Housing Bubble Enters ‘The Danger Years’
A mortgage REIT has earnings results out. “Mortgage lender Aames Investment Corp. on Monday said its losses narrowed in the fourth quarter. The company said it raised rates on production during the quarter, a trend that is continuing into the first quarter.”
“Cutting costs in reaction to a tough mortgage market, Los Angeles-based sub-prime lender Aames Investment Corp. said Monday that it would close offices in Deerfield, Fla., and Parsippany, N.J., and eliminate 100 jobs in its wholesale lending division. Aames is a specialist in higher-cost loans to borrowers with imperfect credit.”
CNN Money reports on lending trends. “Millions of mortgage borrowers are entering their ‘danger years,’ when delinquencies peak and owners risk losing their homes. Delinquencies have historically reached their highest points during the third and fourth years of mortgages, according to Doug Duncan, chief economist for the Mortgage Bankers Association.”
“The number of Americans affected by the coming danger years could be huge. Half of all mortgage loans are three years old or less, according to the MBA. Nearly $3 trillion in mortgages originated in 2002, $4 trillion in 2003 and $3 trillion again in 2004.”
“In addition, many of these transactions involved risky loans, such as interest-only ARMs and no-down payment loans. A recent report from the NAR found that the median new home buyer put down just 2 percent in 2005. Forty-three percent put down no money at all. And according to SMR Research, some 25 percent of loans were interest-only, do nothing to reduce the debt on the house.”
“‘People are really stretched,’ says Dean Baker, macroeconomist for the Center for Economic and Policy Research. ‘They’re betting that the housing market will continue to appreciate. The problem is that few people recognize it for the gamble that it is,’ says Baker.”
And Danielle DiMartino continues her series on systemic risk. “For many people, the concept of systemic risk has never been experienced outside a textbook. But many financial experts worry we’re closer than ever to experiencing it, thanks to stresses on the ubiquitous mortgage market.”
“Lately, lax mortgage lenders have all but maximized the potential for systemic risk. Encouragingly, regulators are finally stepping in. ‘Regulators are obviously very concerned,’ said Paul Kasriel, chief economist at Northern Trust Co. ‘They’ve issued guidelines with regard to home-equity lending and are working on guidelines for nontraditional mortgages.’”
“Mr. Kasriel said he’s been concerned for some time that banks had too many chips on one bet. ‘U.S. commercial banks have a record exposure to the mortgage market,’ he said.”
“When you add mortgages they hold on their balance sheets, you get to mortgage-related assets making up a record 62 percent of commercial banks’ earning assets. As recently as 1985, banks’ holdings were south of 30 percent. We’re talking about a huge bet that housing stays afloat here. If the housing bubble bursts, it is safe to say banks’ ability to lend will be seriously pinched for a time.”
“Recall that many mortgages are sold off by those doing the lending. That explains the letter you got shortly after you closed on your home that asked you to make your monthly check out to someone else. So-called smart mortgages have risen in popularity, the no-document, no-down-payment, no-principal; heck, no-payment-every-once-in-a-while, adjustable-rate jobbers.”
“Believe it or not, these mortgages too are sold off. In a world plagued by low interest rates, they’re gobbled up by investors hungry for yield and not so concerned about risk. Many of these investors are hedge funds. Here’s where things get tricky. To juice returns, they’re buying these investments on credit. And where do they get the loans to buy? Well, who makes loans?”
“In the worst-case scenario, banks could get it coming, in the form of defaults that directly impact their highly concentrated holdings, and going, in the form of bad loans to hedge funds.”
‘Half of all mortgage loans are three years old or less, according to the MBA.’
And we read recently that the US mortgage debt dwarfs the federal debt. As for the hedge funds, who knows what the exposure is?
Can we remember the stress of the S & L debacle circa 1990 ???
This could dwarf that event…..
good butt-pucker factor
Having been in the appraisal profession at the time, I can guarantee you, that the real estate problems today are not remotely comparative to 1990.
Crooked, half-baked, appraisals done by barely literate trainee hacks workin’ for sleazebag bucket shops have fed this run-up.
This crash will be of horrific, mind-blowing proportions.
C’mon…don’t sugar coat it….Tell us what your really think.
Hi handyman….Did a Dominica search of homes for sale in Foxboro, Norwood. 2200 sq ft 10-50 year old homes still listed in $600-$700s. 3x asking prices of here, btw in a market where the guys doing my h’s job (national co) get paid EXACTLY the same! Was curious how the job market is hanging in there.
50% of mortgages - three years or less?
That explains a little more why somebody around here recently reported that Richard Russell (I think it was him, writer of “The Dow Theory Letter” since 1958) said something along the lines of… that a housing decline of 10% (nationwide? or was he talking California?) would put 48% of homeowners into negative equity territory.
To me, a stunning statement, if true.
SF; And, if true you know what happens…..Keys are left on the counter and the short sales start dragging the entire sector with it….
As I recall, keys would be about the only thing left on the counter, if the counter’s even still there.
I walked through many many RTC homes - Plumbing fixtures, lamps, water heaters, AC units, cabinets, irrrigation controllers… ALL GONE!!
It’s true and you are right, it was Richard russell. I honestly feel Ben is really in a box built by Bubble greenspan. Sadly people that did not take high risk are going to be hurt. Check out the read below.
Chris
http://www.itulip.com/reportfromthefront.htm
Thanks for reminding me about iTulip. They saved my rear in the dot com bubble (thanks to them I sold off a month before the stock market crash). And they also warned me about the housing bubble about two years ago. I thought the site had no new content, so thanks for sending me their way again!
“The report below comes from an iTulip.com member who is experiencing the Housing Bubble Correction now taking place in many rural areas of the U.S. The lesson in her story is that a single event in one part of the nation can have a profound impact on a region far away, change can be much more rapid than anyone imagines and even the most capable and well prepared can be seriously set back.”
This is a manifestation of chaos: A butterfly flapping its wings in California will cause a housing crash in St. George, UT…
A little OT but GM announced today it was going to lay off 500 workers. Workers who may have to sell a house in a down market.
Here’s a quote from one happy individual:Dave Kepsel, an engineering manager who spent 26 1/2 years at GM, was among those laid off Tuesday.
“I was told today I no longer have a job with GM,” said Kepsel, a 52-year-old from Lake Orion who works at GM’s massive technical center in the Detroit suburb of Warren.
Kepsel said he wasn’t surprised by the layoffs and thought they might have come sooner because of GM’s struggles.
“It’s one of those things. It’s part of doing business. I don’t have any hard feelings,” he said.
Kepsel drove away in a Chevrolet Silverado, a company vehicle he’ll be allowed to keep for 30 days.
“At least they offered me that and didn’t make me walk home or take a taxi,” Kepsel said.
Sorry to keep repeating myself, but the 500 you mention are the tip of the iceberg. GM is also trying to unload its most profitable unit, GMAC, and has offered job buybacks to all 105, 000 of its union workers. I have not studied the situation much, but if I had to make a bet on the future based on what I have recently read, I would bet that GM will be bankrupt within two years, and the widespread psychological awareness of this fact would be enough by itself to tip the economy into a recession. But maybe I am just being pessimistic again
I learned yesterday that some of the most stupid and irresponsible mortgages available in the Netherlands are those from … GMAC!
what happens with all those people who took a 115% mortage from GMAC when GMAC goes belly-up? Can they simply stop paying for the home and live happily ever after?
Is there any surprise about that? Stupid cars and stupid mortgages — stupid is as stupid does. It seems the entire GM corporation was managed all along for planned obsolescence.
Gm and planning? That seems like an oxymoron to me. Last GM product I purchased was a montecarlo z34. Whoever designed the car had never worked in one. You had to pull the engine to replace the alternator. How long do alternators last? About 4-5 years tops. That means that every 4-5 years you will spend around 500 to 700 to fix a 98 dollar part. Genius!
Interesting. When I was on holidays in the Western US in April 2001, the car rental company gave me a GM car (Oldsmobile Intrigue) and I really liked it. And I averaged over 400 miles a day for 3 weeks. The styling may have been a bit conservative, but for highway driving that was one nice car and it seemed (sample size = 1 :)) to have pretty good build quality as well.
12 months later I read that Oldsmobile had been canned as a brand because of poor sales. It did make me wonder …
OT : I am not saying that GM is not in trouble, but I believe GMAC may be OK. GM can selectively declare certain units/divisions bankrupt. GMAC is still profitable and will be OK; most likely sold off before GM’s bankruptcy. Case and point, Delphi declared only the US based units bankrupt.
Are you aware GMAC has an accounting scandal brewing? Perhaps there is nothing peculiar about that, in light of the Lay defense (Enron was conducted business as usual, no different from all other US corporations…).
I predicted on my blog on Wednesday, October 19, 2005, that GM would declare banruptcy, so I won’t take your bet!
I heard from my dental hygienist that if you work for Ford, they don’t let you take the vehicle home!
seriously…she told me that her friends both worked for Ford, and when Ford was starting their layoffs a couple months ago (don’t forget people..GM is in the news lately, but the other guy Ford, is also up shit’s creek with a lousy line of vehicles nobody wants…how could a company that ate Volvo build the only small sedan tested which did poorly on crashtests recently? no wonder these guys are going down…)and they were expecting to get their round of pink slips. The wife engineer expected to be cut and lose her ride, but the hubby still had his (hmm..if this is true, then maybe one of their self-bankrupting practices was to give a car to *both* spouses? whatever you need to do to keep those good engineers…) and he was feeling luckier about his position..otherwise they’d have to call a cab.
cheers!
Why anyone would spend cash on car named Vulva is beyond me. What garbage. They mint a car named “cross country” that can barely make it across town.
The name sounds rather sexy…
I tried replying here before…don’t know why not appearing?
Ford makes their laid-off employees leave their cars, so GM is nicer apparently!
Don’t forget guys that these are the first round of announced *salaried* layoffs…the buy-outs are for the blue-collar forces.
Ford started laying off engineers and other white-collar couple months ago, and will continue as well no doubt.
Delphi gave their UAW workers their offer to avert a strike, no word yet on whether it will be accepted. Allegedly the offer is to let their 30$/hour salaries go first to 22$/hr then to 16$/hr. Gives you a sense of what the future is when Geely (chinese car maker ) comes in to replace the Big 3. I wonder if the engineers salaries will take that kind of %age cut as well…
cheers!
“Believe it or not, these mortgages too are sold off. In a world plagued by low interest rates, they’re gobbled up by investors hungry for yield and not so concerned about risk. Many of these investors are hedge funds. Here’s where things get tricky. To juice returns, they’re buying these investments on credit. And where do they get the loans to buy? Well, who makes loans?”
I have often thought that a hedge fund that blew up due to losses in MBS’s could bring down the house (no pun intended). I wonder which hedge fund will be the second coming of LTCM? This is one aspect of the housing bubble Little Miss Dottie ReMax doesn’t quite understand.
The hedge fund bubble is almost as insidious as the housing bubble. People don’t think it will affect them directly if they are not investors, but it will. I’m planning to make money on it via index puts.
Which indexes, though? It’s not like the hedgies are all just long the S&P…
Somebody (hedgies, govt?) has tried to corner the market on volatility, much as the Hunt brothers attempted to corner the market in silver and OPEC tried to corner the market on oil in the late 1970s. Unfortunately, all past efforts to corner the market have ended in rather nasty crashes. Of course, we all know this time is different
It’s not one person trying to corner the market it’s lots of bright people showing great returns and little risk:
As melody would say read about hedge funds and risk management
Bluto —
Thanks much for that link!
GS
P.S. Maybe the answer is there in the article you posted, but would you say the folks involved are more or less bright than the Noble prize winners who helped LTCM push the world economy to the brink when it nearly collapsed in 1998? Also, is the strategy “too-big-to-fail”, and at what point does this strategy collapse of its own weight?
hey txchick, (ot)
responding to your questions about Santa Fe from last night!
I’ve been interested in SF for awhile, and have lots of contacts…same ol’ story…loads of inventory, especially in the top end, $1 mil +, second-home market….starting to see some price reductions, not significant yet. I’m getting hounded by agents that just a few months ago wouldn’t return my calls. I’ll revisit that area in the fall. But I’ll keep you posted.
Index puts, eh? You’re a smart one.
“I wonder which hedge fund will be the second coming of LTCM?”
My money is on Fannie Mae.
The face of systemic risk can be seen in the form of asset price volatility management. Look at the near-complete absence of movement in the S&P500 — stuck at 1300 since March 16 and no doubt stabilized in anticipation of today’s Fed meeting. Unfortunately, history has not dealt kindly with the aftermath of protracted periods of low price volatility,
especially when players with massive market power are controlling the price movements, and inadvertently driving a wide gulf between fundamental and artificial valuations.
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=SPX&sid=3377&freq=1&time=1mo&siteid=mktw
The markets are holding their breath and crossing their fingers. My favorite page for a quick look at the bubble:
finance.yahoo.com/q/cp?s=%5EHGX
All over the place in a very narrow range today and the last few weeks.
I don’t personally believe “the markets” can hold their breath that well without a little help from the Central Planners…
This feels like ominous peace before a perfect storm. Everything quiets down and you have this strange feeling, and then, this enormous tsunami comes.
The narrow trading range will continue for a few months when this storm is at its last stage of building. I have a hunch that the third quarter will be really critical.
Anyone who has lived in the Midwest would also recognize the eerie similarity to the still period with the ever-darkening shade of green in the western sky immediately before a tornado destroys a few area trailer parks.
http://www.bluepineapple.com/strange/tornado.html
maybe it’s because Europe is where the action is now? EU stock markets are booming lately, small investors returning in big numbers and cheering again - just like in 2000.
maybe investors are transferring their money from the US to EU stockmarkets because they see some trouble on the horizon? It can’t be because of the better perspective in Europe, that’s for sure.
I am not familiar with affairs in the EU, but here, it’s definitely that old fart that created this whole problem and screwed up the middle class in a historical way. I will call anyone bad names if they speak in his defense.
totally agree.
I think the markets are doing the best they can swallowing all that Easy Al money; they will probably be busy with that for quite a few years.
It is really tough to find adequate shelter from Cat 5 hurricanes and F5 twisters…
But FEMA has trailers!
“When you add mortgages they hold on their balance sheets, you get to mortgage-related assets making up a record 62 percent of commercial banks’ earning assets.
Earnings here is a relative term. In the case of a Neg-Am loan they report the interest actually paid AND the interest they theoreticaly accrued AND the increase in the principal balance as earnings.
Next week, March data. Two weeks, property taxes due. That’ll tell us everything we need to know.
YUP…….
Where were these people 4 years ago? Just more fuel for Senate hearings looking for someone or something to place the blame on.
” A recent report from the NAR found that the median new home buyer put down just 2 percent in 2005. Forty-three percent put down no money at all. And according to SMR Research, some 25 percent of loans were interest-only, do nothing to reduce the debt on the house.”
Under these conditions who in their right mind wouldn’t just walk away from the property. Two percent down on a $1,000,000 property is one hell of a hedge. There is gonna be more then one banker/broker looking for a jar of vasoline! Wow, I’d like to be a fly on the wall in some of those boardrooms.
2% down on a 1 million property is a lot
in my country some people now get away with something like minus 10% down on a 1 million property (I/O loan for 10-15% above the appraised value and no downpayment required; and if you use some tricks that are ‘officially not allowed’, the government will pay for any possible equity loss when you have to sell in the future).
You said it! I can’t wait to see how the reversion to traditional down payment requirements will affect the US housing market.
Reversion to traditional down payment requirements (at least in California) would mean a total collapse of housing as we know it. No more talk of 30 to 40% haircuts; think 70-80% off. Being illiquid, if people have a problem putting down 20K on a $1M house, think about average joes who finance their taxes or pay their house payment on a credit card- absolutely no possibility for normal people to even buy a home at 50% of current prices.
same here as we have even more downside room (although it will probably take much longer to get there thanks to gov. intervention).
I hope when it all starts unravelling, we get a quick jump down here to start with, so that the government backed insurance fund blows up right away (before than can shuffle in more taxpayer money).
Chances are, they will get higher, but may never return to the way it was in the 80’s. The system is broken and without a collapse, nothing could be put right again. Noone can save in the US except a few contrarians.
“Anything which cannot go on forever will stop.”
Herbert Stein
The broken symbiosis where free goods from Asia are exchanged for our uncollateralized debt will stop.
What makes anyone think that we’ll just return to “traditional down payment requirements”? Everything, repeat everything, overcorrects after such a broad deviation from the mean.
I agree. Many who would have traditionally qualified with a down payment will have their loan applications disqualified due to the stringent underwriting standards which will follow the era of free money.
“In the worst-case scenario, banks could get it coming, in the form of defaults that directly impact their highly concentrated holdings, and going, in the form of bad loans to hedge funds.”
I think that the role of hedge funds in all of this insanity is going to be one of the biggest revelations when this is all over. Hedge funds have grown exponentially over the past few years, they’re extremely aggressive (willing to take huge risks), and they’re almost entirely unregulated. Many of the “strategies” they used to employ to deliver fat returns (exchange rate arbitrage, shorting convertibles, etc) are no longer as profitable as they once were because too many others have jumped into the game. I believe this lack of opportunity for returns relative to the enormous amount of capital in these funds has led them all to the same place: the mortgage market.
I read a book about a hedge fund called “Ugly Americans”. Great read. It really gives the reader an understanding of just how much risk they’ll take with other people’s money. On one instance, this particular hedge fund bet everything - hundreds of millions of dollars - on a single stock play. In this case, the gamble paid off, but if they had guessed wrong they would have lost 100% of their investors’ money. The book also discusses how trader Nick Leeson singlehandedly brought down the most venerable bank in England, Barings, with a risky trading strategy that turned against him. I believe it is possible that there will be hedge fund losses at the end of this that will make Long Term Capital Management look like lunch money.
You should see the raping they and the private equity firms do when they do an LBO. It would shock you.
More details?
For an Australian example, google on “beaconsfield gold macquarie bank” and read one of the top links. Not an LBO, but same business model.
“I believe it is possible that there will be hedge fund losses at the end of this that will make Long Term Capital Management look like lunch money.”
This is where AG’s legacy will ultimately be made. The LTCM bailout was the exercise of the Greenspan put doctrine which caused the hedge fund bubble to inflate, as the “too-big-to-fail” doctrine crystalized at that point. It thus became clear that it was OK for a hedge fund to take on any and all levels of risk, provided their degree of leverage was sufficient to arm themselves with the financial equivalent of nuclear weapons. (I guess this is why Buffett says derivatives are financial WMDs?)
Brooklyn gets wise - Real Deal reports growing concern about brownstone price cuts in some nabes:
http://www.therealdeal.net/issues/MARCH_2006/1140977746.php
Tell me about it - my brother bought one of these things last year. I shook him, literally, by the neck before closing. “I know, I know,” he said. “It’s my wife, she doesn’t believe houses EVER go down…” What the average joe on this board can’t possibly understand is the neighborhoods in the article. These are historically speaking some of the worst and most violent ghettos in America - I am not exagerting. I would take Watts any day over this.
The housing stock is 19th Century middle-class and yes, beautiful, but you would have to drive through these places (in an armoured car, preferably) to grasp the mania in paying these prices. On the other hand, maybe my brother will be safe because the crack heads will think he is crazier than they are? Lord help us…
Yes, my boss was bragging that his son and his wife bought a brownstone in one of those Brooklyn slums two years ago and the place has “already DOUBLED in value.” Really shocking that my boss, who grew up in Brooklyn, would let his son buy there, much less brag about it.
Oh I know - my dad grew up there in the ’30’s. He’s wringing his hands over it too. Suffice it say, the familly has been gone from there for a long, long time!
Forgive if you’ve read me rant about this before, but already there is a spate of arsons in Crown Heights. As someone who actively looked in bedstuy during the run-up, I can say there are some tremendous, wonderful blocks with great neighborhood associations, then there are some dicey blocks too - but here’s what is true all over bed stuy and many other low/middle income areas: Plenty, plenty plenty of speculators/flippers, and plenty of folks who have been conned into risky loans. This is why I fear the return of blight, and it will be a very very sad thing for all new yorkers if this happens. Reason #561 why not to gloat.
Lots of regular folks (renters) are leaving Bed-Stuy because the gentrification has caused the rents to rise. And when I say leaving, I mean relocating to another state.
So after the bubble has undeniably deflated, the recession starts. You’ll soon have the yuppies and bubbies trapped in their overpriced renovated townhouses, surrounded by the recently-laid-off people (all those retail and housing-related jobs gone) who couldn’t afford to move when the nabe was gentrifying. Can you say class tensions?
My brother-in-law grew up in Brooklyn. He is the only relative in my extended family whose own blood relatives include bonafide members of the Mafia.
LMFAO…Even Tony Soprano’s, Victor the Appraiser, is gettin’ nervous.
See what idiots’s these POS mortgage people are.
They’re not lookin’ for more “comparables” for security purposes for themselves. Screw what’s rational-we got nothin’ in it.
They’re lookin’ for comp’s to hit the number, ’cause Vic ain’t comin’ in…
And if Vic don’t come in, Joe Jack-off, mortgage broker, can’t sell the mortgage, and if JJ can’t sell the paper, he ain’t gonna make that payment on his $1mil second home.
Man, shiteholes for $800k and change…whooweee is this thing gonna crash and burn.
“Millions of mortgage borrowers are entering their ‘danger years,’ when delinquencies peak and owners risk losing their homes.”
BEN BERNANKE AND THE REST OF THE FED are currently in closed door meetings discussing/contemplating rate increases. CNBC is reporting that we should all know the outcome of this meeting at 2:15pm E.S.T.
BUCKLE THOSE A.R.M. MORTGAGE SEATBELTS- Whhooaaaaaahhhhhhh!
Don’t worry — the volatility management fire team has those hoses out and ready to douse water on whatever possible conflagration ensues after the meeting announcement that they tightened another 1/4 point. (Just in case of head fakes, it might be a good day to go long gold futures…)
From today’s marketwatch.com ..Consumer confidence rises to 4 yr highh.
“Despite sagging home sales, the number of consumers who expect to buy a home in the next six months rose to 4%, the highest level since last April.”
What! Like I said , it could only be motivated by fear of rate increases by BB.
It’s a financial rope to hang themselves.
glass half full- this could be an increase in people who believe the bubble will burst w/in 6 months resulting in fire sales.
Is there anyway to know how many people only refi’d because IR were down? For example, if you had a mortgage at say 7 or 8%, refi’ing at 5 or 6% would have be a good decision. (assuming you only refi’d what you owed, and didn’t take any cash)
Karen; Except that if you are in California and you refi, your loan now is “recourse” (Non purchase money Note)….You can’t just walk away without potential consequence….They can come after your kids….
If you went for a fixed and the costs were low on the refiance it would make sense to lower your interest rate by 2 points .
My guess is that those refi’s were overloaded to the fixed-rate, long-term crowd - boomers interested in using those low rates to free up money the old-fashioned way. I know I did, from 8.5 down to 5.4. And then used the savings to pay down the principal. Old hat I know, but feels good.
That’s old economy stuff that went out of style many years ago. It’s all about hyper-leveraging now. How do you think mortgage debt tripled in the past 4 years? It’s all the jerk-out leverage. Any mortgage guy would tell you that it’s insane to pay down your house - PUT THAT $$$$$ TO WORK FOR YOU (buying cheap crap and going on cruises)!!!
Where have you been hibernating?
Karen,
I bought in 1999 and my loan at that time was 30 yr fixed @7%, refi’d in 2003 to another 30yr fixed @5.25. Since my refi, I’ve been putting in an extra $200 every month and should have this nut paid off in 23 years. I did consider a 15 year fixed but thought I’d play it safe with another 30yr and just add extra money to pay it off earlier.
That’s the smart move… if inflation starts to run like crazy - DISTINCT POSSIBILITY - then you can revert back to your minimum payment and enjoy the coffee fund house payment…
My guess is that we first have to work through a crash with another period of low rates before inflation is a viable possibility…
(Brooklyn gets wise - Real Deal reports growing concern about brownstone price cuts in some nabes:)
I guess I can tell my daugher she will be able to live near us in Brooklyn when she grows up after all!
FYI, systemic risk is the bankruptcy of an institution that made bad decisions (tough luck, regulators dont’ care) leading to the rolling bankruptcy of other financial institutions that did not make bad decisions (due to the interlocking payments between such institutions). That is an extreme scenario we hopefully will not see.
It really is a form of wealth redistribution. Poor people get to live in a house for a while, until they can’t pay the mortgage and get foreclosed. Bank gets the house bank, but probably suffers some loss so the shareholders suffer (assume shareholders have money). Bank has sold loan to hedge fund, and it suffers loss (hedge fund investors definitely have money).
Loose credit been an ongoing part of the American story, and part of what made this country what it is today.
Yep. Bankrupt.
The housing bubble is over. All the foolish bulls I know have now switched over to REITS. Who would think you’d ever hear the names of these obscure REITs come up at the water cooler. Might be some money to be made jumping on the REIT bandwagon. Look at DJUSRE — straight up like a rocket ship today, even with the 10yr yield soaring.
reits are way over priced
yield 6% when the mm will be paying 5 soon= nuts !
Lately, lax mortgage lenders have all but maximized the potential for systemic risk. Encouragingly, regulators are finally stepping in. ‘Regulators are obviously very concerned,’ said Paul Kasriel, chief economist at Northern Trust Co. ‘They’ve issued guidelines with regard to home-equity lending and are working on guidelines for nontraditional mortgages.’”
“Guidelines”…What a f*ckin’ crock.
There are no regulators for the mortgage industry. This is why the system has totally run amuck.
Too bad boys-to late the messenger.
The Titantic is sinking. All the rats are scurrying for a lifeboat.
You need to seriously consider KC if leaving a bubble market for somewhere in the midwest. We live in the Kansas City suburb of Lee’s Summit, and it is great - fantastic schools, great housing, rolling landscape, old-school downtown with history, 1000+ acre parks within or next to city, and great down-to-earth people. Although Johnson County is prosperous on the Kansas side, the nicer folks are in Lee’s Summit.
Kansas City, MO was a little behind in urban renewal, but if you want to live downtown or on the Plaza in midtown, there are great lofts available. The new Sprint arena is going in, and a fantastic performing arts center is on the way. Plus, great art in the crossroads district and in area museums. Also, Midwest Airlines (with wide leather seats) flys direct from KC to many destinations, including SF, Ft. Lauderdale and other east and west coast spots. Getting to the mountains or beach isn’t as hard as you might think. The winters are cold, but nothing like Minneapolis, Chicago, etc.
Jeff, please tell us that you are NOT a Realtor…
other than that- sounds like KC has alot going for it!
He kids you not. KC has much to recommend it, including the potential for Clownifornian refugees to buy a nice home with as little as 1/4 of their home equity pile (assuming they did not cash it out and blow it all).
Well said Get Stucco,
I have a close family member that just moved there, and loves it!!
I have used the question “Kansas City is the largest city of which US State?” 3 times now at Trivia nights (here in Australia; maybe it would be a no-brainer in the US itself).
Always sparks a big debate on the tables over whether it’s a reverse psychology trick question. Always gets a big groan when Missouri gets read out as the answer.
St. Louis is larger if you include the surrounding metro area, but due to the way they drew the political boundaries, KC is technically larger.
There is one natural disaster risk which poses a drawback to living in either STL or KC, which is the historical tendency for catastrophic tornadoes to occasionally wreak havoc on small areas of those cities. However, most of these are drawn away from the major metro areas by the magnetic pull of the surrounding trailer parks…
I am not a realtor, really. I don’t even sit on an economic development board — just think that this is a good place depending on what you want. Believe me, I have friends in SF, and Nor Cal is like paradise to me, but I just couldn’t live there. I am from the east coast originally. You give up some things in the midwest, its all a matter of what you want. KC is on the rise, that’s for sure. There is cool mtn. biking here in a select few places, and hiking. But most people hop a plane (or a car ride across Kansas) to do serious outdoor activities (e.g., skiing, climbing). KC historically has had one of the best skiing associations in the country, with trips to South America, Europe, etc.
CNN Money reports on lending trends. “Millions of mortgage borrowers are entering their ‘danger years,’ when delinquencies peak and owners risk losing their homes. Delinquencies have historically reached their highest points during the third and fourth years of mortgages, according to Doug Duncan, chief economist for the Mortgage Bankers Association.”
“‘People are really stretched,’ says Dean Baker, macroeconomist for the Center for Economic and Policy Research. ‘They’re betting that the housing market will continue to appreciate. The problem is that few people recognize it for the gamble that it is,’ says Baker.”
I like these economists because they put their money where their mouths are, which makes their message far more credible than the industry ‘experts’ the press usually chooses to quote. Both have been renting and waiting for the inexorable crash along with many of us posters here…
“Cutting costs in reaction to a tough mortgage market, Los Angeles-based sub-prime lender Aames Investment Corp. said Monday that it would close offices in Deerfield, Fla., and Parsippany, N.J., and eliminate 100 jobs in its wholesale lending division. Aames is a specialist in higher-cost loans to borrowers with imperfect credit.”
I believe this announcement is typical for the way the SoCal real estate lending enterprise will unravel: Death by 1000 cuts.