The Housing Bubble

I can’t figure out your meaning, wbmz. I sense sarcasm in your post. Personally, I am pretty surprised by this. I did not think people would blame others for losing money or making bad decisions. I assumed that they would be grown-up enough to say, “I made a bad decision. It is my own fault.” This lawsuit phase could not have been foreseen any more than the problems in the mortgage business, home finances, the credit tightening, job weakness, questioning of the ratings agencies, disaster with some hedge funds, Fed absurdity, proposed government bailouts, falling home prices, or collapse in construction spending. Somethings truly are shocking and this is one of them.

Tort reform. You sue me and you lose, you pick up my legal fees.
If that were the case today I wonder how many Vioxx lawsuits and similar cases would have been filed. Merck has said it has incurred one billion dollars in legal fees and has 28,000 cases to go. Lots of research money.

Meant to write “bound not to be a shock”

People sue at the drop of a hat for damn near any reason, so why would this be a surprise.

I’m waiting for all those six-figure income 5 FNMA 1004’s a day appraisal bucket shop fraudsters to get nailed to the wall.

And adios to all the Errors and Ommissions insurance companies who kept this crowd running.

These turkeys knew the score.

On their yearly renewal forms they would always ask the percentage of work being supplied by vendors.

You do 1500 pieces of work for one entity…guess what?

The fix is in.

unfortunately, stupididty is a fairly strong defense in America.

Next bubble: Wall Street attorney’s fees

Where are the lawsuits against the Realtors?

There’s going to be a lot of litigation initially, but I suspect most of it will be boiled off very early on with lots of dismissals and summary judgments, since fraud is a very difficult claim to pursue and prove, especially given the diffuse nature of the REIC.

A handful of suits will survive long enough to settle, and a few might make it to trial; most against a few of the higher profile players.

This one is really creepy. Could someone scroll down to the photos and tell me what the hell IS that in front of the refrigerator? Maybe I need more coffee, but to me it looks like a bound nude torso.

http://tampa.craigslist.org/rfs/419342798.html

What I don’t understand is why people want to live in buildings like that. Even here in New York, I don’t want to live in a building like that. I told my wife, “we will spend our lives either riding on elevators or waiting for elevators.” If you live on the 52nd floor and you need a gallon of milk you have to wait for the elevator, go down 52 floors, get the milk, wait for the elevator and then go up 52 floors. So, you have people that shop for you? The same applies if you want to go to the park, the local pub or any other place. Your home becomes your prison as you venture out less and less. Living that high takes all the convenience out of city living. And if city living isn’t convenient then it really isn’t worth it.

Personally, I will not take an apartment that I can’t somewhat comfortably walk up to. The older I get, the lower that gets. Anything over the eighth floor is now off limits. That high-rise luxury living is a bunch of BS that exists only in the minds of delusional wannabes.

I guess Tampa doesn’t have a limit on how tall a building can be? The neighbors behind Trump must be bummed cause he just blocked their view. They probably don’t even get sunshine anymore.

That was me. Thanks for this! More suggestions also welcome; I have lots of time at work and why not use it to better myself?

Yes, a moment of silence in remembrance of one of the worst tragedies in our country, that led to even more tragedy.

Expect a patriotic rally, market hasn’t had a down 911 day since 2002.

In some ways it seems like yesterday, but on others a long time ago. I don’t think about it much except when something goes “boom” in NYC.

You know it will be a bad day when you mother-in-law calls at 6:45 am to tell you to turn on the news.

I was driving to work in Md. from my home in Va. that day. Had I been running on time, I should been driving essentially right under the plane as it flew into the Pentagon. As it was, I didn’t have the car radio on and wondered why all these cars were turning around in the median on I-95; I figured it was a bad car wreck or something. Wish I had been right.

We had recently moved out of the city to NJ. That day my wife went to work in the city pregnant, by the next day she wasn’t. One of her previous assistant trader’s was later partly found on the top of a nearby building. Every town in the area I live has a memorial with the names of the town’s dead. I walk down the street with my 4 year old and see names of people I knew on these memorials. There is one name that I always look for first and when I see it, it invokes great sadness. Ironically I didn’t know this person and had never met him but I knew a lot about him. He had protected my wife when I wasn’t yet there. When she was a young first year wall streeter, at Lehman, a lot of the traders behaved shabbily towards her. This guy was the only one who stood up and said that nobody was going to treat any woman that way around him on the desk. I won’t go into why and how rare that is on a Wall Street trading floor. To be honest I doubt that I would have stood up like he did. When we moved to NJ my wife and this guy became aquatinted again on the ferry ride into the city. Both were now more senior wall streeters. My wife used to tease him that he might have to be her protector again because they would joke that if the ferry went down there would be no cooperation among a bunch of wall streeters on a sinking ship. He used to tell her not to worry cause he would save her from “the meanies” yet again. If the boat sank the plan was she would grab onto his shirt and he would run through the crowd and onto the life raft. If I remember the story correctly, he had been a college lineman. They sat together often on the ferry and talked. On September 11 when my wife finally made it onto the homeward ferry he was not there. As she got off at home, the first thing she saw was a completely naked man being decontaminated by a Hazmat team. Next to him was a pile of chalk white cloths and a perfectly clean leather brief case, she wondered if it was him but when didn’t want to embarrass the guy by staring at him. It wasn’t and Dave Bauer never made it home that day.

That night we were so jittery that we didn’t know what to do, but we did not want to be at home alone so we went to a local restaurant. The waitress broke down and stared to cry after she heard of my wife’s escape from the city. I took her arm and told her to sit for a bit with us. She was from this area but now commuted out here from Brooklyn. Her boyfriend of some 10 years was an NYC fireman and she hadn’t heard from him and now that it was getting dark she was getting really worried. She never heard from him again.

For almost two weeks the funeral bells of the church around the corner from my house range twice a day. On one of those days it just became too much for me. There was an oak old tree that had been cut down in the spring and I had the guys cut it up into sections but it had not been spit. I went out to the back yard and on a gorgeous fall day with the funeral days ringing I split wood until my hands blistered. I kept splitting until the blisters broke. I kept crying, chopping and pounding the wedge into the longs until all of that oak tree became a pile of seasoned split fire wood. Blood ran down my hands and arms. My shirt and face were covered with sweat, blood and tears. That was when I realized how much I had been effected by that awful day.

There were others that I knew but never heard from again. My little area in NJ lost 44 people that day. Sometimes I wonder if our baby makes it one more, regardless, it only makes that day that much sadder for us.

Got catharsis?

Tried posting this earlier, but it didnt’ show up. I hope this isn’t a double post:

On 9/11, I remember waking up to my alarm clock, which was set to NPR. I was half asleep, and they were talking about some terrible attack in which thousands of people may have been killed. I assumed they were talking about somewhere in the middle east, and didn’t want to wake up to that, so I pressed snooze. 9 minutes later, the story was still on, and they were talking about New York.

Now it’s 2007, and the story is still on. I wish it would go back to the middle east.

My boss and I had planned to go to the Pentagon ,where I worked from ‘86-’92, on that day, to see if we wanted any furniture that was being excessed because of the rennovation. I guess if we had, I would have gotten hazard pay for that pay period. I was getting calls for weeks afterwards from old friends who were vaguely aware that after college I got a job there and hadn’t heard that I didn’t work there anymore. Kind of strange to get “are you alive?” phonecalls.

I live in Arizona, but was visiting relatives in suburban Brewster, NY. I was on a Manhattan-bound Metro North train with a cousin that Tuesday morning to visit a few museums and meet two college friends later that day. The towers were struck during the trip.

At the 125th Street station, the train stopped and there was an announcement that south-bound service had ended. Then there was a bizzare message about lower Manhattan being closed off due to an incident. Someone on the train with a cell phone (I did not have one) mentioned a small plane hitting the WTC. The rising smoke was visible from the platform there in Harlem, miles away from the WTC. I heard a cop’s radio say that the Pentagon had also been hit.

I made the obvious statement that we were at war, and boarded a standing-room only local train back to Brewster. At one point, some lady said out loud that both towers had collapsed. I thought to myself that tragedies are always accompanied by blowhards making things sound worse than they were, and I rolled my eyes at my cousin. I finally got to sit down somewhere around Chappaqua, next to someone who worked at the Trade Center but had never made it to the complex that morning.

My relatives there knew several of the firefighters and businessmen that were killed. I knew one.

http://www.cnn.com/SPECIALS/2001/memorial/people/3089.html

We just need a 100bps rate cut and everything will be perfect.

They’re Bubba’s new gal pals, worry not. The fun will be watching the trip to the joint

“…substantial misrepresentations of material facts.”

Like the material fact… that Crispy had the “intelligence” to buy property with fraud in…Bakersfried!

Crisp,

I hope to run into my BIL while in BK this weekend. He said that Crisp is a friend of his and he visits him from time to time. I can’t wait to see what he has to say today.

“They used me to buy these properties that they wanted because I have good credit,” Sluga said Monday.

Neither she nor her daughter had any knowledge of the activities mentioned in the report and her family is distraught, Sluga said. She says she signed loan documents, but never saw the applications.

“I am a victim,” Sluga said. “I had no idea what Crisp & Cole or Tower Lending were doing. I trusted David and Carl.”

Sac Bee Puff Piece (Oct 2005):

“He got into the real estate business right when it was starting to boom here … and he has just the right personality for it,” said Crisp’s mother-in-law, Leslie Sluga, who has bought and sold investment properties with his help. “You can’t tell him ‘no.’ He just doesn’t understand the word ‘no.’ It’s kind of scary sometimes.”

Given all the talk of a bailout and Fed rate cuts, I’d say we are in stage three.

On the whole I’d say still in stage 1, though some are moving on to stage 2.

Our area, Seattle, is definitely not even to stage 1. Or maybe we are in stage 1. I have friends who have a home that they rent out. They put it on the market, but they hardly got any traffic. Their RE agent told them that the market is slow right now, (they put it on the market in June, so it wasn’t because they put it on at a bad time) but it will pick up again in the spring so they are refinancing instead of selling to get cash. I told them that they didn’t get much interest because they priced it too high and they should try again at a lower price, but I think they are going ahead with the refinance.

My heart, as I’m sure all of us here concur, goes out to all the families who lost loved ones on that terrible, terrible day. In our day-to-day political in-fighting and personal disagreements, let us never forget that the real enemy to our way of life are the religious fanatics who use any means to advance their twisted ideologies.
I dislike fanatics of any strip.

During 9/11 my wife and I had just left Sloan Kettering Cancer Center in NYC a week before. I lost my wife on the last day of September 2001. It was the worst month of my life on many levels. I left NYS in 2004. It took me three long years to think straight enough again to move on with my life. I’m sure some here can relate.

I think we’re still in stage 1. The other day, I was driving with a homeowner friend of mine around Willow Glen and Campbell (near San Jose). I remarked on the high number of for-sale signs in the area, and she replied “Oh, but it’s always been like that.” No.

Another common retort I hear is that “There are a lot of rich people in … (California, the US, the world, whatever), and they won’t let our economy falter. So this must just be a blip.”

I don’t think people will move into stage 2 until more than 1/2 of the decline has already occured.

You are using the wrong model.
This is not about personal loss. This is about financial loss.
The correct model has the following steps, starting at a balanced market:

1. Optimism……….Real Estate might be a good investment.
2. Excitement (I think we could make some good money here)
3. Thrill (boy, prices went up 20% last year)
4. EUPHORIA…………Real Estate is the best investment there is. (TOP).
5. Anxiety ………Temporary set-back. Prices will recover
6. Denial ….. We are seeing lots of this. Look at the recent stories.
7. FEAR…………I think that’s about where we are NOW.
8. Desperation……….Needs no explanation
9. PANIC…..Not there yet.
10. Capitulation……….I give up. I’ll just give it away.
11. Despondency………Real Estate is the WORST investment I ever made. (BOTTOM)
12. Depression
13. Hope
14. Relief
15. Optimism…………Real estate might be a good investment.

One point five.

Yeah, I posted over the weekend the rumor that BOA would be doing another financing lower than the first strike price. I dumped my stock the second the premarket opened yesterday. Made a big $500 but look how it tanked after that.

18 will now be huge resistance.

Didn’t Mozillo take out over a billion or so over the past couple years? Maybe he should “inject” some of that back in himself if they need it so badly.

When CFC announced the big layoffs it also announced that the mortgage banking business would be moved out of the non-bank company, Countrywide Home Loans, into the bank company, Countrywide Bank, FSB. Any thoughts on the following:

Countrywide Bank can get loan warehouse financing through issuance of brokered CDs. Countrywide Home Loans has to rely on bank loans and commercial paper.

Countrywide Home Loans can be forced into bankruptcy by creditors. Countrywide Bank, an S&L, can’t.

Countrywide Home Loans is subject to legal actions by numerous state and Federal agencies as well as state AGs. Countrywide Bank is pretty much under exclusive supervision by OTS.

Warren Buffet’s firm now owns 8.7 million shares of BAC. He must be $hitting in his pants by now.

Got 10% down?

LMAO!!!

sick

He’d better get sent to someplace other than Bakersfried…or Tehachapi…incest means nothing to inmate occupants…”Oh, you’re from bakersfried…we’re related.”

Do I need to even comment here? Nope.

Ewww

Is terrorism still a problem in Belfast? If it is, then where will the next bubble be? In Bagdad?

Last night, I saw a half-finished McMansions in the lower Greenville area abandoned mid-construction, surrounded by chain link fence with a “for sale” sign on it. A lot of the remaining people who had the teardowns the spec builders wanted for this junk are now trying to sell. Way too late. The builders can’t sell the ones they’ve already built much less new ones.

she’ll get a raise– fnm,fre still hiring w their gov backing

The tear-downs and construction of large new $million homes continues unabated in the upscale neighborhoods ‘inside the loop’ in Houston (West University, River Oaks, Bellaire). So long as oil stays about $60/bbl I don’t think it will slow down. It might be a different story outside the loop - some evidence of inventory piling up out there.

““We had thought we would hit bottom the second quarter of this year,” Amy Crews Cutts, an economist with lending giant Freddie Mac, “

How can it hit bottom already when there are a huge number of basically fraudulent loans still out there? I should have become an economist, I could spout nonsense and get paid as well.

LOL at Amy “Crews Cutts”. Sorry Amy, I’m going to have to ask you to sit back down in the barber chair, we aren’t done with the housing bubble haircut yet. First we use the scissors… then we use the trimmer… nope, not over yet, sit back down… time to bring out the razor…

RE: Why isn’t anyone saying it will hit bottom when affordability is restored?

You are exactly correct, RT. In virtually no public or political commentary regarding this fiasco, do you see the word “AFFORDABILITY” mentioned.

It’s like no one can intellectually grasp the essence of the problem.

Like a Fed cut of any dimension solves anything?

WTF?

Because if you mention affordability then all sorts of things get brought up. Such as people not being as well off as they thought, that building lots and lots of “luxury” homes might not have been a good idea, that RE might not be an unending source of increased property taxes and even that RE prices might not always go up.

As everyone else has said, it gets messy if they do that. It gets messy for those who have profited from the high housing prices. It is already messy for those not in that royal class, but our royal class really does not give a rat’s arse about the peasants now do they? I wonder, is there a “Let them eat cake” moment on the horizon?

should be…”lose their shirts…”

from that article. What kind of realtor would take the listing from this dipshit:

But other Realtors say far too many home sellers continue to cling to unrealistic asking prices. Among the independent analysts who agree is Wayne Archer, director of the University of Florida’s Bergstrom Center for Real Estate Studies.

In a survey report last week, Archer said many homeowners “have not yet come to terms” with the harsh reality of the weaker market and the loss of the rapid price appreciation they experienced from 2003 to 2005.

Sukhram is a case in point.

He lived and worked in the New York City area for 26 years before tiring of the snow and ice. He brought his wife and children to the Orlando area two years ago and bought a home in south Lake County for $212,000.

A little more than six months ago, Sukhram, who works at a Wal-Mart, listed his home with a real-estate agency for $348,000. He held firm to that price for the first six months, even though his agent brought no one around to look at the house.

“He said he didn’t get any calls,” Sukhram said. So he agreed to cut his asking price to $340,000 when he signed with McAdams, though he said Monday that he’s not willing to negotiate further cuts.

Not budging

Sukhram said homes in the Orlando area already are priced too low compared with areas of the country such as New York, where a relative of his recently sold a house for more than $500,000. That tells him, he said, that he should hold firm.

But the yard behind his 1,938-square-foot Clermont home is not big enough for the swimming pool that his wife and four children want. He said he has not made any improvements to the property to raise its value during the two years he has lived there, but he needs the $128,000 profit — minus his agent’s commission — to be able to afford the kind of home and large yard that he really wants.

“I would not sell it for less than $340,000. That’s a fair price for me,” Sukhram said.

Perhaps future home purchases will be made with gold coin, since lenders no longer seem very willing to loan fiat currency?

I wonder where they find their guests. They regularly have an oil ‘expert’ on who said oil was going back to 30 last month.

The world is full of “experts.”

Moz,

Count me in for a few bux, if that’ll help out…

I guess it takes lots of cash infusions to help the Tan Man play pump-and-dump…

http://www.bloomberg.com/apps/news?pid=20601087&sid=afnxbVXg0xH8&refer=home

Remember when our leaders worked for us, and not China? Neither do I.

Very interesting…

By contrast, this does look like a bird or a plane…

http://www.marketwatch.com/tools/marketsummary/

And this would look like an inverted yield curve, except that the shortest term yield is mysteriously missing in action (FFR = 5.25% — higher than any other yield on the entire duration spectrum).

http://www.bloomberg.com/markets/rates/index.html

* Who should get the blame for the boom-bust cycle in housing?

Public sentiment

* What should the Fed do to minimize the impact of the bust on both Wall Street and Main Street?

Nothing

* What should be done to prevent similar boom-busts in the future, either in housing or other asset classes?

If they do nothing for number 2, then they won’t need to do anything for this one either, because after the fallout from this one, there won’t be any more bubbles until we are all dead because public sentiment will be too cautious to allow another one.

The NAR estimating to three significant figures would cause my long retired engineering professors apoplexy.

“Something must be done about endangered feces”

r.i.p. Gilda

Did ya notive yesterday the Japanese announced the recession on the land of the rising sun….think multinational effort of Central Bankers heading off the Peoples Republic at Inflation Pass.

Wow!!

With all the news about FBs I really want to hear all about the the Hedgy Wedgy these big investors are getting. Does anybody ever hear any stories about the losses and the toll its taking on the multi million dollar portfolios? Are these guys regrouping? Or groping?

The median price for existing-homes is expected to fall 1.7% this year to $218,200 and rise 2.2% next year to $223,000.

Uh huh.

(You’re not doing America any favors, Mr. Yun.)

let’s see how mr seller feels when his ARM resets to 11.5% next month.

let’s see how mr seller feels when his neighbor gets foreclosed, and his property sits idle for two years.

and then the coup de grace……let’s see how mr. seller feels when the first neighbor breaks ranks and sells for 100K under “market.”

No tickey, No laundry.

That’s what happens when you peg your currency to a loser like the US Dollar.

–
During the depression, when hotel/motel vacancy rates skyrocket the rents on rooms and suites with kitchens would be so low that many people will live in motels/hotels as substitute for renting apartments.

And what would that do to supply-demand for residential RE and the prices?

Jas

Have seen it suggested that people live in Motel 6 or other low cost motels rather than retirement homes - can go anywhere, maid service, free breakfast and cheap meals and no housework or maintenance.

I have a desire to buy gold, but I learned my lesson in 1997 when I bought and the subsequent credit crunch caused a sell-off in PMs. I’m waiting for a PM crash to coincide with a big stock market or other asset sell-off, then I’ll dive in. Then, after that, I think we’ll see PMs move opposite other assets as opposed to with them.

Interesting. I did see that tulving.com was sold out of krugerrands last week.

Some people say gold will go nowhere because bankrupt people will have no money with which to buy it. Bad argument! The buying will come from the other side of the equation: the rich people. At some point there will be a mad dash to preserve wealth as the debt bubble collapses and rich people see their investments evaporating. Real estate won’t work; metals will.

We are gathered here…

Last paragraph:

The survey also found that a third of home purchase closings were canceled in August. Loan closings were canceled for 56 percent of subprime borrowers in the month amid failed approvals, while closings for 21 percent of home buyers with good credit were foiled.

More than one out of five buyers with good credit were “foiled” at closing. (Do you suppose that includes people in Alt-A categories?)

Yow. That’s not going to help move any more inventory.

Though in retrospect those people should be estatic.

“impeded by appraisals”.

–
I lived in SB 1996-99 and have many friends that I keep in touch. They are not as bearish as I am. I think that you should hold out for 1997-98 prices (70-80% down from the current prices). Ex-wife of a friend bought a $1.3M home during 2004-05 on a part-time $14/hour job with mortgage of $900K. Many over-stretched buyers will be selling/defaulting once the recession begins.

Jas

For some reason, that house just seems really ugly to me.

Jas: Doesn’t it seem that the recession has already begun?

Check out the two bare-chested dudes in the background of the picture of the weight room — hmmm . . . kinda like that torso in the picture of the dump FS on CL in Florida posted in another thread here. Don’t people check what’s in the pictures before posting them???

“3X annual income rule”

Key factors include:

1) Will the loan actually be repaid?
2) What is the market interest rate?
3) What percentage of income will be applied against the loan?
4) Will the HH be able to build a cushion of savings to contain the risk of job loss or health problems that may interrupt the ability to pay the mortgage out of current income at some future point?

At current market interest rates (5.93%) assuming a 30-yr fixed conforming loan rate and 31.25% of income applied to the mortgage, I get a home-price-to-income ratio of 4.38. So for instance, a HH earning $100,000 per year could afford to buy a home for $438,000.

BTW, there are virtually no family-sized SFRs in San Diego that have recently sold for $438,000.

Um, its a 2.5x rule. Don’t listen to the realtor-behind-the-curtain muttering that you have to take inflation into account…

–
What did the world expect from bankrupters and fraudsters, aka bankers and financiers, of New York City? Good deals??!

You don’t make much profits if you give others genuinely good deals. You suck them in by making them think that you are giving them a good deal.

Jas

Create your own safe haven if the good ole U.S. of A. isn’t safe enough for you. I suggest a bunker in the backyard and a stash of gold and ammo hidden off site in a buried safe deposit box.

Odds must be high or it wouldn’t have happened, right?

Actually, lots of things that happen have high odds against them, and thus are born theories of such things as synchonicity and luck. But as long as there are any odds at all, things happen.

For example, I read this blog religiously (when I can) and the odds against me being irrational enough to buy a house and catch a falling knife are very very high, those who know me would say astronomical.

And yet, yest. I had an urge to buy an overpriced house, even though the price was only $75k. Mathematic odds can’t take into account human behavior until we really understand it better.

Back to normal, thanks.

See what happens to the cfc shares after the interview:

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=cfc&time=&freq=

I hear the Caymans are nice, no matter the financial weather…

Do we have an extradition treaty with them?

Great song, aladinsane!

C is indirectly a part of the PPT, no?

“(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.”

http://www.archives.gov/federal-register/codification/executive-order/12631.html

Does GMAC have to repay the $21.4 billion?