richard Syron said in an interview. ‘In Boston, New York, San Francisco, it won’t. So I think that is something that has to be taken into consideration.’”
Just give it time and $417,000 might buy something nice in those areas mentioned
The current limit is absurd. One can make a case for the federal government adding stability to the process of obtaining an INITIAL mortgage, a buyer’s FIRST mortgage.
Getting FAMILIES into a first home with some stability is (arguably) a reasonable government role. However, everything after that initial purchase is a matter of CHOICE. The limit on mortgages should be fixed at the historic rate of, what? Three times average/median income? For most of the country, that would be about $150,000.
The higher the limit, the more pressure on home prices. Its just like government subsidies of college tuition….they just go higher, they don’t become any more affordable.
After the first purchase you should be on your own. Either you demonstrate you can own a house, pay for it and maybe improve it (sweat equity creation) or you can’t.
As to the cost differences in various parts of the country, tough. I chose to live in Boston and stay in Boston a long time ago. The higher relative housing prices is a choice I’ve accepted. No one put a gun to my head to stay when housing prices escalated.
The Feds should be REDUCING the maximum loan amount given the clear evidence of today’s real estate debacle. Subsidizing INITIAL home ownership by FAMILIES is one thing, providing benefits to speculators, singles, childless couples is another.
Worse, subsidizing highly LEVERAGED McMansion purchases is stupid on so many levels its too obvious to iterate. Being able to deduct interest on million dollar mortgages from federal taxes is just so wrong its ludicrous to even discuss.
Please someone take Syron down, peg by peg on this stupidity.
I couldn’t agree more. These proposed “bailouts” will only make homes more expensive and put taxpayers on the hook at the same time.
What they ought to do is tie the lending rate to median incomes on a county basis. If the most they’re willing to underwrite is 2 to 2.5xmedian income for the county, you’d get a decent chance of having reasonably sized loans. If you underwrite anything above that, you’re pushing housing prices up, which is bad for first time house buyers.
I moved my mother from the Boston area to Ohio in 1976 when she retired, and her standard of living for the rest of her life was much higher for it. We would both have preferred to live in Boston if we could have afforded it, but that wasn’t the case. You makes the choice & you pays the price.
“subsidizing INITIAL home ownership by FAMILIES is one thing, providing benefits to speculators, singles, childless couples is another. ”
Ben’s blog over the past 2 years has provided a mountain of evidence that greed is not limited to single people. Th numbers of irresponsible parents who gambled on real estate is legion. Responsible people who chose to have children budget themselves accordingly. Renting is always an option.
Where in the constitution does it state that taxpayers should be required to subsidize the housing choices of people who choose to have children?
You want children–pay for them.
You a house–pay for it.
Excellent post. I don’t think the gov’t should subsidize ANYONE owning ANYTHING. Because of ridiculous subsidies, we have people in McMansions (FHA loans) and small business owners driving Hummers as commuter cars (Tax depr. breaks). Both of these situations are less than desirable and both groups are wanting more gov’t bailouts.
HEAR, HEAR!!
Jag, WTF is the deal with giving priority to “families” over childless couples? Shouldn’t there be a level playing field? People should make sacrifices if they want to have kids, not expect everyone else to pay for them!
The wife and I have been saving for four years for a downpayment. IMHO, *that’s* responsibility. Crapping out kids is not.
You’ll note I use the term “arguable”.
I am of the opinion that helping families establish a reasonable lifestyle, subsidizing education for all children, are fundamentally important for a society. A healthy family TENDS to result in relatively healthy adults.
The harder it is to raise children, the fewer there will be as well as fewer HEALTHY ones. Unless you’re going to die in the next few years YOU have an interest in healthy families producing healthy kids.
Yes, it is (mostly) a choice to have children. You want them, you should plan your finances to accomadate them. However, my children should grow up to be productive citizens because I’ve invested the time, resources and (I hope) values that will produce that, happy for all, outcome. Fortunately, we’ve not needed help and, with our resources, we shouldn’t have gotten any.
However, there’s a lot of good people trying to raise good kids who do need a break, here and there. That doesn’t mean the entire government budget is turned upside down for them but it is penny wise and pound foolish for anyone to imagine they will be better off letting lower and middle class families fend, entirely, for themselves.
So, the next generation happens to grow up and finds various cures, solves various problems and those who had no kids, who did nothing to propagate a healthy next generation should get a “free ride”? That’s “fair”?
“So, the next generation happens to grow up and finds various cures, solves various problems and those who had no kids, who did nothing to propagate a healthy next generation should get a “free ride”? ”
Excuse me, “free ride”? By what measure? The various no-downpayment plans propagated by the government, including W’s American Dream Homeownership program, all focus on providing maximum give-aways for families. So how’s that working out?
You’ve got federal and state tax write-offs for kids, property taxes for schools, rec centers, and government subsidized health care for children.
If you work for corporate America, the shareholders and indirectly, taxpayers, pick up the cost of private health care for kids. And that’s just a start.
So, this next generation is going to cure something? Sure?
Can I get a written guarantee in exchange for my tax dollars? All hysterical parents are convinced their children are special, but most are just ordinary. So, are these ordinary kids getting a “free ride” too.
Your plan would guarantee a disconnct between work and reward, between living frugally and accumulating assets.
Hell no, just wait for the government and the taxpayers to pick up the costs. If the kids see their folks getting government check, hand-outs and bail-outs, what have they learned about making their own way in life? Nada.
Remember that when your social security checks are due.
I keep these things in mind when I pay my quarterly taxes.
Actually stable and responsible family units contribute to the stability of a society. Childless couples subsidize some costs for families to be sure, but childless couples and single people benefit from the social stability of a flourishing middle class comprised primarily of family units. Don’t be too reactionary and realize that both sides get benefits. Countries with once very stable and thriving populations who now have very low birthrates are increasingly unstable because to make the country function, they have to import an ever increasing number of workers to perform duties as the population ages.
Agreed. I am sick enough of being “punished” by not having a spouse who ALSO makes more than the median HOUSEHOLD income since you need TWO people like that just to get anywhere in Maryland these days.
Boy do I agree!!!!! Housing and student loans are a racket to fleese the poor and middle class.
Nooo. Don’t raise the limit in NYC, cut the prices.
Sorry, I refuse to pay that much - maybe $299K for a 4bd/2bt in a nice area.
Deal?
It looks like the banking crowd got use to the “Greenspan put” couple of decades when things went south even a little. This time they cried out to Cramer for help who reacted like a buffoon on Friday on CNBC.
A few bankers don’t make money or lose their shirt…cry me a f’in river !
Bernanke would be wise to function more like Paul Volcker than Greenspan.
It looks like the banking crowd got use to the “Greenspan put” couple of decades when things went south even a little. This time they cried out to Cramer for help who reacted like a buffoon on Friday on CNBC.
A few bankers don’t make money or lose their shirt…cry me a f’in river !
Bernanke would be wise to function more like Paul Volcker than Greenspan.
At some point we the people need to stand up and say enough is enough. The fact that everything that has gone on has been easily predictable and that our government together with the FED has systematically stolen the wealth and prosperity of the american people over the past 95 years should be more than enough grounds for a revolution.
Why do we let these people continue to “make the rules up as they go?” Why do we even pretend that they are “experts”? (Experts at fraud) Why do we permit the media to lie to us, the bankers to steal from us, and the government to enslave us by taking one liberty at a time?
I hope for a peaceful “Ron Paul Revolution”, but at some point the average joe/HBBer must take a stand and overthrow this corruption.
While this corruption may provide an opportunity for smart/agile individuals to make some money in the downfall, ultimately we are destroying our society and the future of our children.
Where do we begin?
Rant over… I’ll go back to work now…
Is everyone on this blog a Ron Paul supporter? I’ve been impressed with him ever since we first moved to Houston. It really p*sses me off how the “conservative” media (TV and radio) attacks him like rabid dogs. They make their money off the establishment, which makes its money off impoverishing citizens. Guess the thought of having someone at the top who says that’s wrong scares them to death.
I think most on this blog realize the folly of intervention in free markets. If the Fed hadn’t slashed interest rates and encouraged adjustable rate loans the housing bubble (and inevitable bust) never would have happened.
Ron Paul is one of a small minority of politicians with a record of voting against increases in government. The fact that he can speak intelligently about foreign policy, economic theory, and history isn’t hurting his cause.
My bad, that was a reply to Devil Dog’s comment above.
An HBB’er doesn’t have much other choice than Ron Paul in this election. He is the only candidate who’s voting record and platform does not contradict himself nor the long established conclusions found on this blog that something is seriuosly wrong and hard choices have to be made to correct.
Granted his viewpoints on some subjects go way beyond what may be possible in America, but you can find comfort in the fact that he believes in concensus and compromise.
I’m a Ron Paul supporter, and a donor to his campaign. Shame on any right-thinking person who isn’t. And those of you who go on voting for the Republicrats (the Hollow Men of the Wall Street-owned Democrat and Republican parties) have lost all right to complain about the state of the country. The clinical definition of insanity, after all, is repeating the same actions but expecting different results.
Is everyone on this blog a Ron Paul supporter?
Maybe not everyone, but I’ll bet it’s a pretty good chunk of the regulars.
Check out this entry in Herb Greenberg’s blog:
http://blogs.marketwatch.com/greenberg/2007/08/novastar-headed.html
You guys are harping on novastar, but novastar is dwarfed in non-conforming mortgage origination by…. THE HOMEBuilders. Read on:
For those who really do not have the time to read building company annual reports, here is a bullet list of tidbits that all will find interesting, particularly in light of today’s mortgage environment:
1. Joint venture debt and depreciating inventory held off balance sheet, so you and I can’t see it.
2. A significant amount of the non-conforming market has all but seized up, which will significantly reduce the demand for housing, in an environment where the supply demand ratio was totally out of whack to begin with. I know you think you already know this, but wait…
3. Large public home builders are some of the largest non-conforming mortgage originators, funded by warehouse credit lines that have been the source of unprecedented margin calls throughout the non-bank mortgage industry (which the homebuilders are a member). Banks have internal financing such as deposit accounts to fund mortgages, but non-bank entities must rely on credit lines to fund loans. Significant non-conforming mortgage operations that have already been put out to pasture amount to about 60 mortgage companies - totally out of business, and the secondary market has
Wow, another nail in the coffin….hmmm……understated….perhaps the silent spike thru the heart?
“‘The U.S. housing slump was totally predictable, but the Fed remained in denial about it for a very long time,’ said Bernard Connolly, global strategist at Banque AIG in London. ‘A lot of the problems we see today stem from Greenspan’s term in office.’”
Oh PLEASE! Stop making sense. You are disturbing my comfortable FB alternative sense of reality and real reality is not something I want to deal with right now. I’m a debt junky. Gimme a cut. Spread me a new line. Gimme a cut please!
predicted here since 05
I’m a debt junky. Gimme a cut. Spread me a new line. Gimme a cut please!
Yep, we are debt junkies! But you will get no cut this time(and you will like it).If you are really good and promise to load up on debt past your eyeballs them we’ll give you a cut next go round… Santa FED.
get ready for the release.
a semi-colon, or a comma in the wrong place, and this market is gonna shoot to the moon.
nothings changed people…
“‘At our conforming limit, the $417,000 mortgage will buy you a very nice piece of property in most of the country,’ Freddie Mac CEO Richard Syron said in an interview. ‘In Boston, New York, San Francisco, it won’t. So I think that is something that has to be taken into consideration.’”
Given the current liquidity crunch, my biased guess* is that thehousing market will adjust to the Fannie limit rather than the other way around
*speaking as a renter in SoCal
it’s only good if you already sold, yo
–
I have maintained for the past 3-4 years that the culprit was the Federal Reserve and the bankers nad financiers of New York City (BFNYC). The companies making risky loans were just the foot soldiers in the army of BFNYC. The victims are obvious — tens of millions of American households.
Jas
Yeah, the tens of millions who had to put off buying a house. Those who in their non-greedy, rational approach to housing, realized that it was simply un-affordable and decided to put off their dreams of home-ownership.
If you bought at or near the peak you were either greedy or didn’t educate yourself or both. You really can’t equate lenders to scammers because in the case of a scammer you lose your money every time. A lot of people made a lot of money speculating in housing. Lenders were more like casinos than crooks.
“Shares of Luminent Mortgage Capital Inc. slumped on Tuesday after the home loan investment company warned that it’s been hit by lots of margin calls as the secondary mortgage market ’seized up.’”
Computer Blips will sink a lot of Financial $hips…
“This night time medium naturally lends itself to ecclesiastical buildings, stately homes and ruins.”
Son et lumiere
I realize that this is not going out on a limb. However, this is going to get bad, relly bad. Anyway, I think from here on out till the bubble deflats totally, I think we will get a steady diet of at least 1 major player, i.e. bank, hedgie, mortgage house, or home builder falling apart on a weekly basis now for several months, maybe 5-6. I am also not counting the implode-o-meter counts since there are a lot of small time, relatively speaking, players on that list. I am just looking at the big platers like Bear Stearns, Beazer, etc. I think we are in for the ride of a lifetime now.
FIrst: Just a slump.
Then: sub-prime is contained.
Then: Alt-A defaults through the roof.
Now: spreading outside sub-prime. Defaults doubling every 3-6 months. Just walk away becomes the mantra.
Soon: Full scale spill over to the larger economy.
I’m seeing firsthand evidence of the credit crunch. There are For Sale signs popping up on more and more units in my TH development. (This is a community greatly in demand because it’s the cheapest RE in a “hot” zip code, and moms like it cause it’s in a supposedly wonderful school district.)
There was a flurry of sales activity April - mid June. Since then, nothing. End units galore. (One finally sold, but another promptly took its place.) For the most part, sellers are standing firm on their pricing, or reducing 2-3%. If first-time buyers can’t get financing, these small slivers of reductions are not going to cut it. I can see prices dropping like a rock this winter, between the increasing inventory and the resetting mortgages.
yes, people will get much more desperate in markets with a “real” winter — the NE, the upper midwest — as the number of potential buyers drops to practically nil from november to march.
“For the most part, sellers are standing firm on their pricing, or reducing 2-3%. If first-time buyers can’t get financing, these small slivers of reductions are not going to cut it.”
I think this is a HUGE point. When I sold my home, my fear wasn’t having to reduce my price. My fear was what has played out the last few months, an inability for buyers to get financing. I got lucky and sold in January, before sub-prime problems hit.
Prices have a long way to go down if financing is truly getting back to the way it was and gets back in line with incomes.
Meant to say, “I think this is a HUGE point that sellers are underestimating.”
For what it’s worth.
I heard that conduit loans for commercial properties have changed overnight as well. spreads went from 100bps to 200 bps overnight. Insurance companies are being inundated with loan requests, and consequently, their spreads have gone from 120 bps to 160bps overnight.
Commercial developers who were relying on the lower spreads for their take-out loans are in for a world of hurt.
Its lenders want their money back.”
Now why would the lender’s want their money back?
The originations were fraudulent, the underwriting demented, and the appraisals done by a bunch of number-hitter, bucket shop employed hacks workin’ for a split fee of a hundred bucks.
The MBS hucksters knew the score.
What’s that phrase now, caveat emptor?
don’t worry… be happy wall st will just take their money to the islands
Bear Stearns Caymans Filing May Hurt Funds’ Creditors
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX9aWxCf9y3o&refer=home
Bear Stearns what a “smart” move. Off shore and hard to sue. Do you think this was dumb luck or perhaps they knew what might happen in the future by their actions? Good poker players know when to fold.
Three our of every four hedge funds _worldwide_ registered in Cayman Islands. Hardly a coincidence…
I guess this means we won’t be seeing that dancing alien on the web anymore. I’m going to miss him.
“‘The definition of a crisis in the Greenspan era was any market environment preventing a trader from getting 100 percent of his bonus potential,’ said.”
“Bernanke is trying to wean the market from that form of life support. It’s a slow process, and during times of stress, old habits reassert themselves.”
Couple this with Cramer’s meltdown on Friday last and you have a remarkable week in the housing market. I think that Cramer’s meltdown was a red letter day marking a new change in ‘market talking points’. Before it was there is no bubble, then subprime won’t affect A loans, then the lending debacle is only a smidgeon of the world financial markets, and now:
1) The big boys on Wall Street are screaming they need help. It started with 7 million home owners would be affected and then they raised it to 14 million to get the Fed’s to come to their rescue. Bottom line, they didn’t see it coming that fast and couldn’t unload to the novice traders fast enough.
2) They aren’t saying that flippers and scammers are the majority getting caught in the housing debacle, they have gone to the MSM and are saying what will the Feds do about grandpa and grandma who won’t be able to make a mortgage payment. Pure BS, keep interest rates at 5% or better and a rational grandpa and grandma will be just fine and any other fool and his money will soon part company.
Question for the experts: as we want to move to Flagstaff, AZ next year I have been looking at the NA MLS for some time now. Astonishingly, prices have hardly come down at all - if any. Do you guys see any moves there at all?
Joe
check the inventory-that’s the key
can’t be far off
http://www.housingtracker.net/askingprices/Arizona/Phoenix-Mesa-Scottsdale/
“A broker at mortgage brokerage firm ACE Mortgage Funding LLC estimated Friday that 90% of mortgages that don’t conform to standards set by Fannie Mae and Freddie Mac have disappeared in the last three days.”
Interesting because up til Friday I was getting on average 2 cold calls per day on refinancing a home loan when I’m a renter. Things should start getting interesting here in Salinas real quick especially going into September and October. November is 2nd installment month for property taxes and then we hit the Xmas holiday spending. By January the local RE crowd will not have anything left to hide behind.
Fed retains bias, no bailout imminent, Cramer losing it again.
The Feds remained pad ,just as the old Housing Wizard predicted a year ago ,but the pressure is building on the Feds to make a decision one way or another and I think BB was saying that they are responding to the current data ,and they aren’t going to make a premature decision based on Wall Street crying for relief .
Sorry ,I mean that BB remained pat not pad . Boy , interesting times right now . BB should just go for saving the dollar IMHO .
‘The Federal Reserve, keeping interest rates unchanged, said inflation is still the biggest danger to the economy while acknowledging that the economy may weaken.’
‘Although the downside risks to growth have increased somewhat, the committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected,’ the Federal Open Market Committee said today after meeting in Washington, where it left the benchmark rate at 5.25 percent.’
Yah, that’s pie in the eye of Cramer, that’s for sure. I read it as to say: “Yes, credit is collapsing. But inflation and the dollar are our major concern. Thank your lucky stars we didn’t raise the rate this time.”
Right Ben , and that is why I think after everthing is said and done BB is going to raise rates by the end of the year or maybe sooner IMHO .
Wizard, keep dreaming. The Fed will fall all over itself in dropping the fed funds rate as soon as the losses start mounting for our too-big-to-fail banks. I’m not sure I’ve ever read a more idiotic FOMC statement than the one they put out today - “All is well, move along.” WTF?
‘The Federal Reserve, keeping interest rates unchanged, said inflation is still the biggest danger to the economy while acknowledging that the economy may weaken.’
Strange…that sounds a lot like stagflation.
Yippee….BB is keeping it 5.25% and keeping his mouth shut….a slower road to hell…..but better than a rate cut which would have lead to inflation and the dollar’s demise globally.
Let the markets collapse and at least keep a strong currency at home so we have some tools left to build anew again.
1 Euro = 1.37470 USD
No way Ben can ease with that kind of exchange rate. There’s no way. The guy is stuck between a rock and a really, really hard place.
Few new items:
National City Bank that has offices in quite a few eastern states all the way now to FL, has cut off all brokers as of yesterday. No one can get a mortgage or equity loan from them unless they apply direct in one of their branch offices (No brokers allowed). This is going to massively cut off a lot of independent brokers, because they said 27% of their loans were thru brokers.
In our county in NE Ohio, my brother-in-law who is clerk of courts said that 1 in 15 homes are in or on the edge of foreclosure.
I caught a commercial last night that tonight on the nightly news Katy Couric is doing something on the housing bust.
http://www.cnbc.com/id/20157294
Clinton Outlines Plan to Toughen Mortgage Rules
In an exclusive interview on CNBC, presidential candidate Hillary Clinton outlined her plan to toughen standards for mortgage brokers and to set up a $1 billion federal fund to help homeowners avoid foreclosure.
“I think a lot of the lenders have really taken advantage of what is a really tough economic situation for many Americans,” Clinton told CNBC’s Dylan Ratigan during the live interview. “Although many of us have done well in the last six-and-half years, the median income in America has dropped $1,300, while healthcare costs, tuition and other costs that are really part of a middle class and working family’s budget have increased.”
In order to ensure mortgage brokers are qualified, she also thinks there should be more screening and a national registry of brokers as well as greater disclosure of the terms of broker compensation.
Clinton also proposed a $1 billion federal fund for local and state programs that help at-risk homeowners avoid foreclosures. She said those programs could help the “unsuspecting families” linked to unfair mortgages.
toughen ? she’s offering bail again
In order to ensure mortgage brokers are qualified, she also thinks there should be more screening and a national registry of brokers as well as greater disclosure of the terms of broker compensation.
You need more education and a license to cut hair and these people are handling the finances of millions. Somethings wrong with this picture.
In order to ensure mortgage brokers are qualified, she also thinks there should be more screening and a national registry of brokers as well as greater disclosure of the terms of broker compensation.
A bunch of happy talk to lure voters away from Obama.
She’s just getting in front of the housing bust issue. May be a little early, though.
Who knows what else will crop up between now and Nov ‘08 as prez election fodder?
I like this…
“Clinton also proposed a $1 billion federal fund for local and state programs that help at-risk homeowners avoid foreclosures.”
1) A billion dollars is a drop in the bucket
2) She’d have to collect tax dollars from those at risk homeowners to fill that coffer. If they had that money they’d be paying their mortgage.
“unsuspecting families” linked to unfair mortgages.”
The only thing that was ‘unfair’ was that these people were allowed to own a home without earning it. Pure BS and pandering by HRC.
“unsuspecting families”
I call BS. Did they read their loan documents? Did they make even a rudimentary budget? Or did they just decide to jump on the RE gravy train, and HELOC their way to a new standard of living.
Yeah, I’d like to see a “deserving” family with no HELOC, no cc debt, no refis,reasonable savings reserves, who were responsible enough to read and understand the loan documents they signed, and who bought a house at 2.5 x their income, with a 20% downpayment. These folks are probably doing just fine. That’s what I call a “deserving” family.
“Although many of us have done well in the last six-and-half years, the median income in America has dropped $1,300…”
*********
Well, of course median income has dropped since six and one half years ago!
At that time, by the end of the last decade, we were in another bubble which was propping incomes (much like home equity withdrawals recently) that eventually popped.
Why does no one, including presidential candidates, seem to forget this fact?
“no one” should have been “‘everyone’”
Don’t want to turn this into a political blog, but I feel it is my patriotic duty to remind folks that Hillary Clinton is 100% politician. How do you know when she’s lying? When her lips are moving. How can we forget how she miraculously turned a $10K investment into $100K in just a few months by trading in and out of poultry futures? Did she suddenly have some strong feeling as to the direction of one of the most illiquid markets on the planet. I think not!! More about hubby’s conection to Tyson foods and gaming the system. Now she wants to campaign and talk about how the little guy is getting taken advantage of. Puh-lease……
“The higher the limit, the more pressure on home prices. Its just like government subsidies of college tuition….they just go higher, they don’t become any more affordable.”
Double bingo, on housing and higher education.
Meanwhile, the Fed leaves rates unchanged, with no language implying a rate cut is imminent. I guess when caught between a rock (a mortgage meltdown) and a hard place (a dollar collapse), it’s hard to move.
From Economy.com via MSNBC:
http://www.msnbc.msn.com/id/3032072/
“The Fed has argued for some time that risks were improperly priced. To bail investors out at the first sign of losses would be a mistake that would just engender more risk-taking in the future.”
101 subsidy = price increase
30 years ago 30% of blacks and 40% of whites went to college
the bubble shows us that no one got any smarter
When you see the Financial Goliathons in their birthday suits…
They look so much smaller~
Okay, I know I’m 2 weeks late in this “how would you fix the problem thread we had one weekend”, but it hit me.. first as a joke, then it made more and more sense.
Let’s say the govt is thinking of a $1 trillion bailout. That could be letting Fannie and Freddie or FHA take on $1 trillion in doomed, overextedned loans.. money from the treasury to the lenders. I think they have given up on the idea of a direct bailout of handing the lenders checks to cover their losses on loans after foreclosure.
Okay, so stay with me…
Let’s say we come up with a list of “deserving” Americans. We start with the 110 million American households. Then we slice out the millions that we can say significanlty contributed to the probelm. Realtors, mortgage brokers, appraisers, Wall Street bankers, hedgies, people that got AltA loans with stated income more than they claimed on taxes, etc. Plus we slice out anyone with more than half a million net worth.
Now take out anyone that didn’t cash in huge on the boom. If you sold more houses high than you bought, you are out. If you bought a second home in the last 5 years, you are out.
What is left? The people that bought high, and the people that didn’t buy or sell. What, 70 million households? Slice up the $1 trillion . That is like $14K each. Or, a bit under 1/3rd the median household income.
Now, chop that up $1 trillion at 1/3rd IRS reported income for our 70 million deserving citizens.
BUT, we don’t cut you a check. We let the mortgage holders have first crack at teh money. If you owe on a mrotgage, the mortgage company gets the money, but then subtracts it from what you owe. If you don’t owe on a home, then you get a check.
1) Punishes people that gaied from the bubble, rewards those that sat out.
2) Reduces what people actually owe on their homes.
3) Will stimulate the economy.
Either I owe a lot less on my house, or I have cash in my pocket. Either way we increase spending, stimulating the economy and pumping up inflation.
The inflation helps increase incomes to help people make what is left on their loan payments.
A lot of the banks still crash and burn. Home prices still come down (inflation adjusted).
Is it perfect? No. It is still taking from the savers through inflation. However, any of the other $1 trillion bailouts would do the same.
The banks are still hit hard, as are the holders of crap CDOs as the full $1 trillion won’t go direct to them. GOOD!!!!!
14K per household is a dent in the bucket. That $1T has to come from somewhere…. more national debt that EVERYONE has to pay off.
Never mind the fact that unless the US Government starts issuing debt free dollars (literally printing money with no interest obligation) We can never pay off the Federal Reserve and the banks.
Printing money without debt is the only way out… it will cause inflation, but will ultimately get us to a debt free society. The trick will be to get them to stop printing it once the debt is paid off.
The govt issued the checks, and the treasury sales bonds to cover them. There are no takers for the bonds, so the fed buys them by just “printing” money. Okay, not literal printing paper money, but inventing the electronic dollars out of thin air.
An extra $1 trillion in the hands of the consumers, whether literally in their hands or just a drop in their mortgage obligation, without matching extraction from the economy, stimulates inflation. Wage growth makes it easier to pay on the remaing debt. Devaluation of the dollar makes imports more expsensive and our exports more competative on international markets.
We degrade our standard of living, but we also move to a more sustainable economy. National debt is reduced as % GDP. We lock Social Security COLAs to less than inflation and inflate away that pending doom.
Inflation is the ONLY way out of this without a horrid depression!
Trick is, stoping the inflation again after we’ve kicked it started.
imagine if those who got cut out of the chunk of money had to donate to those who get the chunk of money. I dunno, I don’t see any valid reason to bail people out of them signing documents. Unless they can prove that the documents were swapped in between so they actually didn’t sign what they were reading. Who said that you can’t lose money buying a house anyways?
Printing money won’t work like that. Wages won’t go up, but executive bonuses will increase. Housing will skyrocket, and nobody will be able to afford it. Meanwhile, gas will double in price, as will imports, etc. Handing out money just won’t work: if you give everyone X dollars, the price of stuff just goes up until those X dollars are used up.
While they are at it, they can write me a check for 14K for recognizing this for what it is and renting for 4 years with an expanding family. Call it renter’s burden relief. Didn’t all of these “owners” get a property tax break, which is highest in your first full year because it is all interest, anyway? There are other ways to stimulate the economy.
Hunger is the mother of invention.
The problem is those left out in the cold will be “inventing” new ways of robbing, raping and pillaging from the rest of us (who still have jobs)…
Those who are out in the cold weren’t left there, they put themselves there. Pillaging has taken place forever. You can either protect your family or not.
Yeah, that is what I said. EVERYONE that didn’t make money on the bubble, whether buying at the top, or not selling at the top, or whatever, gets the money. The WHOLE point of my comment was to find a way to reward renters, not just bail out the lenders.
You are forgetting the $700,000,000 that will go toward creating a new agency and hiring new workers (with fat pensions awaiting them) to administer the federal bailout. Likewise another $360,000,000 to funding new state and county agencies to dispense the funds. Then every ‘deserving’ household will get $5000.
They are already overextended, so their budget will get increased by an extra billion or two next year.
And it’s all good, since to fund it the US Treasury just needs to borrow money from the Federal Reserve.
Since the Federal Reserve is really made up of all the banks, it is truly wonderful. The federal government borrows money from the banks to pay banks for their losses, and at the same time now owes those banks interest!!!
LOL!
That’s Yossarian on bailouts.
http://biz.yahoo.com/ap/070807/fed_interest_rates.html?.v=6
Told ya. Judging from the panic on the street, I’d say the clamor for a rate DECREASE will be all-over the place in the next few weeks.
Fed will need to raise the rate. Which works for me, because I’m big on Fed bonds and CD’s. Call me conservative, but my investment portfolio is very similar to Alan Greenspan’s.
Whiskey Tango Foxtrot?
Market down 90 now up over 100 to 13,500+?!?
Ugh…
Got popcorn?
Neil
relatively unchanged. I believe that is the effect the Fed wanted.
http://biz.yahoo.com/ap/070807/fed_interest_rates.html?.v=6
Told ya. Judging from the panic on the street, I’d say the clamor for a rate DECREASE will be all-over the place in the next few weeks.
Fed will need to raise the rate. Which works for me, because I’m big on Fed bonds and CD’s. Call me conservative, but my investment portfolio is very similar to Alan Greenspan’s.
DOW is down in the last few minutes. SUCKERS is all I have to say.
Fed Leaves Key Interest Rate Unchanged
Tuesday August 7, 2:44 pm ET
By Martin Crutsinger, AP Economics Writer
Fed Leaves Key Interest Rate Unchanged; Concerns About Inflation Play Into Decision
WASHINGTON (AP) — The Federal Reserve left a key interest rate unchanged on Tuesday as worries about inflation trumped concerns about turbulent financial markets.
Fed Chairman Ben Bernanke and his colleagues voted unanimously to keep their target for the federal funds rate, the interest that banks charge each other, at 5.25 percent, where it has been for more than a year.
I think that the key word in that article is “unanimously.” A clear message was sent, IMO. Hopefully they keep at it.
I agree. I’m for having a balance between inflation and growth. They know inflation is bad but they also know that raising it will cause financial turmoil (as if we don’t have it already). He inherited this problem. Cramer and everyone said the FED needs to make a statement. The FED voted unanimously and really didn’t say anything. They might have a statement out later or in the next few days.
I think they want to get away frmo the market reacting to the FED and for the market to bet on what the FED will do. They want markets to react to what happens in the market.
I’d also like to add. 2:55 the FED was down over 60 points. 5 minutes later it was up 100 points.
Is this the WallStreet Banks and PPT buying up shares?
It appeared to me to be short covering. Driving the market up 140 points then buyers disappeared and it sold off to up 35 on the day.
http://biz.yahoo.com/ap/070807/wall_street.html?.v=31
Stocks Fall After Fed Statement
Tuesday August 7, 2:45 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Falls on Disappointment Over Fed’s Maintaining Inflation Fighting As Top Priority
NEW YORK (AP) — Wall Street turned sharply lower Tuesday after the Federal Reserve disappointed investors by maintaining inflation fighting as its highest priority although credit has become tighter for consumers and businesses.
The market was clearly let down when the Fed’s Open Market Committee issued an economic assessment that stated the central bank’s predominant concern “remains the risk that inflation will fail to moderate as expected.” The Fed’s assessment accompanied its decision to keep the nation’s benchmarket interest rate, the fed funds rate, stable at 5.25 percent; that decision was widely expected and so had no impact on stock trading.
Wall Street, which has been shaken by two weeks of volatility over the more difficult conditions in the credit markets, had looked for more soothing words — at least a leaning toward an interest rate cut — from the Fed. But the statement, while noting credit problems and continuing weakness in the housing market as well as the market’s turbulence, stood fast by the Fed’s inflation policy.
“A sustained moderation in inflation pressures has yet to be convincingly demonstrated,” the statement said.
touche!
http://www.thestreet.com/_yahoo/markets/marketfeatures/10372890.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Fed Won’t Budge
By Liz Rappaport
Markets Columnist
8/7/2007 2:24 PM EDT
Updated from 2:16 p.m.
The Fed stood pat on short-term interest rates Tuesday but warned that inflation remains its chief concern in assessing the U.S. economic picture.
Stocks, which were up modestly at midafternoon heading into the 2:15 p.m. EDT release of the Fed decision, sold off as investors read the inflation comments as saying the Fed won’t bail out hard-hit investors in the bond market. After being up about 40 points before the decision, the Dow Jones Industrial Average was off 51 points at 2:23 p.m.
“Economic growth was moderate during the first half of the year,” the FOMC wrote. “Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.
“Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.
“Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
“Although the downside risks to growth have increased somewhat,” the statement continued, “the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected.”
The Federal Open Market Committee’s rate decision was widely expected on Wall Street. The move keeps the widely watched federal funds target rate at 5.25%. The accompanying policy statement indicates the Fed continues to view inflation as the greatest threat to the economy.
Action on Wall Street in the past week has focused in large measure on whether the Fed’s statement would make a nod to the carnage in the housing and mortgage markets. Some investors believe the Fed could bolster investor confidence in the bond markets by indicating a readiness to intervene should a credit crunch threaten the broader economy. Others believe that the Fed is unlikely to do so because to reduce rates now risks bailing out speculators.
Look what Kramer said…
http://www.youtube.com/watch?v=UOS_Rlo8cuU
Any other angelenos grow up with Sheriff John in the 50’s and 60’s?
haha, I thought you meant Cramer.
Which reminded me of Fire Marshal Bill from the 90s!
Mind if i give this mbs a little inspection!
“Fannie Mae, the largest source of money for U.S. home loans, asked its regulator for permission to take on more mortgage assets and help ease a crunch in the credit markets, a person with knowledge of the request said.”
Go ahead, you communist cesspools of insider perfidy. Monetize this pile of steaming horses–t, destroy the dollar, send gold to 4 digits, and make my day.
With the giant jump in homebuilder and financial stocks today, it appears that lots of peple believe the fix is in!
The very concept of the ability to get mortgages is something I’d never even considered. That’s scary.
One thought crossed my mind: What does this do to the Timeshare business? I’ve always avoided timeshares; I think they’re a ripoff. But doesn’t all this cause pretty much all their sales to stop? And if you’ve owned one for 18 months, don’t you just walk away from that now? Unless you used a second mortgage to finance one; then you’re really in trouble.
Wow, this is a massive implosion. Nevada, 17% used “unconventional” borrowing. Wow. I can see Vegas prices dropping 50% in the next two years. I view that as inevitable, actually. And since they don’t have an income tax, that means state revenues will fall at a surreal rate. It’s going to get very ugly for them.
“WCI Communities said 17 percent of its condominium buyers have walked away rather than close on new units this year, the latest indication of trouble in the condo market.”
“WCI also said the company is not in default of any credit agreements. Still, the builder said it’s renegotiating terms with lenders to ‘provide broader latitude to operate during the protracted downturn.’”
And what do you know, WCI is up 10% today.
Cramer isn’t the only Finance Celeb crying….Bill (Dow 5000) Gross is doing his share also!
China Threatens Nuclear Option of Dollar Sales
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
I wish Ambrose Evans-Pritchard stuck with politics.
China has every right to liquidate its US Treasury holdings, but as Mr. Alan Greenspan said “Who are they going to sell them to?”
Lavi, I do not mean to insult you or your post, it is just that Mr. Evans-Pritchard has his head up his butt when it comes to international finance.
China did have 1.3T dollars as of June 30 (probably 1.4T today)
Japan had $900B - Mr. Yamamoto proposed that Japan consider investing foreign-currency reserves in high-yield bonds, stocks and real estate of countries other than the United States. (Japan’s equivalent of Paulson Aug 3, 2007)
Russia has amassed the largest per capita foreign currency reserves of any major economy, including China. “In one example, a pro-Kremlin youth group recently staged a mock panhandling to benefit the dollar. They held out hats for passers-by to make donations: “Raising money for the dollar’s ticket back home,” their signs read.” International Herald Tribune Total $416B
Arab countries $3.3T - These are our good allies so we don’t have anything to worry about there.
The list goes on and on
Hoz, I can’t recall if you do sarcasm in your posts, so forgive me if you did. “our good allies” that was sarcasm right?
They only like us, as long as we can offord to buy their oil. When we go broke, they will go looking someplace else to make friends.
The only thing holding back the Chinese is their absolute obsession with their coming out party they spent over $40 billion on.
All bets are off after the torch goes out at the Summer Olympics.
They are going to make sure that the global status quo is held until then.
Good ol Midwestern sarcasm. I’m not to good at it so I guess I’ll post ’sarcasm on/sarcasm off’
Lavi, I do not mean to insult you or your post…
I really appreciate your deference, but I have so little knowledge of finance and global markets and all that, that it would take quite a bit to insult me. I probably wouldn’t know if I was being insulted - well, maybe obsene language might give me a hint
I just threw that out because I ran across it and thought it might be the kind of information that someone here could find useful, or, as you did, would clarify and/or quantify.
My in-depth knowledge of finance goes back to about 1-1/2 year’s worth of reading this blog
Cheers!
“He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.”
Alexander Hamilton was right.
I keep hearing the CNBC talking heads (notably Ben Stein) minimize the effects of a housing downturn by saying, almost laughingly, housing is “only” less than 5% of the economy, I think that was the percentage they gave. Any input on this? I would think that equity withdrawals from RE has accounted for a greater share of consumer spending than than, at least for the past few years, and therefore has a greater impact on the economy than they’re letting on?
It ain’t Ben Stein’s money, were talkin’ about here…
If you know what I mean, and I think you do~
GDP without MEW would have been about 1% over the last three years from one source I’ve seen.
Given that MEW is now toast its very hard to imagine GDP will somehow overcome the loss of that stimulus.
HomeBanc was a very conservative PRIME lender.
Where is this info from?
. . . clinton proposes $1B bailout
edwards says it’s not enough!
http://www.msnbc.msn.com/id/20164915/
This makes me sick.