Bits Bucket And Craigslist Finds For October 24, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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CFC Scare…
http://online.wsj.com/article/SB119318489086669202.html?mod=todays_us_money_and_investing
There must be some mistake - you mean Option ARMs are just a crappy as subprime loans. What a surprize.
I would take a subprime loan (low FICO) with a 20% downpayment ANY DAY before a option ARM 100% financing to a 800 FICO.
The risk profile is RADICALLY changed by allowing 100% financing. Couple that with declining home prices, and as many have said, the sound fincial decision is to turn the home over to the bank. When you have 20% in the game, EVEN IF the “right” finacial thing to do is turn in the keys…. You are going to remember the process of saving up all that money and fight to keep that home MUCH harder then some high FICO/100%/negative AM guy.
I anticipate we will find that Alt-A paper is just as bad, if not worse, then subprime. Especially alt-a 100% jumbos. Those are really heading for a clobbering.
Alt-A is mostly flippers who couldn’t substantiate their income. It’s as bad (if not worse) than subprime or option-ARM.
Don’t know if this was posted yet. DataQuick is out with Sept. numbers.
http://www.dqnews.com/ZIPLAT.shtm
The numbers are all over the place. It seems that Stevenson’s Ranch is up 37%? Well, we’ll just see about that. Post-fire ought to be quite different.
I am starting to believe that the initial reason house prices ran up so fast is not the selling of MBS debt, but the elimination of down payment. If people have no cash for a down payment, there is no debt to sell. That’s why they got rid of the down payment in the first place. Debt was making so much money for Countrywide and WaMu and their ilk, that when they ran out of debt to sell, they created more (low-quality) debt just to get the profit from the secondary market. The problem is that they were able to sell this new low-quality debt using the good name of the older high-quality debt. Isn’t that nice…the new kids on the block coattailing off of the scrimping and saving of our parents and grandparents.
And Leighsong made a good point weeks ago. When banks require a down payment, people are MUCH more picky about house prices. 0% of any price is still $0, so there’s no difference between a $300K house and a $500K house. But, if you have to come up with $50K cash instead of $30K, watch out below.
Simply, put, if you don’t need any money to “buy” something, it’s the easiest thing in the world to run prices up to the moon. Which, of course, is exactly what happened.
Somebody help me here: I see an anology between the housing market and those rent-to-buy appliance scams, but I can’t carry out the analogy to how it ultimately plays out.
Rent to-buy is what the FB’s were doing, in a big way.
Never before and never again, will people unworthy of completing business transactions, be allowed the pleasure…
“I am starting to believe that the initial reason house prices ran up so fast is not the selling of MBS debt, but the elimination of down payment.”
It’s the selling of MBS debt that *caused* the elimination of down payment…so many investors (including pension funds, hedge funds, etc.) were throwing money at MBSs and leveraging them to the moon, allowing standards to drop (like down payments) in a race for more volume.
Hmm…maybe there is a loose correlation philosophically. Generally, the mentallity of having things now instead of later, even if it means paying a higher ultimate cost (as opposed to saving and paying cash).
Otherwise, the rent to own places aren’t really driven by credit are they? At least not in the same sense. I imagine those people play the odds, and price in the probability that an item might be stolen or damaged but otherwise just charge a bunch of money on a monthly (or weekly or whatever) basis for something such that on average they make money by renting/re-renting/selling/reselling items.
Frankly, I’m not sure I consider it a scam, as long as the terms are clear. It may be a bad financial decision on the part of the renter, but that’s a symptom of a larger problem socially than it is a symptom of a scam.
but i’m still confused… what caused the sudden decision to start selling MBS debt? was it a change in legislation that deregulated reselling and rebundling? or just a change in interest rates that made it attractive?
A) The investment banks realized they could make a lot of money selling MBS debt, and B) because the FED & other central banks dropped rates & flooded the global economy with liquidity, the return on safe investments like Treasury Bonds dropped and investors started chasing riskier investments with higher rates like Mortgage Backed Securities
So, was it the rate cut alone, (B), that led to the profitability of selling MBS debt (A)?
I doubt that bank executives just woke up one morning and said…. whoa! All those Mortgage Loans we’ve been sitting on for decades and decades… we could sell em, yo!
I realize this seems like a dumb question to be asking this late in the game, but i still can’t quite get my head around why here and why now. The question is what changed to cause this to happen when it did?
i guess prior to the MBS bubble, investors had been chasing equities for their riskier reward, but then that bubble crashed. and Mortgages were just next in line….
maybe it’s silly to ask why bubbles form where they do and when. they have been around at least since the famous 17th century tulip bubble.
so much insight on this blog about how the thing is playing out. but i’m still foggy on its germination.
Don’t forget:
A key part was the “disappearance” of a risk premium on the ALT A and Subprime paper. When it was securitized it magically became investment grade according to Moody’s and other bond rating agencies.
Some borrowers could find themselves in the painful position of owing more than the value of their home.
Not someborrowers, all, if they didn’t put any money down.
From a Thomas Au article at financial sense.com, that sums up the madness pretty well:
“Because subprime loans, by definition, are made to borrowers who are unqualified, lenders demand higher interest rates, which supposedly compensate for the risk. Except that they don’t, as best explained by George Soros in his theory of reflexivity. That’s because if a borrower who is already on financially shaky ground is charged an above market rate, the excess payment that such a borrower has to make means that s/he becomes an even greater risk than before. In short, the act of subprime lending itself creates the very problem it is supposed to solve. “
As Vinnie and Guido have determined, unqualified buyers can be induced to continue payments on underwater property under threat of broken kneecaps, being taken swimming with legs encased in concrete, etc. Since such incentivizing techniques are unavailable to bankers, they are getting a rude awakening as their pitiful attempts at loansharking begin to fail.
You got that right. Just like borrowers with 18-20% car loans. They’re going to default faster than people with a 6% loan.
Some people pay 20% on car notes?
Ewww my gawd… That’s incredible…
I wonder how many “subprime” car loans are made to people buying luxury (Audi/Acura/BMW/MB/Lexus) vehicles. Something tells me that it’s WAY too high (should be 0!).
I used to work for a used car dealer. Sometimes the rates went to 26-29%. There are a ton of shady companies specializing in subprime auto financing. And yes, there are a trememndous number of expensive cars bought that way.
You would be surprised hom many people with 6 figure incomes get credit this way. Or maybe not, if you read this blog enough.
Yes and Credit Card companies will make you to pay the default rate of 23-30% if you are one day late with your payment, on top of the late fee and over limit fees…..
How in the world does that make any sense?
Because, apparently, some percentage of their “customers” (marks) actually pay on this extremely lucrative debt, rather than going BK or chargeoff (where you might collect at pennies on the dollar).
Also, the high finance charges allow them to “negotiate” in settlements with chargeoffs because the original debt is only a small percentage of the “outstanding balance.”
I have (or should I say, Had) a credit card with Chase. I sent in payment via billpay 7 days before due. Bank statement shows the money was taken out of my account and sent to Chase the next day. I was shocked to see my next statement — Chase said they received payment 10 DAYS after I had sent it! I was charged a $30 late fee and 0% interest climbed to 30%. Supervisor on the phone was rude and obnoxious. I called my bank. They verified Chase received the money 6 days before due. I think this is a credit card scam as I have heard others tell me the same thing. I have since paid off the card and use my debit card.
F*ck em.
I think this is a credit card scam as I have heard others tell me the same thing. I have since paid off the card and use my debit card.
F*ck em.
Expect this to get a lot worse as the other gravy trains screech to a halt for Chase, BoA, Citi et al.
As they take one hit after another on charge-offs, they’re gonna try to squeeze more out of those of us they call “deadbeats” because we pay off the entire balance every month and don’t give them a dime in interest charges.
Fvck ‘em, indeed.
Why can’t you find a friggin class action lawyer when you need one?
BTDT. After telling me that I was screwed, the customer service guy said calmly “after all, banks are predatory”. Actually, you can refuse. Stop the account and pay off at the previous rate. Just have to go cold turkey on the credit line.
Got scissors?
“Because subprime loans, by definition, are made to borrowers who are unqualified…”
This about says it all, and when you think of the implications of this one statement…. wow. And now we are beginning to see the fallout of what happens when fraud becomes institutionalized by lenders. To think that this was considered “normal” behavior for years and both FB’s and banks happily went along still makes me shake my head.
The numbers in that article are unreal.
“Of the option ARMs it issued last year, 91% were “low-doc” mortgages in which the borrower didn’t fully document income or assets”
I can’t imagine better gas to throw on a lawsuit fire than an “I was shocked!” quote in the WSJ.
Wonder what happens if UBS’s 0.18% Option Arm portfolio default rates start to creep up as house prices decline. Their “better underwriting” better have included some downpayment…
These mortgages can be highly profitable. Once the short teaser-rate period ends, the interest rate typically is higher than on other types of loans for a similar borrower.
Yeah, if the borrower actually pays the money back, at that interest rate. Did any of these jokers on Wall Street seriously think that somebody without “very strong credit” would ever pay that high interest rate for 30 years as advertised? If they didn’t default, they would refinance into a lower rate, and whatever pre-pay fee will never make up for the thousands of $$ in interest. Bait and switch!
So what? That’s MONTHS away. By GAAP, they can book ALL of the future interest the same quarter that the loan is signed.
Yes, even first payment default shows up as enormous profits. (Kind of like Cisco during the dot.bomb.) Run, bulls, run!
Go here for a graph which compares option arms against sub prime loans. I believe the market will drop thru 2009 and drift down thru 2011. Part of the reason is the foreclosures will keep coming and coming and coming. Option arms do not even peak until 2011.
While the “specuvestors” have left the market, I still talk to longer term investors who think it may be a good time to buy, even with negative cash flow. The graph is the best example of why you should by nothing, unless it cash flows. There will be no appreciation in the real estate market thru 2012 or later. There is just too much forclosed product which will be tossed on the market. As all these loans melt down, even prime borrowers will be upside down for years, and if they have to sell, they could also start walking away.
Caution is the watch word for a couple more years.
From WSJ article…this crash is just beginning!
Worst to Come? In 2009-2011, monthly payments on $229 billion of option ARMs will readjust (so borrowers may have to pay more).
Not to worry, David. By 2009, President Hillary will be announcing the most massive bailout of the U.S. housing market in history, and the bubble will be reflated.
David! How was Hillary’s birthday party? We want details.
The game may be over earlier for Option ARMs in a depreciating market. I’ve read that when the loan/value hits a stop the options are over.
Hey Jingle,
The thing about that timing is people are paying the minimum so the resets will probably move up. So the position of that peak is moving.
Probably be more in -09-10 than in -011
James
The fact that these weren’t supposed to START resetting until 2009, and yet we’re seeing people crapping out 2 years early indicates these things are doomed early. 2004 loans (when Opt Arms became big) shouldn’t be resetting yet, so we shouldn’t be seeing 2-3% of them going delinquent. I bet we’ll see these wash out much sooner than 2012 (when they stopped originating these guys.)
Recasts are occurring earlier than resets.
“Some loans classified as prime when they were originated are now going bad at a rapid pace. These loans are known as option adjustable-rate mortgages, or option ARMs.”
Oh come on now, we were saying this a full year (maybe even close to two years) ago. There are actual posts by me where I say “this is mess is *not* confined to sup-prime, alt-a and prime include option-arms as well, just wait and see”.
Again, let me just say….idiots!
I have to totally disagree with you here. The issue is not that borrowers overpaid and overborrowed to finance real estate. The issue is a rather sophisticated product was offered to idiots that believe realestate market always goes up. What is a convention mortgage? It is nothing other than an ARM + insurance policy against interest rates rising past point X. The issue was that the borrowers did not do the “insurance policy” part.
Oh, the above was not to say that borrowers were not responsible - they absolutely were. However the idea that the product should not be available because it is “toxic” is just rubbish.
Marketwatch: MERRILL LYNCH TAKES $7.9 BILLION WRITE-DOWN ON CDOS, SUBPRIME
The containment just keeps failing to contain. On the bright side, the emerging iPod economy promises to keep us blithely entertained while patching drafts in our cardboard boxes all winter.
Oh, the Humanity! That’s going to leave a rippling mark.
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And stock futures are up on the news (from -10 to -7 on S&P 500).
Jas
Wonder if they’ll have the cajones to pay bonuses this year.
Depends on Q4 and I doubt that we will see the Q4 rally.
Jas
Chernobyl had better containment.
I saw a BB piece yesterday titled the containment is spreading.
Now that’s funny!
The containment is contagious.
Remember how everyone was saying this is a one quarter event because everyone was going to take the writedowns upfront? Earlier on Bloomberg:
Merrill said Oct. 5 that it will post the first quarterly loss in six years after cutting the value of mortgages, asset- backed securities and loans for leveraged buyouts by about $5 billion. Analysts were estimating that New York-based Merrill would report a third-quarter loss of 45 cents a share later today, according to a survey by Bloomberg.
“It sends a very poor message to the marketplace that Merrill doesn’t have a good handle on their risk,” said William Fitzpatrick….
Even Merrill doesn’t know how to value this junk. They went from 5 bil to 7.9 bil in weeks. The so called experts don’t know either. They expected a 45 cent loss. Bloomberg reports its a (2.85) loss.
“Remember how everyone was saying this is a one quarter event because everyone was going to take the writedowns upfront? ”
Yeah, the “kitchen sink” theory, front-load all the losses into the first quarter. Well, guess what, guys, these f*ckers have a lot of kitchens in their houses!!! They are going to be sucking slop for at least 10 more quarters.
Let the bodies hit the floor…….
LOL — “emerging ipod economy” — yes, we’ll shore up this whole lumbering mess by selling tech trinkets
Well…with a new model coming out every six months or so…who dares to even be seen on the jogging path with last year’s Nano?
iPods … the miniature golf of the 21st century
People who don’t want to be robbed, generally.
My trusty 3rd Gen still works like a champ and I’ve seen little reason to upgrade. Maybe once the iPod Touch breaks the 40G storage barrier.
and I just read:
index’s constituents, fund managers are amassing large stakes in the large cap tech stocks also as a play on the insulation from dollar weakness enjoyed by this index’s multi-national companies. Investors are continuing to be shy of largely US based businesses that do not enjoy currency diversification in their revenues, and with the ongoing aversion to the financial sector, many of the leaders from the late 90’s are beginning to shine again.
until they run out of OPM, I guess this garbage will continue.
Reduced bonuses, skeleton’s flying out of closets, and what does this writedown mean for all the other bagholders?
Merrill’s compensation costs fell by 49 percent from a year earlier to $1.99 billion, indicating that the quarter’s losses may reduce year-end bonuses for Merrill’s 60,000-plus employees.
…
“We’ve got more skeletons to find out about, because the credit cycle has yet to play out,” said Jon Fisher, who helps oversee $22 billion at Fifth Third Asset Management and doesn’t own Merrill shares.
http://www.bloomberg.com/apps/news?pid=20601087&sid=at26joAmOcms&refer=home
From a NYC housing area - Will be interesting to see if bankers were counting on bonuses to make dents against the mortgage. Do they bail?
Well, one thing I do think about the NY area is that when prices start to really decline (think FL) there will be a rush for the exits by the finance guys.
Trust me, as much as we bash them, they are not stupid. And they are also used to losing money on some investments. When it becomes clear to them that housing is going into the crapper, they will pull the plug, imho, MUCH faster then Joe Lunchbucket who will ride that beast all the way down into BK.
Because of this, I think that the markets largerly supported by financial money will see a much more abrupt movement…
Just my little theory… But I’m sticking to it!
I like it!
“I like it.”
Me too. Joe Lunchbucket commits to buying a house with hard-earned money; The Masters of the Universe use windfall money (bonuses and such).
The psychological value of the money is different in each case. The hard-earned money will be fought for by Luchbucket. The easy money of The Masters will be walked away from.
What do you mean cardboard boxes? When this is all over, housing will be the one thing Americans CAN afford (as long as they don’t try to heat or cool them).
Yeah, but all the “sophisticated investors” of the last few years will have been re-indoctrinated by the time housing becomes affordable that they should always rent. They won’t buy again until the next real estate peak.
My dad took a bath on a house in 1960. It was 25 years before he considered “owning” again.
Merrill Lynch: Bullish On Losses
I wonder how many will be hit by the fires in Cali.
Yeh, and with cell phones, we’ve made some real progress in this country. When in the last 100 years in this country could someone live in a cardboard box under a freeway overpass, and still have their own phone service.
Based on Merrill’s announcement, I am bullish on America. Merrill has obviously thrown the kitsch-and-sink into their current financials, the fires are out, and steadily increasing profits lie ahead.
More heads will roll. This is a super stunner. Estimated loses doubled within days. No stock buy backs and Merrill is considering asset sales according to MarketWatch.
Say goodbye to the little SIV.
“…asset sales…”
= fire sales?
Long-term, I’m bullish on America as well. This mess is too big for DC and NYC to manipulate their way out of it. It’s going to be really painful for a number of years, but we’re going to have a very strong country 20 or 30 years from now.
Nice, but I won’t be fully happy until Goldknife Silverchain (Goldman Sachs) takes a huge hit and staggers round in circles, bleeding from countless wounds.
smart money fleeing the dollar:
Oct. 24 (Bloomberg) — Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.
“I’m in the process of — I hope in the next few months — getting all of my assets out of U.S. dollars,” said Rogers, 65, who correctly predicted the commodities rally in 1999. “I’m that pessimistic about what’s happening in the U.S.”
http://tinyurl.com/2gkrwg
I’ve been thinking, reluctantly, that at least some of my money should be in another currency. The loonie, strong now, is too closely tied to the US. And I wonder about China if it gets hit with an export crunch. I’m thiking Norway and Switzerland, but truly, on this subject, i know nothing.
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If dollar does poorly then gold would do relatively better than other currencies vis-a-vis USD. Got gold?
BTW, I am not bearish on the USD at the current levels against the Euro. JPY abd CHF are nuch better values than the Euro.
Jas
I have been trying to diversify out of the dollar as well and have 30% of my savings in gold. The problem with gold is that it is heavily manipulated AND most people don’t even think about it as money anymore.
The way I see it, there is a “fixed” demand for “money” and that demand will be shifted from $USD to a number of other currencies, probably to whatever oil ends up being sold in. So even if USD and the Euro are inflating (increasing the money supply) at the same rate the relative demand for euros will increase thus giving them more purchasing power.
I now have about 20% of my savings split between CAD and EUR, but would like to hear arguments for JPY and CHF.
Fiscal responsibility.
I am in Yen, Norwegian Krone, and Swedish Krone by choice and Reals, Rands, and Loonies because of stock positions.
I am very short the Euro. Euro/Dollar parity is now $1.16, it appears to be in a bubble. Dollar/Yen parity is 85
that stuff is way too sophisticated for me. I stick with simple long and short index positions. I wouldn’t even know where to start with the currencies like that.
“that stuff is way too sophisticated for me” said the spider to the fly.
Young Lady, I like buying stocks that are going to go up, currencies are just like stocks except more liquid.
Basically the currencies and stocks I own are from exporting countries. The Euro nations and the US are importers and subject to the whims of the exporting nations.
go with the Aussie.
I got some pretty Australian gold coins this summer
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Aussie, no way. It is grossly over-valued and once the commodities crash, and they will during the depression, so would the Ausssie dollar.
Don’t get greedy and play safe!
Jas
I don’t see a commodities crash, and neither does Rogers.
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Every dog has its day and Roger has had his. It is supply-demand issue and during the global depression (yes, led by the housing bust) the demand for commodities will plummet. You need to brush up on 1930s; that history might be a good guide. Copper became nearly worthless and all American mining of copper more or less stopped.
Jas
Speaking of China, Henry Paulson seems to have his boxers in a wad about the Chinese currency:
http://news.yahoo.com/s/ap/20071023/ap_on_go_ca_st_pe/paulson_china
This is a REALLY interesting article, IMHO. First of all, I didn’t know there was a George HW Bush China US Relations Conference. This article is larded with interesting globalista quotes:
“He said China needs to move aggressively to refocus its economy, fight off protectionist forces and address the growing concerns about tainted Chinese imports.”
Why is the US Secretary of the Treasury advising China in how to better undermine the economy of the US? Must be something in it for Goldman Sachs, eh, Hanky Panky?
OK, folks, here’s your buzzword for today: “Protectionist”. If you’re sick of China’s tainted products and think this global business might not be in the best interests of the US, if you think maybe the Treasury Secretary ought to be focusing on our own economy instead of that of other nations, you’re a “Protectionist”. Thanks for the newspeak, Hanky Panky.
History shows boom/bust cycles in commodities. Why is it “different” this cycle? When the scare tactics wear thin is when commodities will bust. I think we’re close. JMHO.
I like this part:
“The Chinese government has carried out thorough investigations and rigorously penalized the offenders,” Wang said.
i.e. We have executed our stooges who got caught carrying out government policy.
Jas,
You might want to brush up on the 1970s. I am amazed that in the midst of spiraling inflation you continue to tout the deflationist line. You must live by core inflation.
Where’s the groupthink?
Don’t these guys know how to exclude food and energy from their inflation reports?
Russia is introducing Soviet-style price controls on some basic foods in an effort to prevent spiralling prices from denting the Putin administration’s popularity ahead of parliamentary polls in December.
…
China has also agreed to food price controls; Egypt, Jordan, Bangladesh and Morocco are increasing subsidies or cutting import tariffs to lower domestic prices. Rich countries are not immune: Italian consumer groups organised a pasta boycott last month in a protest over prices.
FT: http://tinyurl.com/384v5m
One thing about the commodity exporting countries is that while there may very well be significant changes in prices for the underlying commodity there is always a market unlike countries that produce bric brac products and services like beanie babies, poodle groomers, cabana boys, IPods, etc.
I agree with Jas. “Scarcity is the mother of invention”. High commodity prices cause conservative behavior and new technology. Combine that with a recession or depression and commodities are toast. In the depressions of the 1840’s, 1890’s and 1930’s realestate and commodities tanked.
Those of you that are bears on housing and think commodities are immune are in for a big surprise.
“Those of you that are bears on housing and think commodities are immune are in for a big surprise.”
BINGO
Jas, actually gold price went up 75% in the Great Depression - from $20 - then the gold confiscation - to $35 per ounce. The deal is that government inflates its way out of a depression. That is why gold is good to hold in deflationary times. Also Platinum and Silver. I just bought some another batch of platinum and gold bullion over the weekend - for cash.
try swz etf for swiss
swz-thanks will check that.
By the way Palmy, did you see Planet in Peril on pbs? Had Dr.Gupta looking at the unbelievably filthy sewage water with added chemical contaminants used to irrigate Chinese fields.
Chinese cops chased them awa…no need to scare westerners about the dangerous qualities of Chinese food imports. Though report cited China’s own environmental agency as listing filthy water as leading reason Chinese die of China, now the number one killer there.
Next time some one calls you “protectionist” explain that to them. Don’t you think Paulson brings his own imported water when he travels to China?
China has a serious water deficit. They’ve long had a program of loading artillary shells with a silver compound and lobbing them up into the clouds to condense water vapor.
isting filthy water as leading reason Chinese die of cancer,now the number one killer there.
Sorry, need coffee.
Spike, re: “protectionism”.
If “protectionism” means not having to compete against dictators who ENSLAVE their people as a means to destabilize us, I’ll take it. It’s call DEFENSE. Now how about DC/K street and Wall street use the defense moniker? Not a chance.
Don’t you think Paulson brings his own imported water when he travels to China?
We can all hope he drinks their water.
spike, didn’t see the Planet in Peril special, but I will watch for it, they usually repeat those. Good stuff.
Check out http://www.goldmoney.com
They have several new features since I last used them and the founder is very legit in the gold world (James Turk).
They just announced a new vault (Via Mat) in Switzerland and I believe that not only do they allow silver purchases but they also allow deposits to be held in cash in your account in several currencies (not sure of interest rate, etc). All of this is new compared to 3 years ago when I had a large account with them. I moved out because I didn’t like that the gold was held in the London area, which they have now fixed. I don’t have any sort of business relationship with them but I like the business model and can attest to the legitimacy issue. DYO due diligence if you decide to use them.
The loonie went from 60c to 101c in about 5 years… not that closely tied at all.
You should watch the Marc Faber interview on bloomberg as well. I’m thinking about plucking down 200 bucks for a subscription to the gloomdoom and boom report.
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Refinance Applications Increase In Latest MBA Weekly Survey
WASHINGTON, D.C. (October 24, 2007) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 19, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 656.5, a slight increase on a seasonally adjusted basis from 656.3 one week earlier. On an unadjusted basis, the Index increased 11.2 percent compared with the previous week and was up 11.5 percent compared with the same week one year earlier; these increases are partly due to seasonal effects after the preceding Columbus holiday shortened week.
The Refinance Index increased 4.0 percent to 2059.3 from 1980.9 the previous week and the seasonally adjusted Purchase Index decreased 3.1 percent to 415.9 from 429.1 one week earlier.
…
Inside the MLEC
http://www.stockmania.com/index.php?showimage=76
ROTFLMAO! Swirling liquidity.
Oct. 24 (Bloomberg) — Ambac Financial Group Inc., the world’s second-largest bond insurer, reported its first quarterly loss after reducing the value of subprime mortgage-linked securities the company guarantees by $743 million.
…
Ambac and other bond insurers have guaranteed the payments on collateralized debt obligations through derivative contracts promising to pay CDO holders in the event of a default.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWT6HTg9yW20&refer=home
Okay, so when it comes to craigslist real-estate-for-sale for my area, sometimes I’m a jerk. I used to repost overpriced listings and inject comments like “overpriced” and “sure to fall in value.” Sometimes people would still email me, interested in the properties.
So I also would post these graphics I made, that pointed out that housing is like the beanie baby craze, or has the Shiller chart. I would hope that it would make people think. Another series had mortgage ads where it was obviously fake, with loans where you write in your income and such. It was fun, and sometimes I would get a tickle out of the emails I would receive.
Generally though, Realtors and other people would flag them quickly. At first they would live, but then it got to the point where people were flagging them hardcore. Bored Realtors or something.
So I got bored and revisited the technique, and posted one mortgage advertisement and then one of the beanie baby / markets going to crash graphics as a house listing. I found that the mortgage one got flagged in a few hours, but the house listing lasted several days.
What can I gather from this? No one is looking at the house listings.
I think I’m going to come up with a fake house advertisement and put it on craigslist, and link to the images from one of my own web servers. This way I can do hit statistics and see how many people actually look at the ad. I could also figure out where they are geographically based on IP address (as long as they aren’t using a corporate VPN and such).
Our area is bubbleriffic. But believe it or not, there are still buyers. We have the Navy, and when people transfer here I think they rush out to buy a house. Sometimes these people are going to have to transfer in 2 or 4 years. I’ve seen some desperate Navy people trying to dump properties on Craigslist. $500-600K homes in Chesapeake, VA. Trying to give away all the furniture to sell it and what not. Nuts.
Kudos to you, VA. You deserve the HBB Paul Revere Award.
The Department of Defense guarantees active military personnel that they will not incur a loss on a house sale due to a transfer. I believe you can either sell the house at cost to the government, or sell at market value and the government makes up the loss. If you take the latter route the government checks that your sale price was legit (appraisal).
The civilian side of the Federal government has the same sort of deal for people transferred involuntarily. So do most large corporations.
Yes, it is a nice guarantee, but what do they call a “loss”? If you buy for $400k, then I’d guess you’d be guaranteed $400k. No (substantial, nominal) loss there, right?
But if you bought for $400k, and then over the few years you refi’d to $450k, and then HELOC’d another $50k, you could be in deep doo doo.
“The civilian side of the Federal government has the same sort of deal for people transferred involuntarily. So do most large corporations.”
For Federal employees, if it doesn’t sell in 60 days, they will buy it at the appraised value. There’s no protection against a loss. I believe you also have to use their contract seller for them to buy the property.
The 60 days starts from the time you accept the transfer appointment. You have to sign up and then the 60 day clock starts. If you don’t sign up in the required time span you lost the buy out but you still made out on the closing costs if you did a FSBO. You also had two years to buy anew and they would pay closing costs. They would pay the appraisal but it was an average of three appraisers, and you had to pass a siding, structural, termite, radon, lead, absestos, subsidence inspection. You were not to paint, make repairs,recarpet or anything else; payment in full at the end of 60 days (during the 60 days if you sold at a higher price they took care of the sale) to your bank account in 24 hours.They paid all closing costs and loan prepayment costs but they didn’t pay to my knowledge the deficient between mortgage purchase price and selling price.
Negative. The military does not guarantee that you will not loose money if you get transferred. If a base gets closed they will buy your house as the market value established before the base closure announcement, which may or may not pay off your mortgage.
We have not had double digit pay raises… its usually been .5 or 1 percent above the official inflation rate, though there have been some target raises and midlevel NCO’s, but these are usually only 4 or 5 percent.
I got lucky and sold my house two months ago when I left South Carolina. Here is Alaska, I know of several houses that are renting out for a loss after siting on the market for over a year.
The anchorage market is turning, which is why I elected to live in base housing… completely unaffected by rent or house prices.
tuxedo…there is no such program for military house sellers that is supported by DOD. I just retired as a Navy officer after 26 years service. A program as the one you erroneoulsy mention above would be imprudent for DOD…it would be a no lose situation for the military person (i.e. prices go up you win, prices go down DOD losses and you break even). The military provides an adequate housing allowance that is adjusted depending on your geographic area. Whether you rent or buy is the military persons option…along with the associated risk and potential reward (or loss).
Ugh… What does the Navy pay these days?? Jeeze, I am in the wrong line of business if the Navy folk are lining up to pay 5-600K on home in VA!
The pay has gone up substantially the last several years. I got out in ‘99 and bumped into a buddy in ‘04 who was still in. He was the same paygrade with maxed out time-in-grade that I was when I got out and he was making double what I had. He said right when I got out they started getting double digit cost of living increases every year.
Pay? What does “pay” have to do with any of this? It’s about credit, not income. You don’t need any money or substantiated income to buy a house, at almost any price.
Didn’t you read about the strawberry pickers in California and their $700,000 Dream House? This has nothing to do with “pay.”
The Navy folks are NOT lining up to BUY at 5-600K…they are lining up to SELL! Most likely they are individuals that bought about 5 years ago or more when the prices were about 50% less. Like anyone else, they are throwing their properties on the market to try and make some capital gains before all their “paper” gains disappear. During the bubble it was (is) a wide spread phenomenon of people owning homes that appreciated so much in value that a similar income person (i.e. their clone) could never afford to buy the house. That is just one of the reasons why I was absolutely certain that the market would run out of buyers once prices over reached any logical ceiling based on income. I guarantee you, there aren’t many, if any, Navy folks looking to buy in the VA area at 600K. They know they can rent or get Navy housing for far less and wait for prices to drop and stabilize before entering the market.
Good for you, VABeyatch. Raising awareness is good, I don’t know if I have the stomach to keep doing what little I have been doing in this regard. It’s not good for me, spiritually.
I’m thining of putting together a webpage about the whole “buyer’s agency” scam and just tossing it out there. Realtors really piss me off. Buyer’s agents are quick to tout how they help buyers navigate transactions. How about all of those buyers in foreclosure now? They sure were helped by those agents, eh? This is becoming my personal bete noir.
I don’t agree that real estate agents aren’t responsible for buyers and making sure a transaction is legal with no hanky panky . RE agents are suppose to bring qualified buyers to sellers homes . Just because alot of criminal loan agents were pushing faulty loans down the pike doesn’t mean that the RE agents should of supported that and act like they had nothing to do with the fraud .We all know that real estate agents were pushing overbuying based on all the chanted real estate myths and knowledge that lenders were pushing faulty loans .Can’t blame it all on the buyers because the whole REIC was pushing this real estate scheme . Never seen so many people being willing to go on bad loans . That being said ,the borrowers will be liable because they signed the final papers ,but the REIC helped these people jump over the clift .
Today is the day of the month that the world is blessed with another batch of (fun)Yuns. Do any of you dare to guess what outlandish bullshit will fall from the idiots wagging tongue?
It’s a most excellent time to buy! Interest rates are falling. Supply is large. Prices have stabalized. Buy! Buy! BUY!
“Things got worse and worse. Finally there came the awful day of reckoning for the bulls and the optimists, and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation-without anesthetics. A day I shall never forget. October 24, 1907″
Jesse Livermore
History almost always repeats itself, if you know where to look…
A little history lesson would be appreciated - 1907?
“Its primary cause was a retraction of loans by some banks that began in New York and soon spread across the nation, leading to the closings of banks and businesses.”
http://en.wikipedia.org/wiki/Panic_of_1907
The bank collapse that resulted with the formation of the federal reserve in 1913. The collapse ended when Mr. J.P. Morgan personally guaranteed funds.
Mr. Jesse Livermore was one of the great traders of the 20th century.
Hi book is online in pdf. form
Reminiscences of a stock operator
Mr. Livermore shorted the stock market in 1929 and started the great depression with $100MM
Edwin Lefevre, a financial journalist, wrote “Reminiscences of a Stock Operator” based on the life of Jesse Livermore.
http://en.wikipedia.org/wiki/Edwin_Lef%C3%A8vre
Well worth taking your time to read. Thanks again Hoz.
Mr. Livermore may have survived the initial crash of 1929, but most of his fortune did not survive the Great Depression. He thought he could speculate his way out — he couldn’t.
He committed suicide not long after his book flopped.
He lost his trading nerve. It happens, to continue to be a great trader requires a sureness an infallibility that Mr. Livermore lost.
How he lost much of his moneys is open to conjecture. His exes got a lot of it and the government got some. A lot of his losses came from getting long in 1932. In his words too early.
Hoz, I’ve read that Livermore lost a lot of his trusted contacts after the ‘29 shakeout — he’d been using a good deal of insider information in the ’20s (in addition to other means in his arsenal) — and that he didn’t have the same jump on the competition he once did.
I don’t necessarily accept that as gospel truth, but it seems Livermore and many other successful traders of the ’20s (both bears and bulls) often relied on tactics of dubious legality. Or tactics that once were legal and were outlawed after the 1929 debacle.
Cool. Just downloaded.
I wonder if it will be as entertaining as BOFH. *eg*
Check Wikipedia for details on the Panic of 1907. As far as I remember it, a big bank failed and threatened to take the economy with it. JP Morgan acting as the central banker without election checked the books of the threatened institutions and saved those that were just illiquid but not insolvent by an organized guarantee of their credit (insolvent = negative net worth). Being so dependent on the benevolence of one man didn’t sit well with congress, and the Federal Reserve was chartered. Teaching for today: Distinguish between illiquidity that can be healed by intervention and insolvency that acts as an abyss for any money thrown at it! The bond mountain built on America’s housing is, due to the decreasing value of the collateral, a case of insolvency and not of illiquidity, as Paulson and his buddies with their superfund want to make us believe.
I knew we had some older posters here, but didn’t realize we had one that remembered the Panic of 1907!
Sure you weren’t projecting and meant the Panic of 2007?
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http://ocbiz.freedomblogging.com/2007/10/23/q3-oc-auto-sales-plunge-15/
Q3 OC auto sales plunge 15%
October 23rd, 2007
New car registrations fell 15.3 percent in Orange County in the third quarter of this year, the Orange County Automobile Dealers Association reports.
Year-to-date registrations have fallen 9.8 percent in Orange County, compared to a nationwide drop of 3.2 percent through September, the auto dealers report.
For all of 2007, the auto dealers forecast a 7.9 percent drop in sales, following a 6.1 percent drop in sales in 2006. The dealers expect sales to fall in 2008 by 1.7 percent, before rebounding in 2009.
…
Housing problems are “contained?”
Jas
My sister works in the office of a large dealership in NE OH that owns mutiple new car lots in 2 counties. The have buick, cadillac, pontiac, chevrolet, jeep, ford, mercury and I don’t know what all. Over a year ago she said it was so slow that they were lucky to sell a dozen a month. She said if it wasn’t for the service dept, they would have to close all 6 dealerships.
What has it been like recently if they were only selling a dozen a month last year?
About the same here. We slowed down way before 2005 so we’ve been stagnant for about 3 years now. Home sales slowed here before the peak too.
If our automobile industry came out with a car that got 70 - 80 mpg, I’d buy it. Cash.
You and me both. Infuriates me when Europe markets have tidy little diesels which manage 60 mpg nicely, but we cannot buy them here… The VW Golf diesel model comes closest, but they’re scarcer than Chinese algebra books…
“For all of 2007, the auto dealers forecast a 7.9 percent drop in sales, following a 6.1 percent drop in sales in 2006. The dealers expect sales to fall in 2008 by 1.7 percent, before rebounding in 2009.”
But sales of auto parts and auto repair shops will be booming. Folks will hang onto their jalopies longer and enrich auto repair shops/dealers through $1000+ repair bills and /or tacked-on auto repair bills, ‘newly discovered’ problems which the consumer simply agreeds with and tacks on to his growing CC balance.
There are huge opportutities in LA for dealers,scammers,auto rip off con artists,auto repair scams, fly-by night auto repair shops, ect.
Best insurance aginst being ripped off by repair bills is to invest $20 in a thourough repair manual, be able to diagnose and focus on the actual problem which needs repair/replacement, and find a trusted reputable repair shop but make sure they only do the repair which is needed. Specify this.
Also keep the car on a regular maintenance schedule,:oil,lube, tires,ect. All vital systems checked at regular specified miles/monthly intervals as noted in your owners manual.
The bursting housing bubble is starting to affect California’s finances.
Oct. 24 (Bloomberg) — Four years after Arnold Schwarzenegger was elected governor of California, vowing to “tear up the state’s credit card,” the actor and former body- builder is about to charge $7 billion to taxpayers’ accounts.
…
Schwarzenegger is losing the revenue cushion he used to plug budget deficits as home foreclosure rates increase at a faster pace than the rest of the country. The rise in IOUs is an early sign that finances are deteriorating….
http://www.bloomberg.com/apps/news?pid=20601109&sid=a8BXAv.pLCxM&refer=home
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Some people (or states) never learn — Bursting of the tech Scam bubble led to the ouster of Gray Davis when the revenues plumetted.
Those who live by the bubble…
Jas
You mean to tell me that another guy who harped on good old fashioned “conservative values” like personal responsibility and fiscal discipline to get elected didn’t deliver? Another one?
He turned out to be a lying scumbag RINO. After running on a conservative platform, he’s proposed socialized medicine for the state and a whole list of other liberal/big spending initiatives. CA got what it deserved for not voting for Tom McClintock, the only CA politician with a brain.
When the masses figure out that the entire conservative mantra is based on a failed economic model (supply side) is when we can expect to right the ship and get back on course.
Gonna take awhile. Worshippers at the altar of Milton cannot get their brains around the concept his system works only at gunpoint - and not well even then.
Arnie was? I would think if a governor were planning to buy all the hospitals and medical facilities and put all doctors, nurses on state payroll would make national headlines.
The “difficult decisions” means the working-class folks. Anyone remember when CalTrans engineers didn’t get paid for weeks? Remember when a judge jumped into the mix ordering the state to send the “free-loaders” their money?
” Four years after Arnold Schwarzenegger was elected governor of California, vowing to “tear up the state’s credit card,’’ the actor and former body- builder is about to charge $7 billion to taxpayers’ accounts.”
I used to follow The Terminator and was a supporter but he has swung left and now espouses typical big-spending liberal programs as if CA has a bottomless well of money to draw upon. Actully more than half of californians pay little or no taxes and usually draw heavily upon state resource(iilegals, green carders pay almost no taxes and get lot of freebees at Taxpayer expense).
Solution-tax the rich and big businesses, soak the big-bad oil companys: that is the liberal solution. Yet despite all this evry two-four years ignorant Californians vote to put the state into even more indebtness through porpositions and initiatives to save this park or that, more school bonds, ect. Problem is Californians want all the goodies without paying for them.
So the state passes gap bond measures-uses credit same as an irreponsible household who cannot manage fiscal tightness and instead cheerfully racks up cc’s.
“Solution-tax the rich and big businesses, soak the big-bad oil companys: that is the liberal solution.”
But you prefer they soak wage earners like you and me instead? Now thats brilliant.
Remember:
The first thing Arnold did was to rescind the increase in the Auto Registration tax. We actually had a responsible tax cut in California that was designed to sunset if state revenues, swollen from the dot.com boom dropped - That’s when I knew for sure that Arnold was full of sh*t. He’s not much different policy wise from Grey Davis, although I think if Davis faced the same budget woes he might move a bit more quickly to raise revenues and cut spending.
Yet despite all this evry two-four years ignorant Californians vote to put the state into even more indebtness through porpositions and initiatives to save this park or that, more school bonds, ect. Problem is Californians want all the goodies without paying for them.
This is why, whenever I am working in California on an engineering contract, I save as much as possible in savings bonds (no state tax), get the per diem (also a big tax break), and thumb my nose at the California commies (Franchise tax Board and all politicians and bureacraps).
It’s official, Philadelphia and the surrounding areas are different. A realtor sent me this letter to the editor (my excerpts) in response to my comments that prices are coming down:
The 2007 real estate market of the Delaware Lehigh Valley is identical to 2003…The differences between 2007 and 2003 are ‘that prices have appreciated 42%, and inventory, or houses available are up by 28,000, giving buyers more choices. Yes, there are parts of the country that are experiencing more difficult times, but in our marketplace median prices are 3.1% over 2006, sales activity is equal to or better than 2003 and 2007 may be the 4th best year for sales ever. Interest rates are 6-3/8% for a 30 years term, lower than rates were from 1972 to 2003…If there’s one thing that the local sports media has right, it’s that people in the Philadelphia area don’t really care about the rest of the country, we only care what’s happening here….Today’s negative mentality went through people’s minds in the early 1980’s and 1990’s and the people who benefited from those times were the ones who: bought a home.
I replied that if today’s market is so much like 2003, then the prices will be too.
If there’s one thing that the local sports media has right, it’s that people in the Philadelphia area don’t really care about the rest of the country, we only care what’s happening here….
is this why we’re always referred to as “provincial”?
Oh, and I love that he’s using the sports media to support his position. Nothing like introducing sound economic theory into the discussion!
Phillians would boo at their own mother, if she was late with supper.
If he continued the sports analogy, he’d note that the Phila fans are fair-weathered, and they will boo a failing housing market much as they boo the Phillies and the Eagles when they are playing badly.
It’s the sports mentality alright. I’m on a school board and I can tell you we never get complaints at the school for academics, only for who didn’t get to play in which game, or why can my son play because he has 4 F’s. You want to know why America is dumbed down. No one cares about academics. Parents will transfer their child to a school with a winning sports team regardless of the fact the school academically ranks last in the state. No one can get it thru their heads that these few glorious sports years, except for the exceptional few, end up meaning nothing compared to eductation. I’ve found some of the biggest jocks, 20 years later, have bear bellies hanging to their knees, low paying jobs, and spend every weekend in a bar watching games and living the glory days. But they got their 15 minutes of fame on the high school football field.
Philadelphia, isn’t that the city where like 10,000 government spy cameras are going up? How disgusting, and with barely even a protest from the citizens? This country has about 20 good years left to then it’s all downhill.
I think you are being overly optimistic with your 20 years remark.
I know they started to install red light cameras, but I don’t know about 10k spy cameras. If they are indeed planning to install that many spy cameras, it’s more to do with kickbacks from the surveillance contractor than any concern for the citizens’ safety.
If any of my children came home with 4 F’s they wouldn’t be playing sports or doing much of anything else either, except some homework of course.
he just said, “But, it’s different here” another way.
What I found funny was that he said, and I paraphrase: “…the market is just like 2003, except that prices are inflated and inventory is very high,” as if those differences are irrelevant to where the market will go.
The “it’s identical but different” logic.
Just in case you missed getting wiped out, by not investing in hedge funds, there is hope for you…
“The world’s wealthiest private investors are planning to put more money into alternative investments over the next three years, a report says.”
“The study said the global rich are increasingly attracted by private equity schemes and hedge funds as they offer more stable returns than shares.”
“The report by Barclays Wealth questioned 790 wealthy individuals from around the world.”
http://news.bbc.co.uk/2/hi/business/7059631.stm
Look, it is getting obvious that the “rich” are really exposed in all of this stuff to a far greater extent than most people think. They have been investing in all kinds of risky stuff because they have no where else to put it. If there is a collapse of the markets, the rich WILL get hit and badly.
Roidy
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Existing Home Sales down 8.0% to 5.04M. Pretty close to my 5.0M forcast. Prices down 4.2% YoY.
Jas
Two articles in today’s Sarasota Herald Tribune, one about the proliferation of “grow houses” and the other about how realtors and real estate companies are (are not) weathering the downturn. The last article is about a developer who wants to build 7,000 additional houses in North Port! That’s despite the planning staff saying no additional housing is needed.
http://www.heraldtribune.com/article/20071024/NEWS/710240480
http://www.heraldtribune.com/article/20071024/REALESTATE/710240410
http://www.heraldtribune.com/article/20071024/NEWS/710240404
The drug growing houses were on one of the CSI’s or Shark or something about a month ago. This guy bought a million dollar house, gutted it and grew drugs there. When they opened the front door, it was unbelievable. All the plastic sheets, grow lights, plants etc. I’ll bet they pay their mortgage on time.
That’s why the investigators came. Anyone paying on time on a $1M house purchased in ‘05 or ‘06 is now very suspicious
the chick on msnbc believes that prices are going up in NE and mid west
what an idiot !
NAR w magic median numbers
Subprime Blame: Where Were the Realtors?
http://www.costar.com/News/Article.aspx?id=CF529EEE1AFC9E0092D55D8439BF2EBF
One question: If Realt-Whores have no responsibility in this mess then why the hell do we need them? I hope the go the way of full service stock brokers. Extinct.
Amen.
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Biggest MoM decline in EHS ever seen, as per CNBC.
Jas
Crikey, I’m watching a report on the Cali fires. Ahhnold, Bush and Chertoff gassing off about what they’re going to do. Three Stooges. That oughta inspire confidence. Cripes. Cali deserves better.
send money -before pols send ours
In his head ….. “hmmm…. I can this be profited from and how can we offload this obligation while driving the cost up 3x?”
Got Blackwater?
I grew up in Pasadena and used to watch from my window each autumn as the San Gabriel mountains lit up the night sky with fire. In 1993, I was renting a home in the foothills of Altadena, and was evacuated during the Eaton Canyon fire (destroyed over 100 homes). We had about an hour to get out. I left with the baby immediately, but my husband stayed to gather a few irreplaceable items, including the hand-carved wooden baby cradle my father made and some photos. I vowed never to live in a fire prone area again. It’s too terrifying. I just don’t get all of the complaining from these people who have chosen to live in these areas that are clearly dangerous. Do they actually think that the firefighters WANT their homes to burn? Build homes in the canyons and foothills and they might burn. Build a city below sea level and it might flood. These are consequences of clearly thought out choices, people. Deal with it.
Per some discussion yesterday about whether the media would correctly link the housing bubble and the severity of the SoCal wildfires, I found this in today’s Washington Post report on the fires:
The move into the hills is for homes that are more affordable, but they are also more vulnerable. An inventory by University of Wisconsin researchers found that about two-thirds of new building in Southern California over the past decade was on land susceptible to wildfires, said Mike Davis, a historian at the University of California at Irvine and author of a social history of Los Angeles.
“It gives you some parameters for understanding the current situation,” Davis said. “Another way to look at it is you simply drive out the San Gorgonio Pass, where the winds blow over 50 mph over a hundred days a year and you have new houses standing next to 50-year-old chaparral.
“You might as well be building next to leaking gasoline cans.”
Link
“….Cali deserves better”
No, I disagree. They have the government/leaders they deserve. I grew up there, even the so called orange county conservatives love socialism
Agreed. I grew up in Fresno. The Republicans there have been far more socialistic than any southern Demoncrap. Okay I’m an atheist and do not think any demons exist or any Gods exist (before some liberal nut calls me a typical Bible-thumping conservative)
Prices down 4.2 pct YOY. Invetory Up. Sales down 19 pct YOY.
http://www.bloomberg.com/apps/news?pid=20601087&sid=akxlfgOldniU&refer=home
Sales down to a 5.04 million annual rate? that is quite a plunge. At this rate of decline we will be under 4 before the next spring selling season starts.
Of course we’ll hit bottom by then and prices and sales will go up up up! /sarcasm off.
The median home price was $211,700 in September, down 4.2% from $220,900 in September 2006. The median price in August this year was $224,400.
WSJ
Stupid is everywhere…the main street media quotes experts that have missed the numbers every month this year.
The real-estate agents’ group this month “reduced its sales forecast for the 10th time this year.”
BWHAHAHAHAHA!!!!
Existing-Home Sales Tumble 8%
http://online.wsj.com/article/SB119323242323769811.html?mod=googlenews_wsj
I have to say congrats to Ben and all of you… you guys were right all along. 4.2% drop in prices across the country!!!
http://biz.yahoo.com/ap/071024/economy.html
It ain’t so much about being right just once, but 13 times out of the last 14 months. Have we reached the point yet where this is the most protracted period of decline in the national median price ever? I am starting to believe that real estate always goes down (only up if in the sense of “up in flames”).
The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.
What was the peak median price?
Professor Bear, good to see you here. I was worried about you. Did I miss something? Are you still in/near Rancho Bernardo?
Back home as of this evening (see details below…).
Thanks for caring.
PB
“4.2% drop in prices across the country!!!”
Impossible…we have been told ad nauseam that RE is *local*, not national, that it’s location, location, location, and that “it’s different here”. In other words, don’t pay any attention to that credit bubble behind the curtain.
hey addge,
stay tuned. Many of us think the RE bottom won’t be reached until 2012, and then some of us think it will be a flat bottom for several years after that.
Suprime disaster caused by federally regulated banks failing to lend in poor areas, advocates say.
http://www.bloomberg.com/apps/news?pid=20601070&sid=aVgZgMsNYrzo&refer=home
Since they didn’t lend, or only lent to people with good credit, poor people in poor neighborhoods with bad credit were forced to borrow from the sharks, the advocates told Congress.
That is one hell of a spin.
One man’s predatory lending practices are another man’s keys to the ownership society.
Since they didn’t lend, or only lent to people with good credit, poor people in poor neighborhoods with bad credit were forced to borrow from the sharks, the advocates told Congress.
Since I used to sell real estate, I got news for Congress. A large percentage of people with bad credit are not poor. They’re middle class (wanna live like the rich) people with bad credit for overspending, charging and finally not being able to even make the minimums on their charges. Everyone I ever got with bad credit, made enough money to qualify to buy a house, but their credit was so bad they couldn’t. I don’t mean just one incident on their credit reports either. They had collections going back since they were able to be on their own and hold down a job. We’re talking greedy, got to have it all, middle class people.
The real poor would get into subsidized programs and some would buy a cheap house and live there forever.
Agreed. My poor rich sister (earning $90,000 per year) spends whatever she makes. She has poor credit. I’ve wondered where my sister (and the other sisters) were when our parents were talking about their experiences during the Great Depression? I learned and they did not learn. Oh vey!
My tinfoil hat was vibrating this morning the same way it did on 9/11/01 on the news that two buildings in NYC had been hit by airplanes. Is it possible for so many major wildfires to coincidently break out within a few hours of each other at the onset of Santa Anna conditions, effectively overwhelming SoCal fire fighting resources? Or did the situation involve coordinated arson? I seriously do not know the answer, although I will assure all readers here that my initial hunch about 9/11 turned out to be on target.
P.S. If there was a coordinated effort involved to set a large part of SoCal ablaze, I have no idea who would have done this and how…
Glad you are OK Prof G. S. Bear!
Disasters are good for the economy short term.
So most benefit, anyone could do it.
I don’t know if you remember the 2003 blazes, but those seemed coordinated as welll…and it was just 2 years after 9/11. However, the correlating factor for these massive multiple fires seems to be the wind conditions (extreme Santa Anas), and not the fact that there are multiple fires. In other words, we *always* have multiple fires at any given time, it’s just that extreme Santa Anas (’Devil Winds’) can fan a transformer fire into a thousand acre blaze in the blink of an eye.
Maybe it started with just one FB.
I agree the wind conditions provide a “correlating factor.” But I am not sure about your assertion that “we *always* have multiple fires at any given time,” especially in locations which are situated upwind of major recently-built McMansion tract home developments. If I were a fire fighter, I would have a better sense about this point.
While I recognize the situation at hand could have come about through some kind of Black Swan random juxtaposition of “perfect fire storm” conditions with an otherwise-typical ambient level of new fires, it is also worth considering that plausible explanations provide good cover for nefarious actions. For example, if a group of individuals wanted to try to set a huge swath of SoCal ablaze through coordinated action, what better time to do it than in the middle of a Santa Anna, when everyone would be most willing to accept natural causes as the obvious explanation? One should never rule out conspiracy explanations before carefully checking the facts and circumstances; if Woodward and Bernstein had done so, the Watergate story might have never come to light.
For an interesting recent fictional example of the principle of hiding nefarious actions under the guise of a plausible alternative explanation, I recommend you see the movie Michael Clayton.
All of the fire areas that have burned are older (10 years +), no new developments. I think land values tend to be higher in these more “exclusive” areas which would limit development to custom or semi-custom homes.
“All of the fire areas that have burned are older (10 years +), no new developments.”
And your point is?
Rancho Bernardo, which has been featured in international news stories, has many new home developments. The fact that most if not all the homes that burned are older is most likely a refection of the fact that new homes represent a small share of the overall housing stock, and also that due to chance factors, the part of Rancho Bernardo most heavily impacted was not Santaluz nor 4S Ranch, but rather Westwood and other older developments slightly to the north.
My understanding is that Harris was started by a house fire and Witch was started by a bad transformer or electrical wires that came down. The OC fires are almost definitely arson. Never underestatement the power of the Santa Ana’s - I remember they knocked over a block wall at our house when I was a kid. A few electrical wires would not be a problem. But yes, I am sure many, many people were hoping the fires would end their problems and give them an easy walkaway. And considering all the small fires that popped up the first night (and are now out or merged) I suspect the reasons for their starting will be heartbreaking. But the two biggies do not seem to be deliberate. (Fingers crossed that people cannot be that evil and selfish.)
California | Local News
California fire focus turns to arson suspects and blazes to the south
Police in San Bernardino County shoot and kill a man they say was acting suspiciously; another is in custody after allegedly setting a blaze elsewhere in the county. A fifth evacuee has died.
By Hector Becerra, Tami Abdollah and Andrew Blankstein, Los Angeles Times Staff Writers
3:49 PM PDT, October 24, 2007
In the fourth day of Southern California’s massive battle with wildfires, officials welcomed better weather and shifted their attention to arson investigations and still-threatening blazes in Orange and San Diego counties. One man, who police said was acting suspiciously in brush near Cal State San Bernardino, was shot and killed. Another was arrested after allegedly setting a quickly extinguished fire in Hesperia.
In Riverside County, officials said investigators had determined that the 411-acre Rosa blaze in Temecula was intentionally set. Authorities had already said that a nearly 20,000-acre fire in Orange County was set by an arsonist, and today investigators from the FBI and county agencies were gathered near the intersection of Santiago Canyon and Silverado Canyon Roads.
“It’s definitely arson and it’s been deemed a crime scene,” said Jim Amormino, spokesman for the Orange County Sheriff’s Department.
http://www.latimes.com/news/local/la-me-fires25oct25,0,2708820.story
“While I recognize the situation at hand could have come about through some kind of Black Swan random juxtaposition of “perfect fire storm” conditions”
I think you are too close to the situation (literally)…again, take a look at what happened in SoCal in 2003, then it was (mostly) the LA area that got hit. Just because someone *may* be out to get you, it doesn’t mean you are not paranoid.
I’m not paranoid — just curious whether the fires were due to natural or man-made causes, and in the latter case, whether coordinated action was involved.
I can remember several conversations with folks about how setting fires all over the west would seem like easy terrorist act. Friend in law enforcement said that when there is word that santa ana winds are coming, they know the firebugs (regular nut cases - not terrorists) come out to play, but there’s no way to really stop them.
They are saying that the Santiago Cyn fire may have been arson. I have not heard anything yet about the others.
How are the rest of the SoCal HBB’ers? We’re ok in Costa Mesa.
Back home in RB. A drive through nearby Santaluz and Del Sur communities revealed that the worst damage either incurred was due to the Santa Anna wind knocking over a few young trees. A walk around our neighborhood offers scant evidence that a major disaster just played out across a broad swath of San Diego County.
Five miles to the north, the hills are blackened in a scene of hellish devastation. We dodged the bullet this time, aside from a harrowing evacuation experience ahead of the Witch Creek fire early Monday morning.
Glad you said it Prof Bear. I was thinking the same thing - and because the OC fire was definately arson, my stomach tumbled, just like it did on 9/11.
I lived in OC in ‘01, and those nice, quiet neighbors from Pakistan who I only saw once in a while, had a great, big party on 9/10/01. Big black luxury cars were parked all over our surburan street, with men and women in flowing middle-eastern robes coming and going until the wee hours of the morning. During the nine years I lived across the street, I have never seen them entertain. I thought it was suspicious that they disappeared after that night, after 9/11. They closed up the house and left. Nobody in the neighborhood knew them, so nobody knew where they went. I called the FBI. They weren’t interested. As far as I know, their house is still vacant.
Hey perfesser, it’s possible. Same thing happened in 2004. It was not due to a squad of terrorists though. It’s the nature of dry Southern California. Lightning strikes and / or careless people combined with the dry conditions equal fires. Wind can carry embers certain distances and cause another fire, seemingly unrelated.
I lived in LA from 2003 to 2006.
Well, BIM, I guess it is also possible for the free market story to explain why the DJIA has a magical propensity to close at the opening bell level on selloff days, isn’t it? Because anything and everything is possible?
Could have been out of work construction workers. Lots of houses to rebuild now.
That’s along the line of the deliberate malice explanations I was suggesting above. There are lots of individuals who could currently stand to greatly benefit by erasing some of the excess supply of CA McMansions from the map. Someone suggested it would not be in a FB’s interest for their home to go up in smoke, but I guess that would depend on the way the insurance claim was determined, and how that would compare to the current resale value of the home…
Wondering what everyone here thinks about a possible increase in identity theft claims as a result of current economic conditions. Not so much fraudulent reporting, but an actual increase in cases. A good credit history / score (and documented income of course), seem like the most valuable thing a “consumer” can have right now. My wife and I both signed up with a ssc# protection service because we get alot of cc offers, and I’m paranoid. Wondering if any of you have any thoughts on this, thanks.
http://www.ftc.gov/bcp/conline/pubs/credit/prescreen.shtm
Follow that link to learn about opting out of receiving credit card offers. By doing this, you will stop receiving pre-screened credit card offers based on your good credit history. I did it, and now the only credit card offers I get are because of my frequent flier accounts (which are not screened for credit, they’re known as “invitation-to-apply”.
Thanks. That was actually one of the features of the service we signed up for, in addition to getting credit reports mailed to us regularly, and placing everything on a recurring 90 day fraud alert (prohibiting any new offers period).
Like I said I’m paranoid, I just have a feeling we’ll start seeing an increase in the reports of this type of crime. No?
https://www.optoutprescreen.com/?rf=t
If you enter your information here, you can cut down your CC offers to nearly zero. I had to put in my maiden name and old address as well as married name/current address to get them all.
Sorry . . . I get creeped out by their request for my SSN.
“Broker commissions on an option ARM ranged from 1.75% to 2.5% of the loan amount last year, estimates Tom LaMalfa, a managing director of Wholesale Access, a mortgage-research firm in Columbia, Md. That compares with 1.48% for standard fixed-rate mortgages and 1.88% on subprime mortgages”.
I was stunned to find out that a broker’s commission was that high. Remind me to push squeeze a mortgage broker for reduced fees/rates next time I’m shopping for a mortgage (not anytime soon). While it’s not listed here, I’m assuming brokers got a higher cut for interest only loans vs fully amortizing, because int-only loans would generate more interest income for the lender? That would explain why my broker was really trying to get me interested in the interest-only option back in 2003 ( I went fully amortizing ).
And another issue that isn’t talked about alot is the kick-backs real estate agents were getting from the loan agents to steer people in loan agents direction toward bad loans . They were all chanting the same investment schemes like a bunch of con men/women . Did anybody looking for homes at the height of the boom not hear about how great it was to go on a low down toxic loan that they could refinance later ? Should be a law against agents promising financing down the road because as you can see they can’t perform so they want the tax payers to bail them out . Just because a person is a commissioned salesperson doesn’t mean they are off the hook for bad faith in a business transaction IMHO .
–
CNBC made reference to “All The President’s Men” in connection with the recession denial from the White House Economic Team. Cover up?
Jas
I don’t get it. Is the price really pegged to the view? You get some acres, OK, but is this typical in western WA?
http://seattle.craigslist.org/sno/rfs/458270669.html
http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=CB3014CE-17A4-1130-F5D087C4632AD3CC
http://www.investorsinsight.com/otb_va_print.aspx?EditionID=604
A Subprime Outlook for the Global Economy
Introduction
Stephen Roach is one of my favorite analysts. However, since he moved to Asia to take up new responsibilities, he has not written as much. Thus I was delighted to receive what will be today?s Outside the Box last week. Roach argues that the US is getting ready for a subprime economy and the world, and in particular Asia, will also slow as a result. This is a particularly sobering essay, but one that should be read.
Stephen S. Roach is Chairman of Morgan Stanley Asia, serving as the Firm?s senior representative to clients, governments, and regulators across the region. Prior to his appointment as Asia Chairman, Mr. Roach was Morgan Stanley?s Chief Economist.
I trust you will fine this Outside the Box stimulating.
John Mauldin, Editor
Outside the Box
the patient is on the table and needs another crack hit to survive for another week. The patient is the economy and the crack hit is an interest rate cut.
This am news was very interesting. A police chopper flying over a fire area saw a motorcyclist on one of the roads debike and start a fire. They wired ahead and nabbed the bastard. Now that begs the question: was this person a housing speculator about to lose everything or a fireman wanting the overtime or a out of work contractor trying to guarantee future business? Seems to me all three classes make out through the suffering of others.
Could it possibly be someone who likes to start fires?
Hopefully they will give you the follow up news but you will probably have to research the case if you can find out the suspect’s name. He probably is one of the nut jobs who gets a thrill out of “his work” being on the news. (I have no idea what drives arsonists - the wildlife loss alone is staggering, do this psychos even get that rabbits and deer and coyotes are going to burn to death?) If nothing else they’ll get his DNA and see if he started any other fires. Hopefully he will go to jail for a long long time since burning him alive is cruel and unusual. (Even if appropriate.
)
Florida September sales results have been released. Sales down 38%, price down 9%. Orlando and the west coast all down double digits in price.
http://media.living.net/releases/September2007_Sin_Fam_Chart.html
Aaarggh. Do I sell my CFC Jan09 puts for a 100% profit? Or do I wait until Friday after earnings? There’s got to be a bounce at some point for me to re-enter…
What would you all do?
The action after lunch looks very similar to August 16th when the Fed leaked out the change in the discount rate. I lost six figures on the gap up the next day.
Remember profits booked can’t be taken from you and they are not yours until you book’em.
Why can’t they leave the markets alone? All this market manipulation is starting to look silly. Are we living in a Banana economy or the greatest Republic on Earth? The rumors are indeed swirling of an imminent rate cut. If untrue, will the markets give it back?
Just part of the game. Always has been…
http://tinyurl.com/32usxb
WASHINGTON (Reuters) - The Federal Reserve on Wednesday declined to comment on speculation in financial markets that the U.S. central bank might cut the discount rate imminently.
Asked if he could comment about the speculation, which traders said was a factor that brought stock prices off earlier lows, a Fed spokesman said, “No.”
http://tinyurl.com/2b4tz9
Don’t believe the rumor until its denied!
The bulls are pathetic. When the facts are not in their favor, they create fiction. This is third time they have pulled it off. First, it was CFC. Then, it was Bear Stearns. Now, it’s the Fed discount window. This kind of manipulation reflects the level of weakness in this market. It’s supported by fiction.
well considering the last statement of ownership from the Fed in 1983 reveals they were mostly controlled by wall street banking interests, then its not really manipulation. Bernanke is going to get death threats if doesn’t continue cutting. Greenspan will be in line for the job once the Clintons return to office in 2009.
How good will the extra profit feel compared to how bad the loss of profit would be? If you hate loss more than love gains or vice versa you have your answer.
boyo’s we are makin history.
this market is a sham, consumption is a feast for the lazy and stupid (in America)…….
get ready to for the music to simply stop, an acceleration event is taking place…..is it wages, is it consumption, is it growth…..is it systemic failure?
make history, and do something, anything….
HOPE NOW!!
The Onion strikes again:
Doll-Housing Crisis Set To Worsen, Mean Older Brother Says
According to 5-year-old Janie Wright’s mean older brother, Dave, 8, if unsuitable borrowers Ken and Barbie continue to default on their high-risk subprime mortgages, it could spell the worst doll-housing crisis to hit the plastic couple since someone threw their dream home’s roof out a window…
Full article at
http://www.theonion.com/content/news_briefs/doll_housing_crisis_set_to
I went with a friend to happy hour yesterday, and while enjoying my manhattan, I overheard a local realtor say, “Oh, it’s just a market correction. We’re still ahead of the game.” I rolled my eyes and chanted, “Must… control… fist… of… death…” I sipped my drink and ate cold crab cakes until he said, “Oh, there’s no housing bubble here.” I could blame what happened next on the manhattan, but there was no way I could stop myself. I laughed, outloud, very loud. “You’re such an asshat,” I said, “There’s no bubble because it burst in 2005.” Well, that started quite the conversation. To my amazement, most of the people weren’t fighting over if there WAS a bubble, but WHEN did it pop? The agent was literally laughed out of the bar — he left with his thin thin thin overly blonde girlfriend, and the rest of us had a roaring good time, even though no one could agree. So HBBers. According to you, when did the bubble go POP?
My Empire started going bad in 2005…
Emperor Norton II, of the Inland Empire, Protector of Mexico and adjacents
SoCal pop - Fall 2005, the Season of “What Happened tothe frenzied buying action?”, aka ‘The Fall Wall’.
“Must… control… fist… of… death…”
Dilbert fan?
San Diego November of 2005. Other places like Austin and Seattle much later. Denver earlier. Cleveland never had one and it’s been popping for years. Remember - all real estate bubbles are local.
im just gonna finish up tonight with this.
if you havent figured out that this is not a recession, its really a depression….you have savings.
hope now?
California
The hot season
Oct 24th 2007
From Economist.com
Wildfires are sweeping across Southern California
http://economist.com/daily/news/displaystory.cfm?story_id=10015133&top_story=1