Demand For Homes Just Being Delayed: NAR
Some housing bubble news from Wall Street and Washington. Financial Times, “Toll Brothers, the largest US luxury homebuilder, on Wednesday warned that home sales might fall even further in the latest sign that the worst housing slump in 16 years has yet to reach its lowest point. The rate of new home sales in June was at its second lowest since September 1999.”
“‘With the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit markets settle down,’ said Robert Toll, CEO. ‘We are now in the twenty-third month of a down housing market. Hesitant customers remain on the sidelines, unsure of whether home prices have bottomed.’”
The Wall Street Journal. “Toll’s home-building revenue fell 21% in its fiscal third quarter. For the quarter ended June 30, net signed contracts declined 31%. Toll Brothers said the fiscal third-quarter cancellation rate was 24%, compared with 19% in the fiscal second quarter. Backlog for the quarter fell to about $3.67 billion, down 34% from $5.59 billion in the year-ago period.”
“And Toll Brothers signed 1,457 gross contracts in the quarter, a 17% decrease from 1,760 gross contracts signed a year ago.”
“We caution that, with the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit market settles down,’ Toll said in a written statement. ‘In the near term, tightening credit standards for borrowers should reduce the pool of potential buyers: liquidity and affordability issues may impede some customers from closing, while others may find it more difficult to sell their existing homes.’”
“Toll Brothers estimates pretax writedowns related to operating communities, land and land options in the third quarter will be between $125 million and $175 million. ‘Given the current state of the market, we are not comfortable giving earnings guidance,” the company said.”
The Associated Press. “A trade group for real estate agents on Wednesday lowered its outlook for existing home sales this year by 1 percent, or 70,000 homes, as the housing market continues to slump.”
“‘With the population growing, the demand for homes isn’t going away it’s just being delayed,’ Lawrence Yun, NAR’s senior economist, said in a statement. ‘More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment _ speculators have left the market.’”
From Bloomberg. “U.S. home sales will tumble to a five-year low this year as a widening credit crunch reduces the number of buyers who can get mortgages, the National Association of Realtors said today.”
“New-home sales, which account for about 15 percent of the housing market, probably will fall 19 percent to 852,000, a 10- year low, the group said. ‘Mortgage disruptions will hold back sales over the short term,’ Yun said in the report.”
The Dow Jones Newswires. “UBS AG is telling mortgage brokers that it will no longer buy loans lacking documentation about borrowers’ ability to repay, another sign that the supbrime mortgage virus has spread to the broader loan markets.”
“UBS Home Finance was one of the lenders to American Home Mortgage Investment Corp., which filed for bankruptcy on Monday. Like many banks, UBS has found itself stuck with purchased residential loans it can no longer funnel to investors in the form of mortgage-backed securities.”
“UBS’s new policies on ‘no-doc’ loans went into effect last Friday. The company reiterated the policy in an email sent to clients Monday morning, a spokesman confirmed. ‘UBS will only accept full documentation, alt documentation, express documentation and stated income/verified asset documentation loans,’ the email said.’
“Washington Mutual Inc., the biggest U.S. savings and loan, has raised requirements for accepting so-called low-documentation mortgages.”
“Washington Mutual told brokers Friday that it will no longer accept mortgages unaccompanied by traditional documentation of income or assets if the loan exceeds 65 percent of the home’s value and the borrower’s credit score is below 680, said Sara Gaugl, a spokeswoman for the Seattle-based bank.”
“Standard & Poor’s may cut its ratings on $913.9 million of mortgage securities backed by Alt-A loans because of rising delinquencies and losses that may ‘exceed historical precedent.’”
“The bonds now have ‘delinquency and default loss trends that are indicative of poor future performance, and these trends will continue to exceed historic precedent and our original ratings assumptions,’ S&P analysts said in a report.”
From MarketWatch. “Fitch Ratings said Wednesday it downgraded IKB Deutsche Industriebank AG’s individual rating. ‘The downgrade of the Individual rating reflects Fitch’s opinion that IKB would have defaulted without the rescue measures put in place,’ Fitch said.”
From PBS.org. “Across the country, mortgage foreclosures are skyrocketing, home prices are dropping, ‘For Sale’ signs are becoming part of the landscape, and construction is slowing down, as the nation’s housing slump becomes a stubborn fact of life.”
“Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies; ‘The problem is, we’re trying to do two things at once. We’re trying to make sure we don’t make loans like these again, but at the same time we’re trying to help people who are stuck with these loans to get other loans, again, tough to balance those two.’”
“Gwen Ifill: ‘That sounds like two competing interests that you’re trying to satisfy.’ Retsinas: ‘They are. And there’s probably a way to do it, but it’s not going to be perfect, and it may not always be pretty.’”
“GI: ‘So what happens then to this big market we saw a year ago? We were probably sitting across this table saying, ‘No end in sight to the housing boom.’ Was that all an illusion? NS: ‘Well, we said it was too good to be true for so long, and we were right. It was too good to be true.’”
“Federal Reserve Chairman Ben S. Bernanke isn’t blinking in his battle against rising prices even as tumult in financial markets threatens to slow growth.”
“Fed officials said higher inflation is ‘the predominant risk’ when they kept their benchmark interest rate at 5.25 percent yesterday. ‘The signal from the Fed was unmistakable: turbulent markets, in and of themselves, will not be sufficient to force their hand,’ said Peter Kretzmer, senior economist at Banc of America Securities LLC in New York.”
From CNBC. “While most investors and economists applauded the Federal Reserve’s decision to hold interest rates steady, there were some critics who feel the central bank blundered by not cutting rates.”
“Robert Froehlich, DWS Scudder: ‘The Fed is out of touch with reality and should be cutting rates right now!!!’”
“Like many economists, Brian Wesbury thinks Bernanke did the right thing. ‘We’ve had a siren call when we should not have had one,’ he added. Wesbury said that the problems in the U.S. economy are not due to overly high interest rates: ‘In fact, [rates] are quite low.’”
“The economist described what he sees as the real culprit: ‘Everyone expected the fed to bail them out, so they put too much leverage on. Now that that bailout’s not happening, people are mad, worried, concerned — but we’ve got to get that excess leverage out of the system.’”
From Reuters. “U.S. inflation has been well contained since the late 1980s and the public understands the benefits of this achievement, Federal Reserve Bank of Minneapolis President Gary Stern said on Wednesday.”
“‘I regret to note that today we are again witnessing some painful and belated learning, by policy-makers and consumers alike, in our consumer financial markets,’ Stern said, in an oblique reference to problems in the subprime mortgage market for borrowers with risky credit.”
“‘This is not the time to go into details of how the Federal Reserve and the other financial regulators are responding,’ he said.”
“The Fed also said in its Tuesday statement that inflation remained a top concern, and Stern said there was broad support for this position. ‘The public continues to understand the long-term benefits of low inflation and thus to support the Federal Reserve’s pursuit of this objective,’ he said.”
The PBS interviews in the link are worth reading.
A reader posted this blast from the past:
‘January 10, 2007 - After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer, according to the latest forecast by the National Association of Realtors.’
‘David Lereah, NAR’s chief economist, said annual totals for existing-home sales will be fairly comparable between 2006 and 2007. ‘We have to keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,’ he said. ‘We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it¿ll be pretty much of a wash in terms of annual totals. The good news is that the steady improvement in sales will support price appreciation moving forward.’
A lurker for about a year - great board Ben.
Just thought I would share some of insanity in my local town of Edmonton where we are about 6x the median income to buy a house. Inventory is at an alltime high so that should bring down prices - we are just behind the curve as usual.
AB
Sounds like you’ve got the same thing going on as we do here in Texas, only moreso. Housing here seemed to defy gravity until recently, no doubt in large part due to high energy prices. I think Alberta has high exposure to energy even compared to Texas. Hope you and yours don’t get caught up in the hype like some of my local acquaintances. It seems like “it’s different here” everywhere.
Deron its oil sands oil sands oil sands - alot of development planned over the next few years.
Actually I have been trying to convince some to sell some of their RE holdings- my investments are mostly in stocks. When apartments have increased by 70 - 80%, and in some cases close to 100%, over a 4 year period you should be close to a top. Try doing a cf analysis on investment property - it just doesn’t make sense now.
I read somewhere that it will take more energy in extracting oil from the sand…. Given the environmental degradation you have to wonder whether it is worth it?
While I agree that the phrase “It is different here” is nonsensical, it is “somewhat” different in Canada. Canada doesn’t have the exotic mortgages that the US has. No neg-ARMs / NINJAs / or 105% mortgages. So while the boom might be speculative, the tougher federal control over the banks in Canada will limit how high the prices can go.
Um… I beg to differ. If I go to see the right people here in Vancouver I can get pretty much anything I want in the way of creative financing. Yes even 105%. So we are not much different here other than the way it’s worded. Only once we see a correction here will we see fraud appear. IMHO
You might be right, but it is definitely not 50% of all mortgages issued or some ridiculous figure like that. Overall Canada has a much more regulated banking system than the US. The other major question is whether Canadian banks / Canadian mortgages issuers are allowed to package mortgages together into CDOs and MBS and sell them to investors and hedge funds. This “passing of responsibility” has definitely helped the US bubble to expand a lot. I personally don’t know the answer, if someone knows, I’d love to hear the comments.
boyce, good question. I don’t know if they’re selling CDO/MBS, but Canadian banks are definitely buying them and sharing in risk. CIBC (Canadian Imperial Bank of Commerce) is expected to write down a $100m loss in US investments, though that figure will be much higher if problems in the mortgage sector continue (in other words, $100m is too conservative).
While we don’t have as many toxic mortgages, we have 105%, 40 year, and some recent ‘teaser rate’ mortgages. Also, due to our onerous taxes and inability to claim interest paid on income tax, our affordability is arguably worse.
Further, our economy is inextricably linked to the US. As ever, we’ll follow the USA down like night follows day.
How does one buy a house at those crazy inflated prices if there are no exotic mortgages in Canada? Has no one been buying there?
Wages in Edmonton and Calgary are INSANE. Supply and demand, people. There simply aren’t enough workers. A friend of ours was recruited from his law firm to work for one of the companies that produces equipment to withdraw the oil from the sands. They offered him, right from the get-go, 133% of his pay with the firm (and he’s only a year out of law school) plus 6 weeks paid.
Another example: Tim Hortons (Sort of like Ihop/Denny’s in the states) needs workers so badly that they’re offering $20/hr plus transportation to and from work.
Another friend who works for the provincial government says there is a HUGe number of working homeless crowded into their shelters. These are well-dressed professionals, not your average bum. They simply cannot afford/find a place to rent.
So maybe it IS different in Alberta since the increase in prices is not necessarily super-disconnected from wages. However, this is all hearsay. Take it for what it’s worth.
It sounds like a bigger version of what is happening in West Texas. My friends in Midland-Odessa tell me that there is a huge shortage of workers there. The state as a whole is way to diversified economically now for things to be as crazy statewide - even Houston. But we are doing a lot better than the rest of the country and probably will continue until oil drops back below $50/bbl or so.
If you want to see whats going on in Alberta, specifically in the Heart of Oil Sands extraction, Fort McMurray check out VBS.tv.
VBS.tv is a New York Alt type news publication.
The story is in a number of segments.
http://tinyurl.com/2fxwlx
Serious buyers today have a long-term view of housing as an investment - speculators have left the market
I wonder if Mr. Yun will be surprised when the “investors” follow the “speculators” out of the market, and all that we are left with is people who buy a house with the intention of using it as a place to live?
Even potential buyers who aren’t “speculators” want to avoid taking a $50,000-100,000 hit right out of the gate.
Whatever the credit markets do, house prices have far outpaced incomes; consumers will be less and less willing to borrow heavily to buy a depreciating asset.
Speculators have left the buying side of the market, but they’re sure not gone from the selling side, now, are they?
Judging from the number of “for sale” signs outside of empty houses, they sure aren’t!
It’s the duty of all future buyers to keep the speculators on the selling side, ie stuck with their “investments”. No one should buy from a speculator, ever. It’s easy to tell from the previous sales history (maybe not 100% accurate, but better to err on the side of caution, meaning no chance you’re dealing with a speculator.) And one should never buy without knowing the sales history. I’ll never understand how anyone can knowingly hand over their savings or future earnings/retirement to some speculator as excess profit (for doing nothing or some slipshod “renovation”), which the speculator will use to pay for their own “lifestyle” and/or retirement.
ex-WA, I second your rant.
There are no serious investors currently around here. Even with 20% down on any kind of property it will not cash flow positive. So ,please tell me why i would like to by more RE at this time?
With the problems we have been having collecting rent and finding new renters for the apartments,i honestly don’t see how even 20-30% down payment people are going to survive…
Maybe in a few more years…
Chris
“Hesitant customers remain on the sidelines, unsure of whether home prices have bottomed.”
No, we are pretty certain that they have not…
Took the words right off my keyboard!!!
Testify, brothahs and sistahs all!
Can I have a Boyaa! For brother Ostriches.
uh huh!
As to what Yun said… blogged it… Grrr….
Neil
“Hesitant customers remain on the sidelines, unsure of whether home prices have bottomed.”
And if they have we’re still not buying because the new paradigm of prices at 10 incomes means that home ownership no longer fits into wealth building!
Leaning into the (tsunami) wave…
“Fed officials said higher inflation is ‘the predominant risk’ when they kept their benchmark interest rate at 5.25 percent yesterday. ‘The signal from the Fed was unmistakable: turbulent markets, in and of themselves, will not be sufficient to force their hand,’ said Peter Kretzmer, senior economist at Banc of America Securities LLC in New York.”
“Well, we said it was too good to be true for so long, and we were right. It was too good to be true.’”
Ben has posted plenty of quotes from Retsinas and his pals at Harvard, and none of them resemble this in the slightest.
The packpedalling from the “experts” is in full swing.
I couldn’t agree more… Retinsas is one of the biggest offenders.
Retsinas’ BS was too good to be true…
Lawrence Yun, NAR’s senior economist, said in a statement.Serious buyers today have a long-term view of housing as an investment _ speculators have left the market.’”
No need to comment, but do these folks that work for NAR go in for a frontal lobotomy and have a series of pat answers installed? This fellow must know that he sounds like a fool.
There was a time when I would want to rip Lereahs balls off whenever he babbled his putrid drivel. With Mr.FunYun, I only laugh at how stupid he appears to be.
Bubblegram:
David Lereah = Drivel Ahead
Bubblegram:
Lawrence Yun = Newer Lunacy
Gary Watts = A Wag Tryst
Yun was interviewed on Bloomberg TV very recently.
He was asked to respond to those in the blogosphere that claim he is a cheerleader for housing. His response was so canned and obscure that I dont even remember it.
The real question for me is - why does the media continue to bring on these fools?
“why does the media continue to bring on these fools?”
Because there isn’t a NABW (National Association of Bubble Watchers) to send representatives to discuss housing.
haha you don’t need to be a bubble watcher anymore.
We’re MSM all day all year now baby.
I guess I’ll go ahead and by the first to call it– The Great Real Estate Bubble News Bubble. It starts when MSM begins to see the value in stories picked up by hot blogs: which is the next big sector to get hit, who’s holding the dirty paper, which market is crashing next? and now we’re seeing this panicked race to get into those stories first.
It started with the Telegraph, NYP jumping into the subprime meltdown and their ratings jumped. Everyone else looked at that and said “Hey I need to get into those Subprime stories!” and what happens next? The stories get even juicier. More quotes, more doom. And more stories are published, readership off the charts, and pretty soon you have this Subprime Frenzy.
But then that coverage gets so exhausted, you know, they’re not making any more facts, that it boils over into the entire economy. How are stocks affected, bonds, what other mortgages are defaulting, lenders collapsing, hedge funds closing, The Dollar. So, it’s not contained to just a few markets anymore, it’s an economy-wide housing bubble bubble in every news market in America. At least that’s where we’re headed.
How long can this go on? It’s hard to say. Bubble bubbles are, by nature, unpredictable. Irrational. But you know it’s coming to an end when even on the blog you can’t dig into any story more deeply than what’s in the MSM… when you can’t post anything more gloomy than what you read on Cnn.com, that’s when it has to end.
And in the unwinding, a lot of bubble experts are going to get hurt. As the housing bubble ends, and with it the bubble bubble, all that knowledge they’ve been banking on simply isn’t worth anything anymore. Try to get a quote, try to provide some insight, and no one’s there to care. It’s over. Bad times ahead, folks, so let’s make the most of it while we have the spotlight.
why does the media continue to bring on these fools?
Because media consolidation strangled whatever trace of independence and true journalism existed on TV.
Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies;
‘Well, we said it was too good to be true for so long, and we were right. It was too good to be true.’”
I think not. As I remember, it was Harvard (with all their RE financial supporters) who said not even a year ago that there was no housing bubble, and prices would keep going up. It is amazing how many people supposedly predicted this whole thing now. I must be getting old, because as I remember it, only an overly pessimistic and perhaps delusional person thought housing would collapse two years ago–and all the fine folks on this blog.
Everyone on this board is with you.
Harvard’s JCHS was been nothing more than a mouth-piece for the real-estate industry. They’re credibilty has plummeted.
Right now, the only people who have ANY credibilty making economic predictions is Robert Shiller, and a lot of good, honest people on this board.
Indeed, Anthony, I went back and found these first three paragraphs from a Salon.com article about this blog, date 6.13.06:
‘Last week, Harvard University’s Joint Center for Housing Studies released a comprehensive report on the U.S. housing market. Although it made some nods to the sorry — and worsening — state of affordable housing, overall, the report was bullish. There’s been some softness in the market of late, it noted, but fundamentals are strong, and the next decade should see a renewed boom.’
‘The money quote: ‘The most immediate risks to the housing market now come from the rise in interest rates, the erosion of affordability after years of strong house price appreciation, and the growing inventory of both new and existing homes for sale. But unless the broader economy stumbles and job losses mount, home sales and construction activity will likely dip only modestly.’
‘At the Housing Bubble Blog…readers were quick to point out a possible flaw in the Harvard analysis. What if the housing boom itself has been one of the main forces supporting the broader economy? Many economists have suggested that the American consumption binge of the past half-decade has been fueled by easy money extracted from housing via refinancing or home equity loans. Couldn’t a slowdown in housing precipitate a wider economic downturn?’
Since we’re quoting clowns in the realm of Blodget, Abby Joseph Cohen and Mary Meeker…
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
Diane C. Swonk, chief economist at Mesirow Financial in Chicago
New York Times, “Trading Places: Real Estate Instead of Dot-Coms”, 3/25/05
“Byron Alvarez of the REMAX Real Estate Center, a 27-year real estate veteran, expects prices to jump by 10 percent or more in 2008… Experts believe Northern California home prices will start to rise again over the next 18 months. Waiting for rock bottom, however, could be risky.”
Reporter John Lobertini, “NorCal Real Estate Market Heating Up, Realtors Say”, KPIX-TV April 5, 2006, 6:47 pm
Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that ‘South Florida is working off of a totally new economic model than any of us have ever experienced in the past.’ He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.”
New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
Bob Toll (President of Toll Brothers):
“‘In Britain you pay seven times your annual income for a home; in the U.S. you pay three and a half.’ The British get 330 square feet, per person, in their homes; in the U.S., we get 750 square feet. Not only does Toll say he believes the next generation of buyers will be paying twice as much of their annual incomes; in terms of space, he also seems to think they’re going to get only half as much. ‘And that average, million-dollar insane home in the burbs? It’s going to be $4 million.’”
And speaking of Britain:
“U.K.’s Subprime Crisis May Be Worse Than U.S.’s”
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=axWmsMHJDjiQ
I love how this arrogant jerk’s (Bot Toll) future prediction of a dismal America full of nothing but renters and people stuffed in houses like sardines in a can came out right about when the market starting turning around. Serves him right!
the harvard pukes were way late…….we said my assssss
the harvard pukes were way late
Same “why don’t they eat cake” crowd as the French aristocracy who fed the guillotine.
Not a clue as to what transpires in the common sector.
The harvard pukes are just as stupid and useless as the mokes from George Mason U. In a race to the botton, Harvard wins, as they add lying in public to their repetoire.
“Q: Is there a real concern about a housing bubble burst in certain markets, and if so, what will be the effects?
“Retsinas: It’s hard to imagine any circumstances where there would be a national housing bubble. As long as we’ve been keeping data, which goes back to 1960, and perhaps back to the Great Depression, nationally home prices have never gone down. But in selected areas — particularly those areas that have seen double-digit appreciation where the economy may be struggling — there may be some price declines. Overall we can imagine that housing prices will probably not rise as much as they have been rising, but we can’t imagine circumstances where there is going to be a widespread bursting of that bubble.”
From http://www.ksg.harvard.edu/ksgnews/KSGInsight/retsinas.htm.
He couldn’t even IMAGINE it.
They don’t even know how long they’ve been keeping data - “As long as we’ve been keeping data, which goes back to 1960, and perhaps back to the Great Depression…” That’s a pretty sorry statement. I wonder if these professors understand inflation at all either.
BTW wasn’t there a slight national decline in 91?
My mom has degrees from two major universities and one community college. By far the best instruction she got was at the community college. Many of the instructors had real experience before teaching and some of them were still actively employed outside the school.
You’ve got your joint studies, i’ve got mine…
What is the name of that self serving idiot outfit at USC. (Fight On)????
“‘With the population growing, the demand for homes isn’t going away it’s just being delayed,’ Lawrence Yun, NAR’s senior economist, said in a statement.”
Maybe he should check with the Census Bureau. New construction has been adding 1.5-2.0% to the housing pool for years. Population growth has been less than 1%. Current housing starts are roughly in line with population growth, but we have many years of excesses to work through.
And the demand that does exist is at 50% of the prices that were being charged last year. That’s the point that all these idiots seem to miss.
There is a TON of demand for Lamboroghini’s too! Shoot, I would have 2 or 3 of them if they were 10K apiece! Demand is, in part, dictated by price. And, in this situation, also by the willingness of lenders to write loans (because almost nobody buys a home for cash), which makes the situation even more precarious.
I would buy 3 Lamborghini’s too. One for driving, 2 at the garage being fixed…. No, wait, at $10k it’s cheaper to buy a new one.
At least he got one thing right. Demand will delayed until after the MAJOR correction.
In the BA, I don’t see any housing appreciation in the long term. It’s harder to get mortgage loans. It is even harder to get a loan over $400K. Prices over here are WAY over that. Interests rates are somehwat rising especially for the JUMBO loans. (which we will need to buy $800K houses.) I see a dramtic drop in prices. Most people won’t have a 5% down around here let alone 20%.
I just saw a few houses that were on the market for a few months and were recently sold. No neighbors yet (40 days now). Looks like there are still investors out there. I know for a fact that the houses were sold 18-20% below asking. Another soon to be FB in the making.
Not to mention that the rate at which new homes emerge is greater than the rate at which our population grow. So actually in terms of the citizen-to-property ratio, the population that sellers are competing for is actually smaller to divide between them all.
except we don’t need the millions of McStuccoBoxes they’ve been pumping out.
Slight correction. Permits, not new starts are getting close to the 1% growth mark. Total housing stock approx 127.7 mil units, 110 mil occupied. Starts now under 1.5 mil and permits at 1.4 mil. Still too high but the oversupply should quit growing in a year or so.
That still leaves us with an enormous overhang. These are macro numbers so the changing market conditions will keep the number of houses on the market growing long after the overbuilding of unneeded houses end. A lot of those unnecessary houses aren’t for sale - yet.
If the DJIA keeps going at its current pace, the top 1/2 percent of the U.S. wealth distribution (the ones who own most of the corporate shares) will be in a fabulous position to snap up J6P-owned-then-foreclosed real estate at fire sale prices once the bust bottoms out…
http://www.marketwatch.com/tools/marketsummary/
Speaking of that, starting to leg back into the shorts side via autumn put positions bought back at significant discount to last Monday’s sale
I sold up monday most of my shorts before the blastoff. (I still hold my 80 BDK puts as it is Jan 09). Blind luck / gut feel rather than knowing anything. Holly F what a drop on SRS and SKF.
Just goes to show that Wall Street ho’s will swing it both ways.
What is your game plan ? Do you think Dow could get to 14400?
Wow, instant gratification so far! Nah, was looking for 1500 - 1503 S&P for the first bunch (got that), then 1525 to get in 100%.
No, I don’t (14400)
Buy GS 2009 puts and Oct 2007 calls. Take a vacation.
I’m also back out of my longs and starting to get interested in the next leg down, but I’m not convinced yet.
txchick
Sounds like a good strategy. The hedgies reported their results to Hedge Fund Research overnight. Dirt on specific funds should start leaking out in a day or two. The average fund focusing on financials was down over 10% in July. Merger arb was down 2%+. If those are averages, there will be several with much larger losses and we get another round of “bank runs” over the next week or so. This is only equity funds; no word on credit funds yet and that’s where the real damage was done.
The nerves at the end of the day were over a rumor Goldman was doing a press conference after the close. GS denied it and bounce goes the market. Clearly, tons of jitters among the pros over the risks in the hedge space but the sheeple are piling in anyway.
If the DJIA keeps going at its current pace, the top 1/2 percent of the U.S. wealth distribution (the ones who own most of the corporate shares) will be in a fabulous position to snap up J6P-owned-then-foreclosed real estate at fire sale prices once the bust bottoms out…
Stucco, that is the theme of the housing bubble, tech stock bubble, and every other bubbles. It’s all about the Cheneys raking back in the chips from J6P who can’t count cards at the poker table. The serial bubbles are engineered by the elite through the Fed to take back what the elite see as being rightfully theirs, i.e., everything. It’s all about wealth transfer!
DP
It’s the Truman Show!
Buy now or forever be left out of the stock market.
Nah, there is no need for anyone to engineer bubbles: avarice, greed, and short-sightedness of j6p will lead to more bubbles in the future. Just as in the past, j6p will jump in, adding momentum to an unsustainable upward trend in some market. Then J6P will tell his neighbor, coworker, etc., about the easy pickings.
Of course, it’s too late for that wave. But they keep piling in to the market, like lemmings off a cliff. Financially, they’ll be wiped-out.
Just like an old rerun of The Honeymooners, where the boys have fallen for another get-rich-quick scheme.
A little engineering at the moment the market seems poised to crash can’t hurt, though, can it?
OT: sort of
http://www.cnbc.com/id/20180216
“U.S. Plans Workplace Crackdown on Illegal Immigrants”
It does speak to (not) coming demand for housing. 12 million illegals have a hard time finding work, and 8 million of them go home…. That is like 100,000 more houses coming on the market!!! [yes, I am saying they live 80 to a house
]
This crackdown can’t come soon enough. In fact, I just sent the CNBC article to a potential client who’s been trying to report a competitor who hires illegals, gives them false IDs and a little bit of training, then sends them out to construction sites. As operators of heavy equipment, no less.
Good for you, Arizona. Everyone who is hiring illegals should be reported AND deported, along with the illegals. In a sense, they contribute to killing off their neighbors, their industry and the US, financially and socially.
yeah
that will drive the prices down! Ameicans are too lazy to do those jobs, we need illegals!!
The employers should get prison time…not just fined. Until that happens, it’ll be business as usual.
Good point, Darrell. It’s sort of like the media now telling the real story of the bust. As long as those $$ were coming in from real estate, mum’s the word. When the $$ dry up, what the hey? Might as well tell the grim stories of the bubble’s bust, who cares? Might draw in some more readers/viewers. The money isn’t coming in like it used to from the builders, developers and real estate firms, so what are they gonna do about it? Pull advertising they don’t have?
Same with illegal immigration. Now that illegal immigrants are no longer needed in great numbers to pound nails and jump around on roofs looking busy, let the crackdown begin. Also not needed for as many landscaping or even ag jobs, so what’s the dif? As stupid as government can be, the gov loves to have those $$ and if you can’t squeeze blood from the stone (average citizen) might as well purge illegals breeding and benefitting on taxpayer money so that taxpayer money can be misallocated elsewhere. Also might as well make some $$ from fines, too. Although I’ll bet Homeland goes after small contractors and businesses and not many majors.
Palmetto,
You’re right that the labor isn’t needed anymore. Suddenly the “Elephant of illegal workers” has been spotted under the living room carpet.
I feel for people who just wanted a good job. I have nothing against someone coming up here to work (welfare… different story).
The number that will be pushed across the boarder will create riots though…
We’ll probably have them anyway.
Got popcorn?
Neil
“Suddenly the “Elephant of illegal workers” has been spotted under the living room carpet.”
Exactly, Neil. Although I feel for people who want a good job, many American citizens feel that way, too and I feel for them before I feel for citizens of other countries. That’s just me, though. Will there be riots? Possibly. But I think the gov is well aware of this and gearing up for it. Homeland Security is testing a “puke ray” weapon. But that’s the gov for you. Allow a problem to be created so that others can profit off bogus “solutions”. Mark my words, we will lose even more of our freedoms because of illegal immigrants. They will become the scapegoat, even though they did not create the problem, just took advantage of it.
This whole illegal immigrant issue is a complete travesty. We never needed them, I don’t blame them for the bubble, but their employment by builders certainly exacerbated it. I have to wonder how much less inventory we’d have if illegals hadn’t been massively employed by builders. Having lived in South Florida, I used to watch Haitians get turned away in droves, sometimes back to their certain death, on the premise that they were “economic” refugees, not political refugees, while Cuban refugees got the red carpet. Made me sick to watch. But if that is the position of the US, then it should be kept across the board. Instead, exceptions were made if you happened to be an illegal immigrant of Mexican or Central American origin. What’s up with that? Maybe the gov didn’t want to also have to print materials in French as well as Spanish.
This whole illegal immigrant issue is a complete travesty. We never needed them,
You preach the word there, Brother P!
I’m right in your camp!
you are wrong, we needed them!! If we did not have them we would see even more outsourcing. Americans will not dig ditches.
“Americans will not dig ditches.”
Bit of a big sweeping generality, that. I’ve seen Americans dig those fiber optic ditches, sewer ditches, etc. Right here in Fla and in Connecticut. Of course, if you’re talking about hedgies, fahgeddaboudit.
Aside from hammer swingers to the builders, these illegals made careers out of jobs once held by high school kids during summer breaks…
If you want to outsource those jobs, why not the whole enchilada? I’m sure we can stand to lose a few drive-thru fast-food joints here in America…
Here in Oregon, good hard working Americans are doing the hard, dirty work and are grateful to have it. You see very few Hispanics, legal or otherwise up here.
I too admire anyone from Mexico or Central America who has the cojones to leave hame and family and head to el Norte for a better future. That said, though, what bothers me is that it creates an uneven playing field that works against the average American Joe (AJ) who isn’t in the “idea economy”. Why hire AJ, when you have to pay insurance, SS and all the rest, when you can hire the illegal for a fraction of the cost?
I’ve never bought the idea that there are jobs here that Americans don’t want. If the job paid a living wage (a hell of a lot more than minimum), I bet there are plenty of native sons & daughters who are willing to sweat and work hard.
Solution? Make employers pay full benefits to the government for all employees - illegal or not. Might go a long way to shoring up some of the underfunded entitlement programs.
Sorry, Ben, I realize it’s not an immigration blog - back to housing….
problem with this line of thinking is that for all but the jobs that must be done here (like roofing, plumbing and landscaping) the choice is either low wage immigrants or relocation of jobs to low-wage countties, i.e, import cheap labor or export jobs.
As soon as you impose a “living wage” requirement on low skill work, any of it that can be off-shored will. We just aren’t cost-competitive for low-skill work.
Lesson, become a knowledge worker, skilled worker or work on things that can’t be off-shored.
“‘With the population growing, the demand for homes isn’t going away it’s just being delayed,’ Lawrence Yun, NAR’s senior economist, said in a statement. ‘More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment _ speculators have left the market.’”
Population growth? Pray tell, Mr. Yun, of that so-called growth, what percentage have the ability to purchase a home and/or obtain financing at current prices and under the new standards? Additionally, I always thought serious buyers were looking for a place to live and call home, not looking for an investment. Finally, there are plenty of speculators still in the market as they just haven’t been able to sell their “investments” yet.
The new bubble: small business loans.
I’ve been hearing more predatory adds on the radio for these types of loans.
Ben, I think it was someone in this board who predicted that the next credit bubble would be in this small business market.
Speaking as a longtime small business person, let me say that there are MANY other sources of loans.
Ben fries up another batch of FunYuns….. eat them up yum. FunYuns FunYuns, silly stupid FunYuns. FunYuns FunYuns, eat them up yum.
OMG, did you just parody that jingle from Turkey TV?
Fish heads, fish heads, roll-e poll-e fish heads
Fish heads, fish heads, eat them up, yum
You can ask them anything you want to
They won’t answer
They can’t talk
Yeah. It’s Dr. Demento from the early 80’s…..
‘The problem is, we’re trying to do two things at once. We’re trying to make sure we don’t make loans like these again, but at the same time we’re trying to help people who are stuck with these loans to get other loans, again, tough to balance those two.’”
And at the same time, we’re trying to drop prices so people can qualify for loans given new lending standards, but trying to hold up prices so that people don’t just walk away.
This is me sitting in the corner, NOT holding my breath that they’ll be able to keep people in their overpriced homes that they could only afford for a short time due to teaster rates and negitave maortization loans.
Here is me NOT holding my breath that they’ll be able to keep people in houses that will soon be selling for 30-50% less than some people owe on them.
“Deer in headlights” comes to mind.
The result will be the same as Deer vs. Car.
Deer dies and car is totalled.
“‘With the population growing, the demand for homes isn’t going away it’s just being delayed,’ L.Y.’er
Hello Bahgdad Larry…
“Federal Reserve Chairman Ben S. Bernanke isn’t blinking in his battle against rising prices even as tumult in financial markets threatens to slow growth.”
Someone should inform the author that doing nothing is not courageous. Volcker is a guy who didn’t shrink from the task. BB is just a deer staring, unblinking, into the oncoming headlights.
BB is letting his minions do the dirty work. Every day there is some lower official or ex official saying the fed isn’t going to lower rates to save the Wall Street banks or casue big gains in the stock markets.
I was wondering if it was the headlights or if he was asleep. Deer in the headlights sounds right. When do you think he figured out what Greenspan passed on to him? The irony, Ben the expert on the Great Depression….
Ben Bagholder.
I think Bernanke is trying to live between what he views as two ends of the spectrum: Greenscum on one end, and Volcker on the other. My guess is he thinks somewhere in-between is the correct position. I think he should be a little closer to Volcker.
“I think he should be a little closer to Volcker.”
As do I. Take the medicine.
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If I had the cash and income to afford that, I would already be living a life of privilege, not beginning it.
Selling $1.6 million homes like late night informercials? Does the house come with a set of steak knives?
How about when Billy Mays throws-in a second home, if you just call within the next 15 minutes…
Please excuse my ignorance on the subject, as I’m not a long time home owner or buyer, but is crown molding really a ‘ luxury ‘ ?
If it’s plastered on by an artisan it is but if it’s just slapped on composite product, I vote no.
Personally, I think the real/solid wood molding that is corner-cut with a coping saw (rather than straight through) is a luxury. But I also think that much of the stuff is not coped and there is also a lot of fake-wood molding that is either plastic or foam. It’s one of many questions you have to ask the builder, if you’re buying new.
“only one left!”
but but, you just said you have two?
Was watching a “my first place” episode last night. Not sure if new or rerun. Middle class, duel income couple, no kids. Start out saying their budget is $200K.
They go shopping, and make the biggest mistake possible… fall in love with a house $60K over their limit. Negotiate down to $240K and think they are getting a great deal since it is $20K off.
Wife says she’ll take a second job. Fewer meals out, fewer fishing trips, fewer trips to the mall….
Bring a home inspector out. Drainage is a problem, electrical panels need replaced, a birck wall on the side of the house is setteling and is about 1.5 inches off plumb over the 3 foot long level.
$40K initial estimate to fix.
They walk and start looking at other homes, but can’t find anything as nice in their price range… duh, nothing else is going to need $40K repairs.
So, after looking at several more houses… suddenly they can do the repairs for $15K and the sellers on their dream house are willing to come down $15K, so they buy the place.
OHHHHH NOOOO!!!!! I tell the sellers that if the repairs can be made for $15K, they make the repairs, and sell me the house for $240K when they are done.
Well, not really.
1) Don’t fall in love with a house before it is yours.
2) Don’t be in a hurry to buy. Look at 400 houses if you have to.
3) Don’t by above fundamental support levels.
4) Don’t have a plan to “get a second job”.
It ends with, “this will be such a great place for kids when they come…..”
Wait, they’re gonna be strapped, with wife working 2 jobs… and they are gonna have kids????
FB!!!! They bought high, a house with major problems, that they’re strapped to afford.
My wife was watching one of those home buying shows last night (we don’t normally have a TV so this is all new to us), and they had a young couple in their mid-20’s with a $550k budget for a starter home in the NY burbs–and not finding anything! So they go around a hyper laptop architect and wide-mouthed Realtor looking at “below market” homes to buy and renovate. All three homes featured on the show needed major renovations, whole new bathrooms, complete kitchen remodels, removing stairs, tearing out and adding walls, adding dormers, finishing basements, etc… but somehow this super architect with the laptop would come up with a remodel for just $90k so they could buy a piece of junk for $460k and still make their $550k budget.
1) No way in heck this couple could really afford a $550k “starter” home with traditional lending standards.
2) there is no way these homes could really be remodeled for the quoted costs.
3) These homes had all been on the market for a long time, and no one even considered making a low ball offer.
I can see how so many folks have developed a warped understanding of home buying if this is the sort of nonsense that has been broadcast over the past few years.
Lmao…. “Wide-mouthed realtor”…. In NY? You don’t say!!!!!
Hope they make 200K a year.
That’s the biggest joke of this entire bubble. I live in a community where most of the homes are 500K to 1.5M dollars. Most of the people in this community drive cars that cost 15-20K. Yes, there are a few BMWs and MB, but by far, the majority are just standard, no frills, cheapo cars. Now, stay with me for a minute; but to afford one of these homes (using normal standards) you should have an income between 200 and 500K.
Yes, I realize that some people are very conservative and will buy a 15K car even when they make 250K a year. NOT MANY!! And certainly not in image/status concious area like Palm Beach. How far over your head are you when you live in a M dollar home, but have a beater parked out front??
My wife watches this show too.
As she oohs and aahs over the computer graphics I continue to remind her about a major remodel on our house back in the early 90’s. The results came out very well but of course it took twice as long and 30% more dollars than the original estimate. About eight months into the project, if our contractor had been found dead in his office with ten square feet of sheetrock stuffed up his ass, the police would have known right where to go to find the prime suspects.
So I ask, “Where is the followup show that interviews these people when the renovations are on hold at the 75% point and they’ve run out of money??
About eight months into the project, if our contractor had been found dead in his office with ten square feet of sheetrock stuffed up his ass, the police would have known right where to go to find the prime suspects.
lol
that’s why I build into remodel budget more time and at least 20% more $$ than original estimate
Groundhogday
That show is called Hidden Potential and it’s freakin’ hilarious. The future homeowners choose between 3 POS houses that have been languishing on the market for a minimum of 6 months usually longer. Most of these *ahem* lovely homes need massive infusions of cash and major construction to make them habitable.
…or a bulldozer
I saw that program . I kept yelling at the T.V., “Walk you fools .Walk!”
OT- Have you noticed that the show “Buy Me” recently only show houses in Canada, not the US?
They did have one episode in NC, but it’s filmed mostly in Canada (the credits page makes it look like they’re based in Quebec)
I watched an episode about a week ago which was filmed in Calgary (the bubble capital of Canada), presumably last fall. I was shocked to see a total POS property with a very nice view listed for 1.15 million with two very reluctant realtors who maintained the price was excessive in a market which had started to head down. The elderly owner was moving to an assisted living facility and her four greedy offspring were preparing to divide the spoils. After a major price reduction, the place finally sold for 750,000. to someone who was going to demolish it and replace it with a new McMansion(?). This was in a neighborhood of 50s and 60s era bungalows. A completely renovated house down the street was listed for 1.25 million. I am familiar with this area and although I am aware of how prices have escalated during the past several years, I was shocked.
Was that the house with about 50 years of defered maintenance and a giant leaky spa that filled the entire area of what should have been the dining room? That house was a real winner. I remember how angry the one son was about giving the house away.
Yeah. He thought the property was worth 1.5 million and anything lower was giving it away. He complained throughout the entire episode.
The trouble with falling in love with a house is that the house never loves you back.
no, but they do occassionally “F” you
And thoroughly, I might add.
I see a self-help book opportunity:
“Houses Who Hate Their Owners and The Owners That Love Them”
or
“I’m OK, My Mortgage Sucks Ass.”
or
“Homedebtors Are From Mainstreet USA, Mortgages are from Irvine California”
These people are going to feel lower than whale sh!t in a year or so.
Didn’t you know that is the new “American Dream” - buy the biggest house you can “afford” on 2 salaries, each higher than the median HOUSEHOLD income for the area. Then, have kids you can’t afford and dump them on the grandparents to raise them. Next, lease out a big, new expensive car every few years. Finally, complain to your coworkers about how you “don’t have any money/need another job/can’t keep the house/can’t have more kids/etc.” Gee, duhh… why could that be?
“Serious buyers today have a long-term view of housing as an investment”.
A very interesting statement. He’s not saying “Serious buyers today have a view of housing as a long-term investment”.
My long term view is also that a house can be an investment. We’ll just have to wait a few years before we buy.
But given the actual long-term picture, housing is more of an inflation hedge than an investment per se. 0.5-1.0% annual real RoR over long periods of time. I don’t think it will be worth investing in housing until the majority cease to think of it as an investment and begin to think of it as an expense. Maybe we’ll see a revival of old movies like “The Money Pit.” Then I’ll think about it again.
The Money Pit was a right-on movie.
We rented it a couple of months ago. I’ve seen it a billion times, but it is a true classic.
Another good one is ‘Pacific Heights”. A bit dark but you meet the tenant from Hell if you want to be a landlord!
“The economist described what he sees as the real culprit: ‘Everyone expected the fed to bail them out, so they put too much leverage on. Now that that bailout’s not happening, people are mad, worried, concerned — but we’ve got to get that excess leverage out of the system.’”
We want our Greeny back. Why can’t you be like Greeny? We want Greeny back! wah wah wah!
Little ditty from Hoyt Axton/Ken Ramsey/Kingston Trio, the refrain from the greenback dollar song:
“And I don’t give a damn about a greenback-a dollar
Spend it fast as I can
For a wailin’ song and a good guitar
The only things that I understand, poor boy
The only things that I understand”
dude, you’re geezin
I liked the my generation bit w the greeting card
Greeny rode that choo choo as far as it went. Homey don’t play that. This little train can’t anymore.
Home sales will begin to improve in the final three months of 2007, rising to 6.08 million on an annualized basis from a bottom of 5.85 million in the third quarter, the Realtors’ said.
`Conventional Wisdom’
In every forecast so far this year the group has projected a housing recovery for 2007, even as they cut their sales estimates. A month ago, it said the bottom of the market would be in the second quarter, with sales rising in the current period.
“The NAR’s forecasts are reflecting conventional wisdom and I think there is a much longer-run negative uncertainty,” said Robert Shiller, co-founder of MacroMarkets LLC.
The decline in housing sales could last “for some years” and may spark an economic recession, said Shiller, a professor at Yale University in New Haven, Connecticut.
It looks like the credibility of the NAR is losing ground fast based on the comments being published. The housing economic forcast put out by the NAR just lack the fundamentals and the NAR information looks more like a way to fool the public into believing they are a credible source so people will buy from their members. I question the ethics behind the information put out by the NAR.
In Shiller we trust.
Which reminds me, isn’t it ironic that he is the commentor who is actually named “shill”er, when he is the only one who isn’t?
“Toll Brothers, the largest US luxury homebuilder, on Wednesday warned that home sales might fall even further in the latest sign that the worst housing slump in 16 years has yet to reach its lowest point. The rate of new home sales in June was at its second lowest since September 1999.”
I was schemin’ when I wrote this
Forgive me for what I have to say
But when I woke up this mornin’
Could have sworn it was Toll’s judgement day
The sky was all Chicken Little’s
There were people foreclosin’ everywhere
Tryin’ to run from financial destruction
You know, I just love a scare
The say two zero zero seven, housing party over,
Oops, no subprime~
So tonight i’m gonna party like it’s 1999!
“The economist described what he sees as the real culprit: ‘Everyone expected the fed to bail them out, so they put too much leverage on. Now that that bailout’s not happening, people are mad, worried, concerned — but we’ve got to get that excess leverage out of the system.’”
Feddy take away security blanky?
bwaaaaaaaaaah!
“I question the ethics behind the information put out by the NAR.”
You mean there’s ethics behind the information the NAR puts out?
Allow me to rearrange the above statement:
“I question the information put out by the NAR behind.”
What’s missing…“the ethics”
You mean there’s ethics behind the information the NAR puts out?
My answer, NO! A complete lack of ethics and that is what is contributing to the problems we face in the USA…A lack ethical business practices that come in the form of spin often leads to severe economic problems. The NAR needs to wake up and realize their lack of ethics in what they report to the public (Their members customers) will come back to haunt them once the end user has been burned.
EEEK! VOLATILITY!!!
http://www.marketwatch.com/tools/marketsummary/
It just the end of the day spike, you know, the normal thing!!!!
To quote a line from “Not Another Teen Movie”
“Wham, bam, what the f^ck just happened?”
I was feelin peachy about the Everest like cliff that it was falling off of, now climbing back up Denali.
http://tinyurl.com/2kvumt
“Carry Trade” with the dollar collapsing against the Euro, The “carry trade is back on, this allows China to get out of more dollars.
The above link is EuroYen vs SP500 5 days. The correlation is 0.94
“The correlation is 0.94″
I assume you are talking about correlation in the daily changes here (over five days). Because the minute-to-minute correlation is clearly 0.
By contrast, if you look at any pair of headline U.S. stock market indexes side by side at high frequency intervals, you will find a correlation near 1.
Hey GS, The problem with the graph is that it does not account for time delay from EuroYen to S&P diff is 6 hrs.
What this means is that when the EuroYen rises the S&P500 rises. When the EuroYen soar on a day like today, it is not wise to be short the stock market. :>)
Go to the same chart and plug in 1yr. Then it is easier to see.
The headline indexes bounced off their opening bell levels like a cat off a hot tin roof. The PPT rides again! YeeHawww!!!
The NAR comments remind me of the quote from Spinal Tap - when asked whether shrinking crowds at their concerts meant the band was becoming less popular, one of the lads replied: “No - it’s just that our appeal is becoming more selective”
Demand is being “delayed.” Sure. I’m not sure Mr. Yun knows what a market actually is.
Phew! OT… The markets will land softly, so says the most powerful man on the planet.
http://biz.yahoo.com/ap/070808/bush_economy.html?.v=3
“I’m not an economist, but my hope is that the market, if it functions normally, will be able to yield a soft landing,” Bush said. “That’s kind of what it looks like so far.”
ROTFLMAO! (Pounding my chest, can’t…breathe…). This from a guy who drove at least two, possibly three businesses into ruin and had to be bailed out by his daddy’s rich Arab friends. This from a guy who wasn’t wanted around at the Carlyle Group, not even with his daddy’s intervention. This from a guy who has managed to score the largest US deficit in history. Sorry, whatever this guy says, I feel I can’t go wrong believing the opposite, especially on the subject of the economy. That said, the man has spoken. Now, everybody hold onto their keester.
Cheers to that!!! Simply the stupidest public figure ever.
Don’t be bitter Palmetto, you’ve got Cramer. I feel a lot better now that GW is keeping his hands OFF. If anything we need an increase in the discount rate to squeeze inflation and get the children off the street. When the Bank of England increases their rate this week (or next) the pound/dollar ratio will really drop.Good luck buying some good English Beer at a reasonable price.In the mean time guys and gals,have a martini on me, it’s cocktail time.
Isn’t it time for this guy just to go to Paraguay? We’ll send his paychecks on.
Global capital markets trump reality and are the greatest threat, from MSNBC.
http://www.msnbc.msn.com/id/20179318/site/newsweek/page/2/
“The peril is that so much has changed so quickly that no one knows how the system operates. It’s often roulette. Monday’s defensible investment may become Tuesday’s silly speculation. Global markets are interconnected, and financial conditions are tightening. Some hedge funds—including foreign funds—have suffered huge losses on U.S. subprime mortgages. These could harm banks that lent to hedge funds. Up to a point, losses are inevitable and desirable. They remind investors of risk. But too many losses—too much fear of the unknown—can trigger a chain reaction of selling and credit contraction. This must worry the Federal Reserve and other government central banks.”
Lawrence says: “…but general gains will be modest next year.”
That’s cool, I’m glad he is forecasting gains next year. I think this is the shaky guy with a nervous tic and desparate eyes I saw playing the hold-em table in a joint selling 25-cent hot dogs and 1-dollar shrimp cocktails. It was a place on the Strip next to Circus-Circus called “Slots-A-Yun.”
Stock Market dived in the last 30 minutes, over 200 points.
Why? Bush and Cavuto on Fox had an interview. Cavuto interrupted and said, but Clinton said…
And Bush interrupted again and sternly said, “I AM NOT FOR A FEDERAL BAILOUT.”
Cavuto then said, “That is what she is advocating.”
Bush says, “That is not the way to solve the problem.”
Also, there was a rumor hitting trading desks that Goldman Sachs would make an announcement after close. They denied it about 20 minutes ago.
Question: Why are home prices NOT falling like they should in this real estate market?
In my area (SC), prices are holding steady or maybe a very slight drop in prices. Looking at places in Idaho, YOY sales are down 15-40% but YOY prices are up 2-8%. In addition, inventory is up…way up.
Has the “supply and demand” theory become just that…an unreliable theory?
I know I should wait to buy and wait I will but for crying out loud, I have have been waiting for 9 month for the price slashing and blue tag sales but haven’t seen them except in a few major cities.
Real estate price movements are slow. It took quite a while for this bubble to blow up, it’ll take a long time for it to deflate. In Denver the prices went up in 94 and 2000. They’re still not really correcting, even though the foreclosure rate is horrendus.
Even in the much smaller decline from 1988-1994, the big price drops didn’t really show up until 3-4 years into the thing. Sales collapsed early on, just like they’re doing now. But the sellers refused to lower price, hoping “the market will come back.” They’ll be disappointed this time just like last time but even more so.
Greed, stupidity and denial are all inherent to human nature. We just need to figure out how it will likely influence the housing market. It will be the pros that first undercut this thing - first the builders then later the banks that are involuntary owners (REO).
Gotta have it now, Tim? 9 months is nothing. Can you afford 20% down? Can you afford a fixed rate? Do you have a FICO that will get you qualified? Can you find a bank that won’t sell the loan? Is your income at least 1/3rd of the purchase price of the house? If you answered “no” to any of these questions, keep waiting. If you are not currently an mortgage slave somewhere else, then you are in a better position than probably 80% of the people out there. Patience is a virtue.
Don’t look at median numbers
Pick a basket of houses in your price range and watch them.
See how many sell and how many lower their prices. Also track out what really sell for. How much below asking price.
My wife and I have been watching 30-40 houses over the last 8 months and 2 have sold. Half have dropped their asking price from between 5-15%. A couple have dropped asking 20%. I’m quite happy renting for another year. When I start seeing houses sell in significant numbers with sellers getting their asking price I’ll consider buying. Until then I’m quite happy renting.
Don’t look at median numbers
Pick a basket of houses in your price range and watch them.
See how many sell and how many lower their prices. Also track out what really sell for. How much below asking price.
My wife and I have been watching 30-40 houses over the last 8 months and 2 have sold. Half have dropped their asking price from between 5-15%. A couple have dropped asking 20%. I’m quite happy renting for another year. When I start seeing houses sell in significant numbers with sellers getting their asking price I’ll consider buying. Until then I’m quite happy renting.
Club Fed Loan Aerobics class…
“‘I regret to note that today we are again witnessing some painful and belated learning, by policy-makers and consumers alike, in our consumer financial markets,’ Stern said, in an oblique reference to problems in the subprime mortgage market for borrowers with risky credit.”
Work those oblique references…
Feel the burn!
I thought they might be opaque.
Chortle
Don’t you all know about the “demand being delayed theory “. That means pay high today for the demand that’s a coming . You know global markets are good ,the buyers will give in ,(even without money ). This must be the theory all the cheerleaders are going on .
By the way ,I would not think that Bush would be in favor of a Federal Bail-out . I would like to know what he thinks is the answer however .
Bush’s answer would be the same one he had for the 2 ladies who were Kartrina victims that had told him they had no clothes—”The Salvation Army is here & they will help you.”—So he would expect any of the newly homeless middle class to go stay at a Salvation Army shelter.
Bush’s only interest in the American people is how much of our money he can stick in his pockets and the pockets of his cronies.
But he would bail out his Wall Street pals in a heartbeat.
off topic comment : . . . of all the things in Florida I regret not doing the most, #1 is missing a close-up Space Shuttle launch.
I pulled over on I-75 N.Bound between Tampa & Sarasota to watch a bit of the launch contrail from the ill-fated Challenger launch way back when(didnt know of the disaster until minutes later by radio) … but a west coast view is limited to rare clear sky days.
You usually can tell a launch is happening by the cars/RV’s pulled smack dab over on the roadside looking up at the eastern sky.
This’ll happen on any road, freeway. etc … the natives are always in a rush to get to or from work & grimace at the distractions.
Will be watching the Endeavor launch on TV here in Sacramento CA this afternoon.
GO NASA !!!!
Hey all you Colorado junkies (like me). Check out this steal of a deal just sent to me by some jacknut RE agent!
$200K reduction!
Now only $599K!
Over $100K under assessed!
A whopping 925sf!
Grosses $20K
http://www.innmatchmakers.com/prp/141.html
Gosh, I’d better plunk down a couple hundred grand right now! I might be paid back in (let’s see, um, carry the four, um) 986 years!
Holy crap, I am being innundated with anecdotal evidence of people with money problems here in Council Bluffs / Omaha.
My work peer is looking to sell diamond and sapphire rings on eBay soon, as she is broke. She doesn’t know how to cut expenses.
My wife’s work peer just got rid of a 2005 Acura TL for a new Honda Civic “because of the gas mileage”. Yeah right. They didn’t get the hybrid. These nitwits are building a house right now. And after prodding my wife for more info, enough came out that it was OBVIOUS that they are having money problems. Even here in a place that’s “cheap to live”, there are still A TON of people that are flat broke, that tried to keep up the charade as long as they could. Time to pay the piper.
BTW, I can’t even count the number of people I personally know that I’ve mentioned like this on both hands anymore. Oh yeah, these things speak well for our “stong economy”.
Interesting. Omaha has insurance, meat packing, transportation, some manufacturing. Just enough prosperity and keeping-up-with-the-Jonesesism to support its own bubble, I suppose. I don’t think I’d want to be broke in Omaha in the winter. It can get chilly there without heat in January, can’t it?
BTW, the market for used gold rings with diamonds or sapphires has never been great on eBay, probably not much better than your local pawn shop or old-line jeweler. But of course you can stay anonymous.
“probably not much better than your local pawn shop or old-line jeweler”
That’s what I told her. And yes, it does get chilly. Not quite as bad as the Northeast, but we did have a string of days where it never got above freezing (a couple of weeks?). But, we have the worst of both worlds. Here, it is only in the low 90’s, but with 75% +++ humidity, the AC is running all the time.
…and dont forget to throw in a handful of divorces. I am scared of October.
Borrowers should be scared for the next five years!
http://www.autodogmatic.com/forum/viewtopic.php?t=280&highlight=resets (I love this graph)
Should we believe Countrywide saying that 2/3 of their sub-primes and alt-A have already refied, with only 23% or 24% taking adjusables again ?