The Housing Bubble

Am I the only one confused by the Miami Valley closing on a Thursday? That breaks the pattern of Friday closings by the FDIC. Is something going on that I don’t know about?

Got popcorn?
Neil

Story in the Voice of San Diego on changes in rental screening:

http://tinyurl.com/2wjhsv

“As the tenant pool swells with ex-homeowners, however, industry experts say landlords are beginning to show flexibility, as long as the tenants have relatively good credit besides the foreclosure.”

“To companies like On-Site.com, an online credit screening service for property management companies and landlords, those rising foreclosure numbers represent a largely untapped pool of potential renters. In the last two weeks, that company has unveiled a new feature that separates a foreclosure from the rest of a tenant’s credit report. If the prospective tenants have otherwise good credit and a good rental history from before they bought a house, the report reflects that.”

There’s been a lot of discussion about what hurdles those in foreclosure might face when trying to rent an apartment. This story begins to provide some answers. It appears that landlords are modifying rental standards to better assess risk instead of just blindly relying on a credit report. Imagine if home loans the past few years had used a similar approach (i.e., ability to repay versus blind use of FICO scores).

http://www.reuters.com/article/bankingfinancial-SP/idUSN0439931020071005
Miami Valley becomes year’s 3rd failed bank - FDIC’

I’m watching CNBC and all the traders are saying “a second rate cut is in the bag.” Has the Fed just sold us all down the river? I mean no one is mentioning that the dollar is now close to worthless.

Motley Fool commentary on Countrywide:

http://tinyurl.com/33xy3n

Not a fan of the PR offensive.

“Countrywide CEO Angelo Mozilo — the aforementioned butcher’s son — might be right about things being “personal,” but he’s completely misguided on the identity of the victims in this story. It ain’t Countrywide, and it ain’t Mozilo.”

“But for all those poor souls that were bum-rushed into risky loans during a dangerous housing bubble, and who may lose them as interest rates reset, this is now intensely personal. There are few things more personal than the danger of being tossed out of your home because you can’t afford the gimmicky loan you little understood, and whose risks you weren’t prepared to assume.”

Ok so jobs are up. Why does the market need a “rate cut?”

Debt makes you do crazy things:

CLARKSVILLE, Tennessee (AP) — A business owner shot and killed himself during a City Council meeting Thursday night after members voted against his request to rezone his property, witnesses said.

Mayor Johnny Piper, third from left, talks with City Council members and others outside City Hall

Ronald “Bo” Ward, owner of Bo’s Barber Shop, had told the council his business would go under if he couldn’t get his home rezoned as commercial. After the 5-7 vote Thursday night, Ward stood and walked toward the council.

“Y’all have put me under. … I’m out of here,” he said before shooting himself in the head with a small handgun.

Fire and police officials attending the meeting immediately ushered the audience of about 50 into the hallway, where several people were sobbing.

At least one police officer is always on duty during council meetings, officials said. However, visitors are not required to go through a metal detector or any other screening.

“When a gun gets whipped out like that, someone is going to get shot, but I didn’t know who,” Councilman Bill Summers said. “You could’ve been right next to him, and I don’t think you could have stopped that.”

Mayor Johnny Piper said Thursday’s council meeting would be the last held in that room.

Ward had said the rezoning would increase his property value, allowing him to secure a loan to offset debt he incurred when he expanded his shop.

The New Mortgage Czar
http://www.stockmania.com/2007_10_05_archive.html

WAMU 3Q profits fall 75%. Sees bright future.

It was a great exercise in sheeple manipulation. Bloomberg:

Payrolls grew by 110,000 after an 89,000 increase in August, the Labor Department said today in Washington. Revisions added 118,000 workers to payroll figures previously reported for July and August.
…
Most of the August revision came in government payrolls, which expanded by 57,000 during the month, reflecting hiring of teachers for the new school year. Previously, the Labor Department had reported a decline in government payrolls in August.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7FekSPg6CQM&refer=home

baltimore gets the blues:

For Baltimore Housing Slump Slows a Revival

As home sales dry up, tax revenues fade, foreclosures have surged, hiring is down and a new caution is inhibiting activity.

“I don’t see a recession mentality,” said Atwood Collins III, executive vice president of the M&T Bank Corporation, who complains that the national media are amplifying the bad news. “But you would have to be deaf, dumb and blind not to be a little infected by what is being said.”

http://tinyurl.com/37uaa5

If you’re a renter and want to move out be sure to give 30 days notice…… or else.

Charlotte man was stabbed after planning to move out
STAFF REPORT

PORT CHARLOTTE — A Port Charlotte man stabbed his roommate with a broken glass mug Wednesday morning because the roommate intended to move out and had not given 30 days’ notice, according to authorities.

Detectives found the man, Gary Samuel Boyd, 43, on Wednesday afternoon at a bar in Punta Gorda. He was questioned and later arrested on one count of aggravated battery with a weapon.

The roommate, Richard Paul Hoyle, 52, told detectives Boyd got angry when he told him he planned to move out.

According to detectives, Boyd hit Hoyle in the nose with a mug, in the head with an ashtray and then used a broken piece of the mug to try to cut Hoyle’s throat.

He then hit Hoyle’s head several times with a weed trimmer and also kicked and punched him in the head, according to sheriff’s officials.

Hoyle is recovering at Lee Memorial Hospital.

- I received an email response from Senator Schumer yesterday. it was a response from an email I sent several months ago. I’m sure he didn’t write it but it was very detailed and tried to explain his bailout measures and measures for the future. More and more I agree with Ben that bailouts will not work. Then why spend the money? Below is my response to Mr. Schumer.

Dear Senator Schumer,

I appreciate your response to my email but I find major flaws in your reasoning. First off, you have not been able to address the single largest contradiction in your thinking. Every year millions upon millions of dollars are spent by the government to provide “affordable housing” to citizens. Now you are proposing spending large quantities of money in keeping housing most unaffordable. The current levels of prices are based neither on economic fundamentals nor local incomes. Anybody that is proposing an increase on the caps on Fannie Mae and Freddie Mac is especially championing a cause of keeping home prices out of reach of lower and middle-income citizens. I believe that is who you are saying you are serving with your plans and proposals. If you want to serve those people then let prices fall to their natural levels and we will once again have “affordable housing”.

You point out that foreclosures can be costly for local governments. Good! These local governments are complicit in the overbuilding of ghastly developments throughout the United States. I have seen this with my own eyes in the Midwest, in the South and here in the Northeast. Local governments saw dollar signs at every turn and ignored the long-term good of their citizens. I have seen them sell their souls, and the souls of their fellow citizens, for nothing more than a wink and a nod from Corporate America’s gentry. Shame on them! They too need to learn the value of a dollar and put their citizens first.

I support your ideas for making lenders more accountable. I just wonder if you will stand by that as the Wall Street community throws millions of dollars into the battle to block such regulation. And the other question I have is, “where were you, Barney Frank, Chris Dodd, Hillary Clinton and the rest of the indignant politicians five years ago?” It didn’t take a genius to see this disaster coming. It just took two eyes and some common sense.

Do you notice how I use the word “citizens” when I type? Government officials have forgotten that they represent, we, the citizens of the United States. We are not “consumers”. Quit calling us consumers. We are not “consumers” of housing. We live in houses. I find the arguments that you pose for your actions to be confused and contradictory. You write, “there is no perfect solution to the current subprime mortgage foreclosure crisis”. You are wrong. Let everybody involved take their lumps and let’s move forward with a viable economy that rewards saving and punishes stupidity. This is a simple solution. Be a leader and tell people what is best for this country, even if they don’t want to hear it.

I would welcome the ability to speak to you further about this topic. Unfortunately, I do not think you would welcome such a conversation because I would be armed with truth and common sense and the proposals you, and your fellow politicians propose, lack both of those qualities. That may be harsh but the truth is always harsh. That is why it is so frequently ignored. I hope you will make the best decisions for the long-term good of this nation but so far I am sorry to say that you have presented no evidence to support my hopes.

NYCityBoy

Just read the exchange on the FLA thread yesterday, between FLA realtor chick and some HBB regulars.

I thought it was neat how she started out with the Realtor mocha-latte-spielatta but when posters hit her with hard data and numbers crunching, she caved.

I wonder if her name is…DIANE???

My dirtbag neighbors:
http://finance.yahoo.com/real-estate/article/103638/The-Dirt-on-the-Neighbors

A story about collateral damage from southcocoabeach.com

This unwinding of the housing bubble has touched many lives. Besides the flippers who were too late to the party and people who bought more home than they could afford with exotic mortgages, some innocent victims have been dragged down, too. A deadbeat homeowner in my building has decided to walk away from her mortgage and will be leaving the remaining owners with thousands in unpaid assessments. My life will go on even though it riles me to have to pay for someone else’s bad choices. It may hurt more for my retired neighbors. More heartbreaking is the impact on the decent people who run the small grocery store close to my home. They didn’t speculate on pre-construction condos or try to flip houses and yet their lives have been changed forever.

It all began when construction began on the big empty parcel of land that was to become Magnolia Bay. Business picked up as workers walked over for lunch, snacks, cigarettes and so forth and the promise of all the new families that would be moving in made the future look bright. Shortly thereafter, the trailer park next door that housed the biggest part of our grocer’s customers was purchased. With plans to build townhomes on the site, the trailers were progressively moved out or torn down until the property was empty. Things were still looking good even with the loss of the regulars. With 77 new half million dollar plus Magnolia Bay units and 18 new townhomes right next door, the customer base was growing and being upgraded and the construction workers were providing business in the interim. Life was good.

Then, Magnolia Bay sales slowed and the planned 4 buildings got scaled back to 3. Scheduled closings failed to happen and the construction workers finished their work and moved on. Today, the grand buildings at Magnolia Bay are mostly empty and dust blows in the sea breeze on the site of the old trailer park. The only townhomes there today are in the picture on the “coming soon” sign. Business at the grocer who stocked my favorite beer in a corner of the walk-in cooler at my request dried up to a trickle and, this week, he told me that this is his last month there. He can’t make it any longer.

There are multiple losers in this story; the developers of Magnolia Bay, the trailer park residents, some of whom had lived there for decades, the owners of the trailer park property, the customers of Express Grocer including me and, most of all, Sam, the grocer and his family, and Gary, his long-time employee, who has been known to extend credit to a down-on-his-luck customer or two. Sam, your family, and Gary, you will be missed by many. You are good people.

My favorite Express Grocer memory will always be the sign that appeared on the door one day. It read:

“Do not ask Gary for credit. He is not allowed to give it anymore. Sam”

How about this? An $850,000 (46%) price reduction in an affluent NJ suburb. Two years on the market and currently at just about half it’s original list price. Still sitting..

http://njrereport.com/index.php/2007/10/05/price-reduced-850005-46/

Bloomberg — Homebuilders Liquidate Assets as Threat to Survival Spurs Sales

“It’s desperation time and some companies may not make it,” said Alex Barron, an industry analyst…. “At this point in the housing cycle, if you have too much debt, it’s hard to get out from under it.”
…
“They are all losing money,” Burns said. “They’ll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn’t make their costs.”

http://www.bloomberg.com/apps/news?pid=20601109&sid=adFsGVxspArw&refer=home

NEW YORK, Oct 5 (Reuters) - The New York Federal Reserve confirmed that it took no action in the open market on Friday at its usual time for open market operations of 9:30 a.m. ET (1330 GMT).

Federal funds were trading steady at 4.75 percent midmorning, matching the target rate the Fed sets.
********************************************
looks like the patterns are changing.

THE FED
Half-point rate cut may be enough: Fed’s Kohn

By Greg Robb, MarketWatch
Last Update: 9:41 AM ET Oct 5, 2007
WASHINGTON (MarketWatch) — The Federal Reserve’s half-point rate cut on Sept. 18 may be enough to keep the economy from sinking from the financial market turmoil, said Donald Kohn, the vice-chairman of the Fed Board on Friday.

I wanted to scream when I read the “New Speak” that Nancy Pelosi used yesterday:

http://www.allamericanpatriots.com/48734135_nancy_pelosi_nancy_pelosi_democrats_are_committed_taking_concrete_action_strengthen_housing

She now calls forgiven debt “phantom income”.

Whether or not you want to give deadbeats a tax break is one thing. But call it what it is: A tax break. Someone who doesn’t have to pay taxes on income.

Please don’t call it “Phantom Income”. It isn’t. And in many cases, it was HELOC’d right into their countertops, their driveways, or their new boobs. It was very real income that they got tax-free when they decided to be deadbeats.

The New York post doesn’t call forgiven debt “phantom income.” They call it a “surprise tax bill”

http://www.nypost.com/seven/10052007/business/business_briefs.htm

I’m going to start calling my estimated tax payments and payroll taxes “Surprise Tax Bills”. Maybe people will feel sorry for me, too

Do a realtor.com (or your favorite MLS search) on Celebration, FL. There are over 1500 homes and condos currently listed for sale. And there’s a lot more in new condos, and “rentals” that would probably sell if the owner thought he had a chance of getting an offer.

And in the category of “Most Clueless, Obscenely Wealthy, Self-Absorbed Inhabitant of Fantasyland” the Oscar goes to:

http://www.entertainmentwise.com/news/37498/george-clooney-running-for-president

The ever-resilient bull is running again today, despite a $5.5b write down at Merrill, an announcement that WaMu’s earnings will drop 75 percent, and a strong jobs report (= no more FFR cuts). Needless to say, Merrill’s stock price is up on the bad news. This bull market never met bad news that was not bullish for stock prices!

Merrill pegs write-down at $5.5 billion
Quarterly loss may hit 50 cents a share on ‘much more severe’ fallout

http://www.marketwatch.com/news/story/merrill-lynch-write-down-nearly/story.aspx?guid=%7BA8C4BEB8%2DEB92%2D4EB3%2D8A11%2DDC49CE6EDD0B%7D

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

anybody care to comment on the cause of the dramatic drop in the LIBOR in the past month?

Nice, you can see the area of attack here. I expect to see an overthrow (potentially fake breakout)

https://image.minyanville.com/assets/FCK_Aug2007/File/Links%20Charts%201/sg2007100539157.gif

BOSTON (MarketWatch) — The U.S. attorney in Brooklyn has started a criminal investigation into a pair of hedge funds run by Bear Stearns Cos. that had positions in mortgage-backed securities and subsequently collapsed last summer….

http://tinyurl.com/28mylb

Dean Foods Company
Dallas, TX
Dean Foods Co., the nation’s largest dairy producer, said Tuesday that record high milk prices are cutting into profits, and the company plans to cut 600 to 700 jobs or more than 2 percent of its work force. The company lowered its profit expectations for the third quarter and all of 2007. Milk and ice cream prices have been surging this year. The national average price for a gallon of whole milk rose from $3.29 in January to $3.87 in August, according to the U.S. Department of Agriculture. The chairman and chief executive of Dallas-based Dean Foods, said high dairy commodity costs have created the most difficult challenges the company has ever faced, “and 2007 results have been well short of our expectations.” Dean officials had expected growth in the milk supply to force dairy prices lower, but they now believe prices will remain high the rest of the year. The company has about 26,500 employees, said a spokeswoman. Dean sells dairy goods under more than 50 local and regional brands and many private labels.
Approximate Affected Workforce: 501-1000
Source: The Associated Press State & Local Wire - October 2, 2007

Kraft Foods Inc.
Northfield, IL
More job cuts and plant closings are on tap for Kraft, but it’s too soon to tell how Oscar Mayer — whose headquarters are in Madison — or corporate Kraft employees based here may be affected. The changes also involve splitting off Oscar Mayer meats and Kraft pizza products into individual business units. They currently are combined with macaroni and cheese in the Convenient Meals sector. In a memo sent to employees last week, the Kraft Chief Executive Officer said at least 600 more positions are expected to be cut by early next year, primarily from corporate and regional white-collar ranks. In early 2008, Kraft will be reorganized into eight North American business units, with Oscar Mayer as one of them. Kraft/Oscar Mayer has a total of about 2,000 employees in Madison, including one of seven Oscar Mayer factories. The Madison plant makes hot dogs and cold cuts such as bologna, ham and salami.
Approximate Affected Workforce: 501-1000
Source: The Wisconsin State Journal - October 2, 2007

Krispy Kreme Doughnuts, Inc.
Winston-Salem, NC
Effingham, IL
Effingham will lose a national food making facility when Krispy Kreme closes its factory there in December, city officials said this week. The operation employs 47 people, and the company has indicated that employees will be laid off permanently by Dec. 21. The struggling North Carolina-based company is trying to find a similar operation to purchase the Effingham location. Krispy Kreme’s shares dropped to record lows earlier this month after reporting disappointing earnings. One of the ways it is trying to improve performance is by selling one of its two manufacturing facilities. The batch plant and distribution center in Effingham was designed to provide doughnut mix for a planned production expansion outside its Southeastern U.S. base.
Approximate Affected Workforce: 1-50
Source: Herald & Review - September 29, 2007

Topps Meat Co.
Newark, NJ
Topps Meat Co. on Friday said it was closing its business, six days after it was forced to issue the second-largest beef recall in U.S. history.
On Sept. 25 Topps began recalling frozen hamburger patties that may have been contaminated after with the E. coli bacteria strain O157:H7. The recall eventually ballooned to 21.7 million pounds of ground beef.
Source: AP Oct 5, 2007

“YOU ARE NOT BIDDING ON THE LAND - YOU ARE BIDDING ON THE RIGHT TO BID ON THE LAND”

http://tinyurl.com/245a75

Yet another scapegoat. I wonder how much these two issues will intertwine. I can see it getting very ugly politically.
http://www.wjla.com/news/stories/1007/461286.html

http://wcvarones.blogspot.com/2007/10/blog-post.html

“The Nordic countries are the world’s greenest and, despite the cold winters, Finland is the best country to live in, according to a Reader’s Digest study released on Friday.

Finland was followed by Iceland, Norway, Sweden and Austria.

“Finland wins high marks for air and water quality, a low incidence of infant disease and how well it protects citizens from water pollution and natural disasters,” the study said.

The United States was 23rd on the list of 141 countries, Britain was 25th and China 84th. Nations at the bottom of the table were all African….”

http://tinyurl.com/3apd77

At least we’re ahead of Britain.

Here is something quite interesting.

Look at the volume on COMP compared to the steadily rising index level this year. Consider three periods in the linked chart:

mid April - mid July — volume steady around 2b w/steadily rising index level from 2460 to 2730

mid July - mid August — index crashes 2730 to 2390 on high volume (hit over 3b shares on many days)

mid August - Oct 4 — volume markedly thinner (only a few days over 2b) and index in parabolic blowout mode

Oct 5 — index blows higher on lowest volume of the period (below 1b, at 722.49M)

Are the playas setting up a replay of Black Monday timed for the 20-yr anniversary?

http://www.marketwatch.com/tools/quotes/intchart.asp?symb=COMP&time=7&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp

Question? If a borrower facing foreclosure does not have to pay income tax on the portion of debt forgiven by the lender would it not be wise for someone to pay off their kids mortgage, become the lender, let them go into foreclosure, renegotiate the debt to say 20 cents on the dollar, and then deduct from their taxes the loss that was sustained as the lender? Will this work under the New law passed by Congress?

SuperModels10/4/2007 12:01 AM ET
For home builders, the worst is to come
Builders soberly predict even lower prices as millions of homes sit empty and would-be buyers (who must meet tighter mortgage qualifications) bide their time.

By Jon Markman

http://articles.moneycentral.msn.com/Investing/SuperModels/ForHomeBuildersTheWorstIsToCome.aspx?page=all

–
How many Realt-Whores have real jobs today compared to a year ago?

I guess that we can deduct 1.5M Realt-Whores from employment numbers, YoY. And how about Mort-gage Breakers? And “Escort” services?? And more.

Housing IS a big deal for the economy and, especially, jobs. Denial will end one day.

There is a good reason why employment is the laggiest indicator.

Jas

Jubak’s Journal10/5/2007 12:01 AM ET
Our biggest export: Inflation
The sinking U.S. dollar, and the inflation it causes, could throw the runaway Chinese economy off the tracks. And the entire globe would suffer the consequences.

By Jim Jubak

http://articles.moneycentral.msn.com/Investing/JubaksJournal/OurBiggestExportInflation.aspx?page=all

Just an on-the-ground type thing: I’ve had a real estate search for years and years for the south suburbs of Portland. For the past 3-4 months I’ve seen almost no new listings. Nearly every email has been for a “price changed” notification. And in the past month, most of the price changes are short sells. And glory be, the past few weeks have been price changed short sells owned by realtors. It’s not different here, but it’s sure getting more enjoyable by the minute.

I am so confused because I really thought it was different here, but this is the fourth condo development in Minneapolis to go into foreclosure or cancellation this week…

http://www.startribune.com/535/story/1465742.html

But, but…we have such a strong economy. We have 3M, Medtronic, Cargill. And another mild winter has just been predicted…And, and…Who wouldn’t want a $1.9 million condo here?!

Houston Chronicle:

The fire that destroyed the home of Texas Supreme Court Justice David Medina was intentionally set, the Harris County Fire Marshal’s Office announced today.
…
According to public records, a mortgage company filed to foreclose on the home in June 2006. Green said Medina and the mortgage company reached an agreement the following December. Green said the foreclosure filing on the house was a “very, very big red flag” for investigators.

Nice article on the front of the Tampa Trib today:

http://www2.tbo.com/content/2007/oct/04/apartment-vacancies-abound/?news-breaking

I remember trying to find a 2-bedroom apartment when I moved here 2 years ago (probably the worst possible time), and not finding anything inhabitable and near to downtown for under $1200/mo. Now, I see tons of former condo-conversions coming back as apartments (the former Archstone Bayshore behind the Gandy Publix on Himes comes to mind, as well as “The OC” on Himes just north of Henderson–I still crack up every time I drive by that one). They are all offering incentives because they chased all the renters out to convert and are now at maybe 50% occupancy. The nice thing is, they are nicer units now since all of the “upgrades” were installed, and the rent is cheaper than it was before. The glue-sniffers trying to rent one-bedroom condos in the new buildings downtown and in Channelside are still around though, wishing for their $1600/mo.

Another way to punish those who are financially responsible.
The FDIC advised the banks to freeze the teaser rates and ” make them fixed”!
So the irresponsible get a fixed rate at 1% with no money down and cash out to pay for all of the their toys and bills, while the responsible people pay the going interest rate and will need a sizable down payment.
This will also stop the foreclosures and thus the prices will not come down.
This is maddening beyond belief!!

http://money.cnn.com/2007/10/05/real_estate/fdic_rate_freeze/index.htm?postversion=2007100517

I am sure they expect the tax payers to foot the bill.
I wouldn’t have a problem if they passed a tax law that the banks could spread reporting their losses out over a 5 year period. That would soften the blow.
But this idea is outrageous.
I wonder of the next group of buyers can “demand” the same 1% fixed rate; no money down and cash out at closing as they want to give the current mortgagees?
If they won’t offer this same sweet deal to future buyers is that not discrimination?
The responsible potential buyers were priced out of the market because of non- exsistant loan regulations that drove the prices to the stratosphere.
Now they want them to subsidize those who had no business getting a mortgage in the first place. gr-r-r-r

OT, and another dig at the US:

“Iraq has ordered $100 million worth of light military equipment from China for its police force, contending that the United States was unable to provide the materiel and is too slow to deliver arms shipments, Iraqi President Jalal Talabani said yesterday.”

“The China deal, not previously made public, has alarmed military analysts who note that Iraq’s security forces already are unable to account for more than 190,000 weapons supplied by the United States, many of which are believed to be in the hands of Shiite and Sunni militias, insurgents and other forces seeking to destabilize Iraq and target U.S. troops. ”

http://www.truthout.org/docs_2006/100407S.shtml

Last night it was so much fun listening to Mary Umberger, Chicago Triubne real estate columnist.

( http://www.chicagotribune.com/news/opinion/columnists/chi-maryumberger,0,4570876.columnist )

I can’t find a link to her comments last night but to paraphrase “sellers need to be more realistic with their asking price, but buyers shouldn’t hold out for a great deal.”

If any of you need a quick pick-me-up, just watch the Suzanne Researched This video

http://www.youtube.com/watch?v=Ubsd-tWYmZw

Hi All,

Eddie Murphy’s former mansion is for sale with a 3.5 mil “discount” - priced at only $6.5 mil. I’m thinking I could qualify to buy it. Oops wait, those were last year’s standards. Oh well…

http://www.sacbee.com/749/story/417354.html