November 28, 2007

More Unaffordable Markets Than We’ve Ever Had

Some housing bubble news from Wall Street and Washington. MarketWatch, “Sales of existing homes fell further in October even as more homes came on the market, driving the supply of homes to the highest level in 22 years, the National Association of Realtors reported Wednesday. For single-family homes alone, the inventory of 10.5 months is the highest since July 1985. The median sales price fell 5.1% in the past year to $207,800. That’s the largest year-over-year price decline ever recorded.”

“Sales dropped 1.2% to a 4.97 million seasonally adjusted annualized pace in October, the real estate advocacy group said. The sales pace is the lowest since 1999, when the group began tracking combined sales of single-family homes and condos. The median sales price for single-family homes is down a record 6.3% in the past year to $205,700.”

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

“In the West, where sales have plunged 33% in the past year and down 48% from the peak.”

“Existing-home sales in the Northeast are 12.6 percent below October 2006. Existing-home sales in the South are 19.4 percent below a year ago. In the Midwest, existing-home sales are 16.9 percent below October 2006.”

The Associated Press. “Shares of two big Texas-based homebuilders fell to their lowest levels in more than four years on Tuesday after their chief executives said that the troubled housing market will weaken even more next year. ‘This is my fourth downturn,’ said Donald J. Tomnitz, CEO of D.R. Horton Inc. ‘No question about it, this is the most difficult downturn Horton and I have worked through.’”

“Timothy Eller, the CEO of Centex Corp., said, ‘There is no way to predict when this thing will bottom.’”

“Tomnitz said the current slump is different because speculators who had bid up prices disappeared. ‘Once those investors could no longer buy a home and flip it for 15, 20 percent more, they left the market,’ he said.”

“The speculative bubble pushed up prices, which Centex’s Eller blamed for the current state of housing. Despite relatively low interest rates, he said, ‘We have more unaffordable markets in the U.S. than we’ve ever had,’ making it harder for buyers to qualify for loans.”

From Builder Online. “D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year.”

“On a more positive note, Tomnitz said home builders have done a great job adjusting prices and cutting costs through the downturn, so most builders are in a very strong position when they go head-to-head against existing-home sellers.”

“‘That’s the rosy picture here,’ said Tomnitz. ‘We can offer a new product at a more competitive price,’ he concluded.”

From Bloomberg. “Wells Fargo & Co., the second- largest U.S. mortgage lender, will take a $1.4 billion pretax charge tied to increased losses on home equity loans.”

“The fourth-quarter charge reflects ‘the higher losses the company expects in this portfolio because of further deterioration in the outlook for the housing markets,’ the bank said in a statement. The bank cut off most home-equity loans originated by other financial institutions and mortgage companies and tightened standards on ones made by outside brokers.”

“CEO John Stumpf said this month the bank is ‘not immune’ to the housing market slowdown, which he called the worst since the Great Depression.”

“Although Wells Fargo didn’t pinpoint the troubled markets in Tuesday’s SEC filing, management has previously said the bank is experiencing its biggest headaches in California’s Central Valley and ‘auto-belt’ states in the Midwest.”

“Freddie Mac, the second-biggest source of money for U.S. home loans, plans to sell $6 billion in preferred stock and cut its dividend in half to shore up capital depleted by record mortgage defaults and foreclosures.”

“The company may be trying to raise capital in ‘a big chunk’ because sales ‘three to six months from now may happen at worse prices,’ said said Thomas Atteberry, who oversees $2.8 billion in fixed income. Atteberry’s holdings include $550 million in mortgage bonds guaranteed by Freddie Mac and Fannie Mae.”

“Investors will be looking for about an 8.25 percent dividend on the non-convertible shares if they carry a fixed rate, according to Jim Vogel, head of research into debt of government- affiliated issuers at FTN Financial.”

“‘It’s going to be expensive capital for them but they just don’t have a choice,’ said Andrew Harding, who helps manage $16 billion. ‘Sometimes the rate isn’t as important as getting the loan itself.’”

“‘On the surface, the fact that they’re going with this offering means they’ll have to service a dividend on a regular basis. To me, it just adds another liability to their books,’ said Eric Bjorgen, co-manager at Leuthold Core Investment Fund. According to Bjorgen, ‘it smacks of desperation. They’re probably not finding much in the bond markets and they’re finding that traditional avenues have dried up.’”

From CNN Money. “Abu Dhabi’s $7.5 billion stake in Citigroup Inc. is more than just a bandage for the bank, but it’s far from a cure.”

“‘It’s a bad deal,’ said CIBC World Markets analyst Meredith Whitney in an interview, pointing to the 11 percent yield, which is nearly 4 percentage points higher than the yield the bank gives shareholders through dividends. ‘Someone was not using their calculator on this deal,’ she said.”

“Sandler O’Neill & Partners LP analyst Jeff Harte…added, ‘their decision to raise capital given the current market is somewhat troubling. They may be more capitally constrained than we’d like to think.’”

“The 11 percent yield is higher than investors get for non-investment grade bonds, noted Bill Smith, president of SAM Advisors LLC, which owns 60,000 Citigroup shares. ‘We blew right through junk status,’ he said.”

From Reuters. “The seizure of the credit market, which roiled the financial markets and cast a pall over the U.S. economy, could last into 2009, real estate leaders said on Tuesday.”

“The fear factor grew as defaults of home loans made to those with risky credit histories popped up in all kinds of investments, in what has become to be called an FTD — a financially transmitted disease.”

“‘Did anyone know E*Trade was in the subprime business?’ said Michael Fascitelli, president of Vornado Realty Trust.”

“Fascitelli and CB Richard Ellis Group Inc Vice Chairman Darcy Stacom said Wall Street must first digest the nearly quarter of a trillion dollars in loans it absorbed before it resumes profitable lending operations.”

“‘The system has one chunk in it,’ Fascitelli said. ‘When you’re constipated, you’re not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they’ve cleared that big load.’”

“Although Fascitelli would not say exactly when he believed that would happen, he said the fast and easy amounts that made possible large transactions earlier this year would not return. ‘If we have a recession, then all bets are off,’ he added.”

The LA Times. “Countrywide Financial Corp. moved to reassure investors Tuesday that it wasn’t borrowing too much and wouldn’t be constrained in its ability to provide home loans.”

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

“Florida local governments and school districts pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money- market fund contained more than $700 million of defaulted debt.”

“‘Knowing other people were pulling out, and that word was spreading, we looked at the potential for a run on the pool,’ said Jim Moye, Orange County’s chief deputy comptroller.”

Keep Maine Current. “The state treasurer apparently got caught in the subprime mortgage lending mess when a $20 million short-term investment designed to raise money for the state’s cash pool was made in a fund whose assets are frozen, at least for now.”

“State Treasurer David Lemoine, whose office made the investment based on advice from its financial advisers at Merrill Lynch, said Monday he believes the money will be repaid.”

“‘Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,’ Lemoine said. ‘I haven’t booked it yet,’ he said, but, ‘I’m pretty confident, that with patience, we should get our money back.’”

The Wall Street Journal. “The ax has been falling on the CEOs of banks — UBS, WestLB, Bear, Merrill, Citi, Northern Rock. I think the ax should be aimed up one level at the boards of these institutions, whose directors have failed miserably.”

“Amnesia about past credit mistakes is common in the banking business as banks compete for every deal that any other bank is willing to do. This amnesia is taking its usual blame for the current slowdown. But this time is very different. The handwriting has been on the wall for some time, and bank boards have made little effort to read.”

“Wolseley Plc, the world’s biggest distributor of plumbing and heating equipment, plans to cut 1,300 jobs in the U.S. in its fiscal second quarter as the worst housing recession for 16 years hurts profit.”

“‘This is at the very extreme of our worst-case scenario and 2008 will get worse,’ said Paul Checketts, an analyst in London. ‘The cuts announced today are the bare minimum.’”

“Up to one in three or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the U.S. subprime crisis and the tougher lending climate it has created, a study showed.”

“‘The focus over the last few months has very much been on subprime borrowers, but they are only the tip of the iceberg,’ Toby Clark, a senior finance analyst at Mintel, said in a statement.”

“Mintel said 9 percent of British mortgage holders were classed as sub-prime, while a further 24 percent were ‘non-standard’ and relatively high risk because they had irregular incomes.”

“‘In today’s more conservative lending climate, the unconventional financial situation of these homeowners means that they will now face higher repayments and increased lenders’ fees when remortgaging or moving house,’ Mintel said.”

The Calgary Herald. “Since it was introduced a year ago, the 40-year amortization for residential mortgages has been a big hit with Canadians, especially in this province.”

“Albertans have embraced the long-range mortgage debt repayment plan more than any other Canadians, says Canada Mortgage and Housing Corp.”

“Bill McFarlane, regional manager of builders’ markets for Royal Bank, says the uptake is large. ‘I’m suggesting it’s over 50 per cent of the mortgages, and in the new home category, it’s probably higher.’”

“The reason for the popularity is simple, says Richard Corriveau, regional economist with the Calgary branch of CMHC. ‘It’s largely a result of the escalation of house prices,’ he says.”

“‘The principle and interest on the 40-year amortization would be $2,420 a month, compared to $2,840 for a 25-year term,’ he says. ‘That means people would need $12,000 less of an income to qualify, or they could buy $75,000 more house.’”

“A big benefit, though, is for the first-time buyer, who wouldn’t otherwise be able to purchase a new home with the rising prices in the city, says McFarlane. The average price for new single-family homes is expected to reach $475,000 this year and $550,000 next year.”

“‘Rising prices over the past several years have squeezed affordability,’ says McFarlane. ‘The extension to 40 years has helped substantially. While incomes have increased, they have not kept pace with the run-up of prices of homes.’”

“The sentiment of people today has changed, says Corriveau.”

“‘There is less aversion to debt,’ he says. ‘The days of paying off the home may be far behind us. The comfort level in Alberta is that prices will continue to climb, so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”




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180 Comments »

Comment by Ben Jones
2007-11-28 10:22:34

‘The days of paying off the home may be far behind us.’

Statements like these are why I told Swerve Magazine that Calgary was like a time machine for me.

Comment by DinOR
2007-11-28 10:46:15

Ben,

I hope that is where the debate shifts next. We’ve covered the unethical practices of realtors (TM) and lenders along with the pitfalls of the MLS as well as desperately trying to determine how big certain markets corrections will be? I, for one, have grown tired of debating prices from the standpoint of looking at (8/05) as some measure of where people would like/need/want them to go.

We need to get people back to a point of not only looking at homes in terms of “affordability” but more importantly an amount that someday… can actually be paid off!? Crazy, I know.

 
Comment by crispy&cole
2007-11-28 11:02:40

I keep hearing, on the radio, that the “average” went down. Did the NAR issue the numbers using “average” and not median? or is the MSM just using the wrong term?

Comment by WT Economist
2007-11-28 11:18:25

The median is an average. The mean is another average.

Comment by packman
2007-11-28 11:49:18

No, the median is not an average. Median is half below, half above.

Take the values 1,1,2,8

Median is 1.5
Average is 3

(actually - anywhere in the range of 1.1 - 1.9 is median)

Average is relatively useless with regards to home statistics, since $25 million mansions can skew the value significantly. That’s why median is used more often.

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Comment by Andrew
2007-11-28 11:57:53

Sorry packman, mean is an average. Average has a very broad meaning and can include a number of calculation, one of which is the arithmatic mean that you calculate above.

 
Comment by laonlooker
2007-11-28 12:17:43

Mean and median (and mode) all are measures of central tendency. I’ve never heard of the median being referred to as an average. That term is generally equivalent to the mean.

 
Comment by Professor Bear
2007-11-28 12:50:09

“No, the median is not an average. Median is half below, half above.”

1) The median and mean are both measures of central tendency. I would not say they are ‘both an average’, as in most laypersons’ minds, average and mean are synonymous.

2) If the distribution (data or population) is symmetric (i.e., bell-shaped), the mean and the median are one and the same.

3) If the distribution is right-skewed (like that of house prices or household incomes), the mean is typically above the median, though I believe that artificial special cases can be constructed to violate this rule of thumb.

 
Comment by bluprint
2007-11-28 12:54:38

I concur that mean and median are both types of averages.

Further, in large samples, they are typically very close to each other. In practice, I’m not sure I’ve ever experienced a case (with regard to national economies and such) where one of those measurements of average was used to show a very different story than the other measurement.

 
Comment by MD_Renter
2007-11-28 13:20:06

The mean and median are likely to be relatively close together in large samples because large samples more closely approximate a normal distribution. Housing prices are bound at one side ($1) with an extremely long tail. This sort of distribution will affect the mean, pulling it higher. The median is less affected by this non-normal distribution.

 
Comment by are they crazy
2007-11-28 13:27:59

Whatever way you slice it, it’s all going down big time. At this point, I’m less interested in what went wrong - I think most of us already know that. I’m more interested in strategies for the future and looking at the other side. Does anyone ever read boards that oppose HBB? I’m not talking about NAR cheerleading - is there any intelligent conversation looking towards the future from the other side - people planning to buy further out towards the bottom, fixing credit ratings to get better scores, investment strategies for the average joe that doesn’t want to invest huge amounts of time & money, areas of the country or industries that may see job growth with reasonable wages? Are there former big spenders honestly looking for advice on how to reform? Because so many here are so well read and agree on so much, my concern is that we may become near sited and one dimensional. Then again, I dislocated a baby toe again yesterday for the 2nd time in 10 mos and am drugged up so maybe my mind is just playing tricks on me.

 
Comment by Rental Watch
2007-11-28 13:50:41

I get my anti-”HBB group think” conversations here at work, although, the people I work with are very smart, so the debate is generally about where the market will come back first, and whether increases in volume will coincide with increases in price, or whether price stability will lag significantly.

I’m in the “volume back first, price stability lagging far behind” camp, with the caveat that volumes won’t be at 2005 levels for YEARS AND YEARS.

 
Comment by Professor Bear
2007-11-28 14:54:05

“In practice, I’m not sure I’ve ever experienced a case (with regard to national economies and such) where one of those measurements of average was used to show a very different story than the other measurement.”

One such case is in comparing median home sales prices to the Case/Shiller S&P index. The former confounds changes in quality-adjusted price with changes in the mix of homes that are selling, while the latter averages over changes in the price of homes that sold twice (or more times) during the sample window, thereby controlling for quality in the comparison.

 
 
 
Comment by SteveH
2007-11-28 11:48:56

The mean is what most people call the average; all prices of sold properties added together and then divided by the number of sales. The median is the point where 50% cost more and 50% cost less.

 
 
Comment by Lisa
2007-11-28 11:55:03

‘The days of paying off the home may be far behind us.’

Yeah, good luck retiring with that attitude. The next house I buy will be with 50% down and a 10-year fixed loan. Done by mid-fifties.

Comment by brimstone
2007-11-28 12:20:37

I did that with my first home. Of course, the purchase price was only $61,000 at the time. During the bubble it would have sold for $225,000. Long before then I had already let the next sucker … er, “happy homeowner” take it off my hands. LOL!

 
Comment by DinOR
2007-11-28 14:14:56

Lisa,

Exactly. I used to be in the AF Reserve and it was so great to work around guys that really placed a value on that. They were smart enough to figure out that if they were meant to be rich (it would’ve happened by now!)

So instead they focused on the basics. That was what my original post was all about before the great median/average debate. I’m not saying it isn’t important to point out REIC spin, wherever you might find it but I’m really ready to move on and I think *Rentalwatch said as much.

 
 
Comment by Van Gogh
2007-11-28 21:57:43

Ben, they don’t call Calgary … “Calgreedy” for nothing. I’ve spent over half my life in Alberta and it’s only been the past five or ten years that it has turned into a nest of snakes, carpetbaggers and fleecers all whilst the MSM and the Local and Provincial Governments are either totally complicit in the scheme or totally ignorant of reality and the real world.

The peak has definitely passed in this mania and the price will be paid in spades as this thing unwinds. There are so many uninformed and financially illiterate people out there that have bought into this thing that it is really is effing unbelievable.

To paraphrase Santayana …. “Those that fail to learn from history, are condemned to repeat it”… and i think the fact that this mania and bubble is of such a high degree, as and when it unwinds, i wouldn’t at all be surprised that history will show it to be of at least as high a degree as the 1929 manic highs and perhaps even as high as the South Sea and Mississippi Land Bubbles way back in the 1720’s

 
 
Comment by Neil
2007-11-28 10:24:31

“‘This is at the very extreme of our worst-case scenario and 2008 will get worse,’ said Paul Checketts, an analyst in London. ‘The cuts announced today are the bare minimum.’”

First, my heart goes out to the worker ants who are getting laid off.

But let’s look at this from a distance. This is getting towards the end of layoff season and the layoff anouncements are growing at a precarious rate! The financial sector has yet to ‘clean house’.

‘The days of paying off the home may be far behind us.
With people about to retire in mass? I don’t think that word means what you think it means. ;) What a REIC shill.

Recessions teach people to plan for the future. This one will be a doozy.

I’m planning another dinner (click on my name to go to my blog if you’re interested).

Got popcorn?
Neil

Comment by DinOR
2007-11-28 11:04:48

Neil,

Exactly. I see it everyday. What on earth is some recently empty-nester couple doing with a $850k, 3,000 s/f home? Whatever happened to bulking up your retirement accounts after the kids leave college? If you don’t “believe in IRA’s” (convenient excuse for not saving… at ALL!) then stick it in your mattress. I guess if the ‘RE thing’ doesn’t work out they figure they can always live off the good graces of others?

Comment by In Colorado
2007-11-28 12:34:10

If you don’t “believe in IRA’s”

I wish that I had a dollar (better yet, a Euro) for every young hyperconsumer driving a $40K car who has told me that they “don’t believe in 401(k)s or IRAs”. I ask them how do they plan on retiring and they just shrug their shoulders and say “oh, something will turn up”. The more honest ones say “I’ll never retire”.

I guess that they are expecting

Comment by In Colorado
2007-11-28 12:39:40

….a government handout

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Comment by Gwynster
2007-11-28 11:27:48

If I do end up in SoCa that weekend and make it to the dinner, I’ll be sure to tell lots of my mom’s stories of depression-era germany into occupied berlin and onto the Marshall plan. I have some unpublished socio data to leak too . You’ll understand quickly why I’m such an economic pessimist.

Comment by sandy_valley
2007-11-28 13:48:53

My mom lived in Germany throughout their hyperinflation and wwII and it was potatoes and beans every day for years. If they were lucky.
s

 
 
Comment by mikey
2007-11-28 12:26:30

Dear Larry ,

Everytime a speculative FB CRASHES in Flames , a little Angel in Heaven rings a tiny bell.

..and that little sucker better HIRE some HELP…FAST :)

 
Comment by Professor Bear
2007-11-28 12:51:16

‘The days of paying off the home may be far behind us.
With people about to retire in mass?’

The days of retirement may be far ahead of us.

Comment by Neil
2007-11-28 13:01:15

You might be right Prof. Bear. Some will retire… some will caddy for them.

Got popcorn?
Neil

Comment by hd74man
2007-11-28 17:14:53

RE: some will caddy for them

Or stick a gun under their nose in the country club parking lot demanding the Rolex and designer golf shoes.

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Comment by are they crazy
2007-11-28 13:32:53

I think paying off the house ended when people decided to be mobile and don’t stay in the same place a lifetime. Also, you used to go to work as a young person, put in your 30 years while you paid off the mortgage, then you dumped the bigger house, took your pension, and retired so a smaller home someplace warm. You didn’t even really have to invest or save much for retirement - homes were more afforable in terms of pay and by the time you retired, you had a paid for home, pension and SS. It’s not just paying off the mortgage that has changed - it’s the entire process of basic living.

Comment by oxide
2007-11-28 14:54:31

I think paying off the house ended when people decided to be mobile and don’t stay in the same place a lifetime.

Even if you are mobile, you can still pay off “a” house. Every time you move, you get all your equity back when you sell, buy a comparable-size house at your new location, and plug all that equity right back in to a larger down payment each time. You’re essentially just picking up the same mortgage where you left off. Any $$ you lose with closing costs and fees, you make up for by equity from appreciation, or by your increase in income (which, presumably, is why you moved).

It’s only when people want to trade UP instead of sideways that they can’t pay off a mortgage. Or plug their equity into toys instead of a new down payment.

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Comment by kirisdad
2007-11-28 16:45:10

I have friends and relatives in New Zealand and paying off ones mortgage was and is the only way most can retire. Super-annuation ( social security) is very low. They also have no tax incentives for mortgage interest. A flat tax here would give the incentive to pay off a mortgage. Unfortunately, that would take another bite out of real estate values.

 
Comment by CA renter
2007-11-29 05:41:37

Every time you move, you get all your equity back when you sell, buy a comparable-size house at your new location, and plug all that equity right back in to a larger down payment each time.
———————
Not trying to pick on you, oxide, but the bubble mentality is still stuck in your thought process.

Neither the price of your house nor your income is guaranteed to go up. There are many places in the US that have seen only price depreciation or stagnation when taking inflation into consideration.

Lots of people make less $$ today than they did 10 years ago.

IMHO, the “growth” story was a by-product of the Baby Boomers’ population buldge, as well as the U.S. being a fairly new “emerging market” when compared to the rest of the world.

We just might see things very differently going forward, at least for a while.

 
 
Comment by whyoung
2007-11-30 15:48:55

Another factor (forgotten by many) I think, is the legacy of “red lining”,”white flight” and similar factors. People moved out to the suburbs - supposedly for better schools, etc. and left behind those (now-gentrifying) inner cities to decay.
Grew up in a paid for house, but by the time my mother was widowed it was not safe for her to live alone in their inner city neighborhood, so had to move her out of a great well kept victorian house.
moving out and up became normal for many of my boomer cohorts…

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Comment by Fuzzy Bear
2007-11-28 15:04:42

The days of retirement may be far ahead of us.

Too many people are living beyond their means and not saving for retirement or that rainy day. Looks like there will be loads of competition for the greeter jobs at WallMart!

 
 
 
Comment by sf jack
2007-11-28 10:25:30

“Mintel said 9 percent of British mortgage holders were classed as sub-prime, while a further 24 percent were ‘non-standard’ and relatively high risk because they had irregular incomes.”

*******

Seems we have some kin overseas with regard to the borrowing in the Alt-A Bay Area!

Comment by Ben Jones
2007-11-28 10:27:05

And because the UK had the mini-bounce over a year ago, people were saying they had no bubble- ha!

Comment by flatffplan
2007-11-28 10:34:11

the UK deal was weird- slight softness in 04 after interest rate increase ,then bam, back to the races

Comment by sf jack
2007-11-28 10:43:30

Answer: Pig Man “innovation”

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Comment by EmperorNorton_II
2007-11-28 12:42:37

The Pommies are up to their eyeballs in debt, and it’s our fault?

“Up to one in three or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the U.S. subprime crisis and the tougher lending climate it has created, a study showed.”

 
 
Comment by CA renter
2007-11-29 05:44:40

I watched them begin to panic in the UK (on UK housing blogs) when things slowed there in the second half of 2004.

(Not) coincidentally, So Cal was experiencing a fairly significant slowdown at exactly the same time. Even some in the REIC were calling the bubble a “bust” in late 2004. In spring of 2005, things picked up again…no bubble here.

I believe the toxic junk got even more toxic at that point, just to keep the party going. When will they ever learn?

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Comment by Professor Bear
2007-11-28 12:52:41

Given the pace of slow equilibrium adjustment in real estate markets, I am guessing dead cat bounces can last over a year (relative to short-lived DCBs folks are accustomed to in equities).

 
 
 
Comment by matt
2007-11-28 10:28:33

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said.

heh,heh,heh.

Comment by Ostriches
2007-11-28 10:51:46

Apparently, Larry has not yet realized that he has no anticipatory sense.

 
Comment by TulipsAllOverAgain
2007-11-28 11:08:03

His “fundamentals” are not factoring in a recession or rising unemployment. It seems that the “analysts” are not factoring this in and will escape penalty for their incorrect forecasts by blaming the recession and rising unemployment as factors that distorted their models.

BTW, are the current analysts foretelling that there will be no recession the very same analysts who were saying there was no real estate bubble? They look pretty similar to me.

Comment by oxide
2007-11-28 15:03:30

FunYun’s fundamentals are wrong, even with no recession and no layoffs. The fundamental fact is that Joe Sixpack is going to face a reset and a higher mortgage payment he can’t afford. And he will face that higher payment even if he stays healthy, married, and employed. And since he can’t sell (no buyers) and can’t refinance (early FB’s destroyed credit markets), he will still foreclose.

Recession –> layoffs will only accelerate the process. Foreclosure is baked in the cake.

 
 
Comment by AZtoORtoCOtoOR
2007-11-28 11:24:24

Great news Mr. Yun! You have convinced me more that I am still on the right track by renting.

 
Comment by Paul in Jax
2007-11-28 12:20:57

No further sales declines is quite possible; however, it can only take place with significant price declines.

 
Comment by Asparagus
2007-11-28 14:23:57

I wonder if Yun is shocked when he sees the monthly numbers down. I’d like to see a video of his reaction.

“What! This can’t be! This defies all the fundamentals. Again.”

 
 
Comment by NYchk
2007-11-28 10:29:53

“‘The principle and interest on the 40-year amortization would be $2,420 a month, compared to $2,840 for a 25-year term.

“A big benefit, though, is for the first-time buyer, who wouldn’t otherwise be able to purchase a new home with the rising prices in the city, says McFarlane.

Am I reading this right? The “benefit” for the first time buyer is to pay $1.2 MILLION over the course of the loan for 40 years instead of $852K for 25 years? The buyer will overpay by over THREE HUNDRED THOUSAND dollars, and that’s being marketed as a “benefit”?

Those bankers who came up with this scam are criminals!

Comment by edgewaterjohn
2007-11-28 11:48:56

Well, you really can’t lay all the blame at the feet of the banks. As stated in this same post, it seems that many have rationalized their way to believing it acceptable to never pay off a home - ever. If people weren’t willing to be lifelong wage slaves then the 40-year concept would be left to twist in the wind.

40 years - and to think I was raised to think renting was bad - what’s the B.F. difference?

Comment by Salinasron
2007-11-28 13:12:07

” As stated in this same post, it seems that many have rationalized their way to believing it acceptable to never pay off a home - ever. ”

And isn’t that just one step further from those who never own a car but continually lease a new one every so many years. I can see where it would be easy for these people to justify their actions by thinking that they’ve locked in a bottom, have rent control, and when they sell in the future they’ll reap some equity in the property.

 
Comment by Rental Watch
2007-11-28 14:59:20

My great uncle (also a great guy) is almost 90, has been preaching ownership over renting due to the tax benefit, etc. for years. After all, he was a real estate guy way back in the day. That said, he remembers how lots of people were underwater on their mortgages in the 1950’s, etc.

Well, anyway, he told me recently that given where prices were compared to rents, why would you ever buy? He said that it makes no sense…

Uh Oh, it seems as though the old guard has awakened…

Comment by spike66
2007-11-28 16:31:15

Rental Watch,
I bet your uncle is a great guy…I love that he is near 90 and still keeping an eye on the RE market. Successful guys seem to always choose to keep up with whatever part of the market was their playing field. You’re lucky to have him.

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Comment by az_lender
2007-11-28 12:06:49

It would be interesting to see what inflation rate is required to make the 40-year thing a better deal. There is some inflation rate that would make it better to defer as much of the repayment as possible. I’m going to go into my FORTRAN incarnation now and see if I can get the answer before Prof Bear posts it…

Comment by az_lender
2007-11-28 12:20:37

I get a 6.1% inflation rate to equalize the present value of the time series. It’s easier to believe in a 6.1% inflation rate than in the “cooked” low inflation figures we get from our govt.

 
Comment by SanFranciscoBayAreaGal
2007-11-28 19:32:09

Wow az_lender, haven’t seen the term FORTRAN used in quite a while. I know it is still being used as a programming language I just haven’t seen FORTRAN in quite some time.

 
 
Comment by are they crazy
2007-11-28 13:37:18

Many people don’t care about the overall cost - they only look at the monthly payment. If you have noticed, a lot of advertising for autos, furniture, electronics, etc., has switched to listing the monthly payment instead of the price.

Comment by HBBLurker
2007-11-28 14:08:28

You better believe it, most poeple do only think about the monthly payment, these are the same poeple who watch a lot of reality tv and american idol aka star search…They pulled this scam on a friend of mine when she went to buy a new car, they overcharged her on the price they agreed on and the finace sleeze ball tells her don’t worry about the total just look at the monthly payment…I got it all corrected after the fact but I’m sure the “only look at the monthly” payment sceme goes on all the time….

 
 
Comment by are they crazy
2007-11-28 13:45:08

People don’t care about the overall price - only the monthly payment. Most advertising now is in the monthly payment mode. People don’t expect to stay in the same home 25 years let alone 40. They don’t expect to drive a car until it’s paid off. As for furniture, computers, TVs and the like - they don’t care about the price as long as they think they can make the monthly payments because they want it now.

 
Comment by peter wiener
2007-11-28 19:05:08

No, not criminals, just inventive financial entrepeneurs with imbeciles for customers (borrowers).

 
 
Comment by Quirk
2007-11-28 10:30:18

I think the housing market is about to pass a constipated load. Ouch - that’s going to hurt!

Comment by Leighsong
2007-11-28 10:57:05

First we have Toll CEO telling us that we’re (they’re) in deep doo-doo. Now we have VRT President telling us we need (they) need laxatives. What’s with all the butt references? My My.

“‘The system has one chunk in it,’ Fascitelli said. ‘When you’re constipated, you’re not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they’ve cleared that big load.’”

Sounds like they’ve been in the romper room playground, watching all the other kids finger paint with their…er…poo.

LOL,
Leigh

Comment by Jimmy Jazz
2007-11-28 11:28:57

Why do I get the sense that the big steaming load is going to drop on us responsible taxpayers?

 
Comment by potential buyer
2007-11-28 11:47:06

Isn’t that what monkeys do anyway? Or at the very least - throw it!

 
Comment by SaladSD
2007-11-28 12:23:59

Here’s the Freudian analysis of our financial wipe-out–notice how the anal stage is right on track from 2005:

Anal Stage: 18 months - 3.5 years (approx.)

Physical focus: anus (elimination). Until now the baby has had it pretty easy. Now baby is supposed to control bowels. Freud believed baby’s sexual pleasure centred around the anus at this time.

Psychological theme: self-control/obedience. These things are not just related to toilet training but also the baby must learn to control urges and behaviours (terrible twos). What goes wrong here is either parents being too controlling or not controlling enough (Freud was a great believer in moderation).

Adult character: anally retentive (rigid, overly organised, subservient to authority) vs. anally expulsive (little self-control, disorganised, defiant, hostile).

 
Comment by SLO Bear
2007-11-28 12:40:44

That has to be one of the funniest quotes to date.

 
 
Comment by michael
2007-11-28 11:06:20

pass the preparation h

 
 
Comment by sf jack
2007-11-28 10:31:58

From the Maine State Treasurer story:

“The investment was made in asset-based commercial paper called Mainsail II on Aug. 8, when the fund was receiving the highest rating possible by Standard and Poor’s and Moody’s. Commercial paper is a short-term obligation with maturities ranging from two to 270 days. They are issued by banks, corporations and other borrowers to investors with idle cash. In less than two weeks, the Mainsail II rating was downgraded and assets frozen after it ran into trouble because of its holdings in the subprime mortgage market.

‘Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,’ Lemoine said.”

********

Was he not paying attention?

I wonder how many others out there at the state level made moves like this and hasn’t come clean - and how large will the $$ be?

Comment by sf jack
2007-11-28 10:37:45

Here’s more:

“Sen. Karl Turner, R-Cumberland County, who serves on the Appropriations Committee and works as an investment adviser, said there were possible red flags on the investment since it was offering a higher return than more traditional funds. ‘This is just one person’s view of the world, but I tend to like my investments to be pretty much plain vanilla,’ he said, and Mainsail II was hardly a well-known investment.

He said the Treasurer’s Office was “at the mercy of a provider, in this case a broker from Merrill Lynch, with a long-term relationship with the state. ‘Had I been treasurer, I probably would have steered away from asset-based commercial paper,’ Turner said. The downside is conservative investments earn less interest, he said.”

******

Are not State Treasurers supposed to seek out conservative investments?

If they want to have the thrill of seeking higher returns, perhaps they should be doing something else.

As for Lemoine perhaps thinking that relatively higher risk was not a problem… he may have felt due to Fed policies that “Risk” was still on its decade long vacation.

“Many thanks Alan Greenspan and the ‘Do Nothing’ Fed!”

Comment by bluto
2007-11-28 10:54:59

I’ve worked with a couple of State investment groups and found that generally investment advisors who were involved with politics were the worst of the lot, by a good margin.

His statement shows he knows very little about the market, other than a few sound bytes. There isn’t much commercial paper other than asset backed.

 
 
Comment by bluto
2007-11-28 10:45:32

For Maine on this investment probably 0. The fund got a judge to declare them insolevent so they can begin the process of making the owners of the lower ratings eat the losses, even though they still had enough cash to meet demands through the end of Nov.

Commercial paper buyers always spread their investments between lots of funds, it’s likely that they were investing several hundred million or possibly billions of which this was one investment.

It might mean that they need a quick loan if they were very tight with their daily cash needs but not much more than that.

Comment by sf jack
2007-11-28 10:54:29

I know what you are saying, but Maine doesn’t have billions to invest. $20 million means a lot more there than in many places.

As you stated, I wasn’t expecting further problems with them on this particular type of investing - I was just asking /wondering where else something like this may show up (among municipalities or states).

Comment by bluto
2007-11-28 13:05:34

Most states probably will deal with something similar with at least one issue, the key to who will get fired is in the line that Maine earned $63 million last year on their short term investments (implying that this was about a 2% loss if they recover nothing) if that 2% is more like 6-10% there is a much better chance of a house cleaning in certain state’s treasury departments.

King County (around Seattle, WA) was in the same paper. It’s likely that between employee pensions, tobacco tax money, state run school tuition, and lumpy tax reciepts that more than a few states have several hundred million and up in asset backed commercial paper.

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Comment by Not_In_Montana
2007-11-28 13:51:06

Montana for another.

This just came out today.

Subprime mortgages are loans given to borrowers with weak credit and are causing chaos in the financial world nationally.

…Montana, as of Sept. 30, “had entrusted” $465 million, or 19 percent, of its $2.5 billion Short Term Investment Pool to SIVs. The Short Term Investment Pool, or STIP, combines and invests money over the short term for state and local government agencies.

Included in Montana’s $465 million of SIV paper is $90 million of Axon Financial Funding Debt that matures April 15, 2008, Bloomberg said. Although Axon’s credit ratings were high when the state bought the investments, one credit rating firm recently downgraded it to a CCC rating, which is below investment grade and close to junk status.

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Comment by Groundhogday
2007-11-28 14:52:18

Don’t worry, only a fraction of that debt is in subprime mortgages. And we all know that the credit crunch is contained in the subprime arena, right?

 
 
Comment by hd74man
2007-11-28 17:22:45

RE: I know what you are saying, but Maine doesn’t have billions to invest. $20 million means a lot more there than in many places.

The Dept. of Human Services “lost” $15 million dollars last year and the Dem governor Baldacci did squat.

There’s virtually no accountability for the bureaucrats.

All Mainer’s want is their welfare and SS check to be mailed on time.

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Comment by rick
2007-11-28 11:33:33

And they were going to buy affordable housing at $175/sq for the “heros”. Just think about where the money might come from?

CA is going to be short $10b next year, commercials already out urging good Americans to buy CA bonds. Yeah government bail out, if the FED does not print more money pretty soon and inflate to neverland we will be seeing local government BKs.

 
 
Comment by exeter
2007-11-28 10:34:11

“‘The system has one chunk in it,’ Fascitelli said. ‘When you’re constipated, you’re not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they’ve cleared that big load.’”

And when they stand up and look in the toilet they’ll see a montage of David Lereah and Lawrence (fun)Yun.

Comment by exeter
2007-11-28 10:43:33

And don’t forget to wipe.

Comment by Arizona Slim
2007-11-28 12:22:51

Exeter, you just insulted toilet paper. That was naughty

 
 
Comment by hwy50ina49dodge
2007-11-28 11:01:24

At Ben’s HBB…it gets better every day! ;-)

Comment by exeter
2007-11-28 11:10:55

lmao.

 
 
Comment by sleepless_near_seattle
2007-11-28 11:37:28

LMAO!!

NYCBoy, is your real name Michael Fascitelli??

Comment by NYCityBoy
2007-11-28 12:13:07

Not the last time I checked. I would have been more creative than this clown. A flaming gerbil and an aerosol can would have been involved if it were me they were talking to.

 
 
 
Comment by hwy50ina49dodge
2007-11-28 10:36:48

‘…We have more unaffordable markets in the U.S. than we’ve ever had,’ making it harder for buyers to qualify for loans.”

Let’s see…make it easier for millions of Americans to buy…or…lower the house prices so that they can then be able to “afford them”…or…do neither…and just wait…until you can sell it to the chinese saudi mongrels…that will be visiting Disneyland & Universal Studios in the coming months…setting up a kiosk might be a smart move. ;-)

 
Comment by Paul Hiller
2007-11-28 10:37:36

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

When I was a child there was a cartoon character named Captain Wrongway Peachfuzz. Whatever he said, the opposite was true. If he predicted a sunny day, you took out the unbrella. Mr. Yun has brought this character to life.

Comment by mikey
2007-11-28 12:15:53

It’s ALL those darned Irresponsible Renters Fault! Saving their hard earned MONEY, patiently waiting and LQQking for and expecting reasonably priced Houses. IT’S a Major Economic Recession a’coming I TELL you …and IT’S ALL their FAULT, they’re to BLAME for all of this. Isn’t that so Larry ?

tee hee :)

Comment by hwy50ina49dodge
2007-11-28 14:58:27

And don’t forget to add Ben to the list! ;-)

Lucy: Ben you BLOCKHEAD!
Charlie Brown: Finally, someone takes my place. I wonder if Ben knows how to kick a football? ;-)

 
 
Comment by Xpovos
2007-11-28 12:43:30

http://en.wikipedia.org/wiki/Peter_Peachfuzz
I feel ashamed for not having known this. Love Rocky & Bullwinkle.

Comment by SanFranciscoBayAreaGal
2007-11-28 19:39:32

Love the Fractured Fairy Tales, and Aesop Fables.

Comment by Talon
2007-11-28 20:11:31

“Love the Fractured Fairy Tales, and Aesop Fables”

And let’s not forget the wayback machine…

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Comment by exeter
2007-11-28 10:38:18

“‘There is less aversion to debt,’ he says. ‘The days of paying off the home may be far behind us. The comfort level in Alberta is that prices will continue to climb, so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”

Oh my God. Who was the asshat who discussed perpetual mortgages…. Was it Bob Hole (toll) or the other puke in Florida.

Deja Vu brothers…

 
Comment by hwy50ina49dodge
2007-11-28 10:41:06

“…so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”

Oh, Canada!
Thy Kingdom come…thy will be done…in Canada as it is in Heaven

Comment by CAsellerCOrenter
2007-11-28 12:26:28

You made a typo or two. I corrected it for you. ; )

Oh, Colorado!
Thy Kingdom come…thy will be done…in Colorado as it is Heaven

Comment by EmperorNorton_II
2007-11-28 12:34:10

Why’d the evangs decide Colorado was where they’d hole up?

Comment by DenverLowBaller
2007-11-28 12:54:38

New World Order HQ of the future. Get on your Tin Foil Hat!

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Comment by In Colorado
2007-11-28 15:30:58

Based on my personal experience Evangs and Fundies are far more common in SoCal than in Colorado. IIRC Colorado is one of the most “unchurched” states in the nation.

I think that the image is mostly driven by Dobson and his Focus on the Family ministry.

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Comment by DenverLowBaller
2007-11-28 16:37:32

Agreed. There is Colorado. Then there is Colorado Springs.

 
 
 
 
 
Comment by hwy50ina49dodge
2007-11-28 10:46:35

For you Mr. Bear:

( I like Tom, but I think Ben’s HBB knowledge broadcasts are seeping into his writing.) ;-)

Bears are becoming harder to ignore.

http://www.latimes.com/business/la-fi-petruno24nov24,1,1406386,full.column?coll=la-utilities-business&ctrack=3&cset=true

 
Comment by EmperorNorton_II
2007-11-28 10:49:24

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

L.Y.’er now sounds like a weatherman, saying that heavy clouds are overhead and it all looks good, except there’s a chance of a downpoor of prices, if there’s a crisis.

Comment by SFC
2007-11-28 12:29:09

And those fundamentals are what, exactly, Mr. Yun?

waiting….waiting…..

Every prediction this guy’s made has turned out to be fundamentally incorrect. Fundamentally speaking, of course.

 
 
Comment by SoBay
2007-11-28 10:50:16

“Up to ***one in three*** or 5.5 million mortgage holders in Britain could face serious financial difficulties as a result of the U.S. subprime crisis and the tougher lending climate it has created, a study showed.”

- May I give an Indiana farmboys translation?
Their ‘one in three’ really means about ‘Four in Seven’. WTF.

Comment by mikey
2007-11-28 12:47:58

..And Larry, when you Sound Off..

It’s One, Two,
Three, Four,

We don’t BELIEVE you anymore,

five, six,
seven, eight,

because you’re a NAR REPROBATE :)

 
 
Comment by Professor Bear
2007-11-28 10:50:41

“Amnesia about past credit mistakes is common in the banking business as banks compete for every deal that any other bank is willing to do. This amnesia is taking its usual blame for the current slowdown. But this time is very different. The handwriting has been on the wall for some time, and bank boards have made little effort to read.

The handwriting has been on this blog for some time :-). Bank board members and FBs who signed the paper to buy homes they cannot afford both apparently should have made a little more effort to read.

 
Comment by bayparkwatcher
2007-11-28 10:50:54

Earlier, I read in San Diego’s UT that our fair city has fallen out of the top 10 most unaffordable cities. Two years ago we were number one; now we’re 16. Woo-hoo!

 
Comment by EmperorNorton_II
2007-11-28 10:51:25

“D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year.”

How much longer before D.R. pulls a D.B. Cooper?

 
Comment by hwy50ina49dodge
2007-11-28 10:52:54

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

Now & then… I like a “Black & Tan” …but a “Black & Blue & Tan” what would one call it?… the Mozillo Zombie? …on the “rocks”… shaken not stirred ;-)

Comment by az_lender
2007-11-28 12:24:45

“blue in the face” = deceased. Well, it won’t be long!

 
 
Comment by Housing Wizard
2007-11-28 10:54:59

Some lady on the business TV channel is asking that the big investment banks forgo their bonuses to pay for foreclosures in her area . I just caught the tail end of this piece .

Comment by exeter
2007-11-28 10:56:34

For once I’m in favor of gargantuan bonuses for the wealthy elite pigmen.

 
Comment by reuven
2007-11-28 11:05:48

Those big bonuses are obscene, for sure, but let’s not forget that most of the people foreclosing are hardly “victims”. It’s just a diversion technique the FBs are using

Comment by aimeejd
2007-11-28 11:57:40

Those big bonuses are obscene, for sure, but let’s not forget that most of the people foreclosing are hardly “victims”.
_________________________________________________________

No they aren’t, but they’re suffering for their stupidity. Who’s suffering for the stupidity of the investment banks?

Comment by reuven
2007-11-28 17:45:30

Suffering? Not really! Most of them got to live in a nice house for a few years, with no money down, and paying a low teaser rate, HELOCd out a hummer, boob job, and plasma TV, and can walk away from it all w/o owing a penny!

You’ve fallen for the trap! These people got away with a great deal of income, in the form of forgiven debt, that they many not even have to pay taxes on!

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Comment by edgewaterjohn
2007-11-28 11:55:29

Is she asking the pound to spare all the puppies and kitties too?

Comment by phillygal
2007-11-28 14:39:37

kitty and doggy FBs?

My God, it’s worse than I thought. I’m glad my kitty paid cash for her cat-house.

 
 
Comment by Michael Fink
2007-11-28 12:01:20

I just caught it.

I was begging for somoene to ask a hardball question, but nobody did. And that lady said “Ax” (instead of “Ask”) about 50 times; something that just drives me nuts.

There is absolutely NO mention of the fact that these people cannot afford these homes, and frankly, now that the prices are going down, likely DON’T want these homes anyway. The only thing that would make sense is to help them keep their homes if the prices were going up, which, imho, would be akin to the govt giving me money in my margin account to buy more stocks that were “promised” to go to the moon.

These people just don’t understand. Even if her program were 100% effective, there is still a huge problem. Housing is unaffordable for those that don’t already have it (no net new buyers). That will always (with a durable asset) result in an oversupply until the prices adjust. Anything that is done to prevent that just delays the inevitable.

 
 
Comment by EmperorNorton_II
2007-11-28 10:56:34

“Although Wells Fargo didn’t pinpoint the troubled markets in Tuesday’s SEC filing, management has previously said the bank is experiencing its biggest headaches in California’s Central Valley and ‘auto-belt’ states in the Midwest.”

There’s a few Wells Fargo cheerleaders on here, and how can you explain them loaning so much to the rust belt and my empire?

Emperor Norton II, of the I.E., B.F.E., protector of Mexico and adjacents.

 
Comment by hwy50ina49dodge
2007-11-28 10:57:12

“…in what has become to be called an FTD — a financially transmitted disease.”

Siv’s… FTD’s…is there a doctor in the house!

Bugs: “eh, What’s up Doc?” …”Where exactly are you hurtin’?”

Comment by goirishgohoosiers
2007-11-28 12:39:22

The market must be strong for surgeons who can perform a Joshua tree-ectomy.

 
 
Comment by Michael Fink
2007-11-28 11:01:44

I’d like to take a vote. Who here thinks that the entire RE establishment should be FOREVER banned from using the word “fundamentals”?

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

Comment by edgewaterjohn
2007-11-28 11:58:52

YUNdamentals?

Comment by mikey
2007-11-28 13:29:24

Hey!..It’s MOST reassuring to know that CRAZY Jim Kramer and CRAZY Larry Yun are DECIDING the ENTIRE Domestic Economic Policy(if there IS one) for the Bush Administration.

“CUT the RATES NOW”

“BUY NOW and NO RECESSION”

Why are even PAY TAXES to the Government to RUN things into the Ground when we have these CLOWNS DOING IT for FREE ? :)

 
 
Comment by az_lender
2007-11-28 12:28:32

Michael, I wouldn’t vote for this one-word ban, but I might vote for the RE establishment being required simply to shut up. The advertising that investment advisors are allowed to do is strictly limited by law, although they get around it by sponsoring broadcast shills like Cramer.

 
Comment by joeyinCalif
2007-11-28 12:44:53

I’d have to vote no..
Larry Yun and company should not only be allowed to expose the ineptitude of the RE sales industry, they should be encouraged to do it more often.

 
 
Comment by reuven
2007-11-28 11:04:17


“‘There is less aversion to debt,’ he says. ‘The days of paying off the home may be far behind us. The comfort level in Alberta is that prices will continue to climb, so even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”

40 years is just plain dumb.

Some simple math:

$500,000 @6.1% for 30 years is $3029.97/month
$500,000 @6.1% for 40 years is $2786.00/month

but over the term of the loan, for 30 years you’ve paid $1,090,789
and for 40 years you’ve paid $1,337,280

Why would anyone do this?

Comment by Andrew
2007-11-28 11:54:43

Why would anyone do this… think “time value of money”.

Assuming governments continue to inflate, in 30 years that $2,786/mo will be peanuts. If the rate is the same, I’d always take the longer loan just to have the lower mandatory payment. In fact, IF interest only rates were fixed for long periods of time (10+ years) and equal to a 15 year fixed rate, I’d go interest only. Then, you can decide whether to pay money against principal or invest in something else.

Plus, what’s the chance they’ll actually keep the place 40 years?

Comment by az_lender
2007-11-28 12:31:44

I agree with your analysis Andrew. As I posted somewhere up above, the present value of 40 yrs payments of $2420/mo is smaller than the present value of 25 yrs payments of $2840/mo, provided the actual inflation rate is at least 6.1%. Not that I would ever take a 40-year loan or a 25-year loan or even a 1-year loan. I’ve been known to take a few days’ loan when I get confused about stuff in my brokerage account.

 
 
Comment by Michael Fink
2007-11-28 12:07:55

Because you can somehow “afford” 2786 a month, and cannot, in any sense, afford 3029 a month (for example, you take home income is 2850 a month, which, given the standards in the past, would be just fine for a 2786/mo loan). And, because you are convinced that the prices are going to increase at 10% per year forever, and if you don’t buy now, you will never be able to buy.

They ONLY reason to buy with a longer term morgage is expected appreciation. Anything else points out how crazy it is. However, if you expect prices to go up signifanctly, you want to make sure you have as much house (debt) as possible, so that you maximize your returns.

It’s buying stock on 100% margin. That’s all it is. How much stock do you want when you think it’s going to the moon? As much as you can borrow (see 1920’s stock crash). How much do you want when it’s falling? Almost does not matter, because any (or almost any) amount is going to quickly crush you under the massive depreciation.

I am SURE that there are people in my neighborhood that, after working ALL year, are poorer at the end of the year then they started. Made 80K, house fell 160K in value. You just worked all year to LOSE 80K. How’s that for a crappy deal.

I just wish more people would point out the NEGATIVES of leverage. It’s wonderful on the way up. But absolutely devistating on the way down (even more so when you have a illiquid asset).

Comment by In Colorado
2007-11-28 15:33:14

I just wish more people would point out the NEGATIVES of leverage. It’s wonderful on the way up. But absolutely devistating on the way down (even more so when you have a illiquid asset).

Yup, if you roll snake eyes you lose everything.

 
 
Comment by potential buyer
2007-11-28 12:17:03

Its all to do with the psychology of owning a home. Its drummed into everyone that there is an American dream and part of that is owning your own home. Really doesn’t matter whether that makes financial sense or not, does it/
One would hope that even if they do take out a 40 yr. loan, they attempt to pay it off much earlier……….probably not though…sigh.

Comment by In Colorado
2007-11-28 12:38:27

Its drummed into everyone that there is an American dream and part of that is owning your own home.

In this case its the Canadian dream.

Comment by EmperorNorton_II
2007-11-28 12:48:44

Canadian Dream, eh?

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Comment by DenverLowBaller
2007-11-28 13:17:53

I am so sick of dealing with the RE establishment, I’m thinking of changing my handle to:

DenverMotorHomeOwner

Tough to raise the little one in, though.

 
Comment by hd74man
2007-11-28 17:27:14

RE: I am so sick of dealing with the RE establishment, I’m thinking of changing my handle to:

DenverMotorHomeOwner

Scott Burns the financial advisor rambles around in a used AirStream. He’s no fool.

 
 
 
 
 
Comment by hwy50ina49dodge
2007-11-28 11:04:33

‘…Sometimes the rate isn’t as important as getting the loan itself.’”

How many “homeowners” in the last 5 years resemble that remark?

 
Comment by KIA
2007-11-28 11:11:55

“The 11 percent yield is higher than investors get for non-investment grade bonds, noted Bill Smith, president of SAM Advisors LLC, which owns 60,000 Citigroup shares. ‘We blew right through junk status,’ he said.”

So let me understand this. 1) Citi needs cash so badly that it will pay foreign investors 11%, which is 4% more than it pays on junk bonds, to get what it needs. 2) Citi sure won’t offer domestic investors 11% on their CDs or savings accounts (or 7% either), so it apparently either doesn’t think Americans have enough cash or it doesn’t want to actually pay that much cast to them. On that basis, I conclude 3) Citi intends to take the Abu Dhabi loan and run. I also reach the dangerous conclusion 4) if it takes 11% to convince a foreign investor to buy into Citi, anybody who leaves their money in Citi for less than 11% risk premium is a sucker.

Comment by nycjoe
2007-11-28 11:25:39

But it’s such good news that Citi could pull this off that the Dow is soaring again. Wow … so what would register as a troubling sign??? Where does the street it find its next hit? Prostitution, petty crime … usual stuff for street junkies, right?

Comment by Salinasron
2007-11-28 13:19:17

They’ll write 4% of the 11% off so the net will be 7%. I’m sure they are stalling for something in the wings to come to their rescue, hopefully not from the government.

 
 
Comment by warlock
2007-11-28 11:30:51

As far as i can see, the only explanation is that they needed the money NOW

I would guess that doing any kind of offer to domestic investors where it had to be broken up into smaller chunks would have taken too much time to get the money onto the books for the end of this year.I guess we can also infer from this that there weren’t any american institutions with a few billion lying around to just loan out either.

Anybody want to start a sweepstake on when the IMF has to step in? It’s so much fun when that happens…

Comment by nycjoe
2007-11-28 11:50:48

and I guess they”re pricing in the U.S. peso as well? But the bet doesn’t pay off until 2010, right? So no expected strengthening of the almighty gingoback until then …

 
 
Comment by Frank Giovinazzi
2007-11-28 12:16:35

In other words, Citibank now resembles a trembling, toothless fishwife clutching her pocketbook in front of the big bad bankers desk, praying she’ll get a loan to save her house. When she gets it, she’s so happy she doesn’t care about the terms.

This is poetic justice at its finest. Link to 2003 story, in PDF format: Citigroup, Wall Street, and the Fleecing of the South

 
Comment by Paul in Jax
2007-11-28 12:59:35

This seems crazy to me. $7.9 billion is not an enormous chunk of money for Citi, yet by paying 11% they have allowed their bluff to be called (”we need a big chunk of cash now and don’t have time to piecemeal it together”) and have shown the world how weak they are. If I’m not mistaken they currently pay a dividend of $0.54/qtr. on about 5 billion shares - over $10 billion a year. They could cut the dividend in half and just about cash flow this in a year, without the stratospheric interest rate and eventual dilution. This company needs proper managing, fast.

 
Comment by Darrell_in _PHX
2007-11-28 14:38:42

If they start offering 11% to all depositors, then ALL the current depositors would want 11%.

By cutting a special deal for 11% they can continue to pay their current customers the much lower rate.

 
 
Comment by hwy50ina49dodge
2007-11-28 11:17:19

“State Treasurer David Lemoine, whose office made the investment based on advice from its financial advisers at Merrill Lynch, said Monday he believes the money will be repaid.”

Dear David:
Please give this guy a call, he has some advice that Merrill might not offer. ;-)

Ask about the O.C. bankruptcy of 1992 ;-)

Supervisor John Moorlach
Vice Chairman
John M.W. Moorlach,
Supervisor
Second District
Phone:
(714) 834-3220

 
Comment by Blano
2007-11-28 11:19:45

“‘Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,’ Lemoine said. ‘I haven’t booked it yet,’ he said, but, ‘I’m pretty confident, that with patience, we should get our money back.’”

Yeah, sure. And I’m pretty confident, that with patience, that I can nail Eva Mendes too.

Comment by palmetto
2007-11-28 11:23:01

“Yeah, sure. And I’m pretty confident, that with patience, that I can nail Eva Mendes too.”

BWAHAHAHAHA!

Comment by Blano
2007-11-28 12:16:27

“Without hope, the people perish.” :)

 
 
 
Comment by WT Economist
2007-11-28 11:22:13

Despite decent fundamentals and thus far a lack of defaults, funding for commercial real estate transactions is drying up. The reason? The prices were too high.

http://www.bloomberg.com/apps/news?pid=20601109&sid=au2XBiCyWeME&refer=home

“In the bond market, commercial property investors are about as creditworthy as U.S. homeowners with subprime mortgages. `Commercial real estate is a full-blown bubble that feels very much at a bursting point,’ said Christian Stracke, an analyst in London at CreditSights Inc., a fixed-income research firm. `There’s a fairly toxic mix of factors at work.”’

 
Comment by sleepless_near_seattle
2007-11-28 11:40:51

Gah! WTF is up with the market?

Where’s the Launch Protection Team when you need it?

Comment by matt
2007-11-28 11:59:40

Git outta the way of this Mack truck! Shorts aren’t done crying uncle.

 
Comment by edgewaterjohn
2007-11-28 12:03:25

Well, at least it isn’t coming as a surprise…but what’s next?

 
Comment by bizarroworld
2007-11-28 13:01:21

It all makes complete sense: Housing starts are collapsing, housing values are down again, housing sales are down acroos the board, banks need to borrow from foreign companies to stay afloat, freddie needs to sell 6 bil to make ends meet, holiday spending is slower than expected, gas is 3.20, the dollar is falling, the financial and housing sector is laying off by the thousands, durable orders are down again, and HELOCs are no longer the ATM of the home owner, but a fed clown hints the fed will be “nimble” and the party is on.

Comment by flint 'burbs
2007-11-28 17:47:24

Its simple - these men (who run Wall St) are not rational! They have the attention span of a worm and if you scare them they start to coil up and roll around (THAT’s a real safe move to make when the predators are circling & hungry).
Their hysterical response is totally irrational to the situation, but, like those who watch Sports but don’t exercise, it makes sense to them. Sooth them by changing the subject and they’ll make the same moves that got them in trouble LAST time (ya just can’t teach ‘em, so make ‘em entertainment!).

 
 
 
Comment by sideliner
2007-11-28 12:07:05

I need some input from any of the financial great minds on this blog. The place has saved me $100’sK by not buying into the SoCal market and just renting.

So here is my idea: What if the way property sale proceeds are disbursed changed from the purchase of a oreclosures. With so many foreclosures hitting the market and many more on the way, and many lenders are just not wanting to admit the party is over and still holding out for that top dollar. With price based on location, neighborhood, medium incomes of that particular area and then offer to the lender a % of the proceeds should you sell/refi within the first 5 years. It seems that lenders would be put back in control of the $$, and getting rid of mortgage brokers would certainly help the industry as a whole. By the way, did someone one day just decide to interject themselves into a business transaction between a lender and buyer and then what - convince the two parties it could not have been done without them? Hence the mortgage broker was born?!? If you want to borrow money, go to a bank. If you need help with legal contracts, go to a lawyer. Realtors and Mortgage Brokers are like the kids in school that ran back and forth between two friends who didn’t talk to each other delivering messages, and most of the time - it was wrong. And in the end the two friends talked to each other and life was back to normal.

Now, I have no economic background to really understand my own idea or the practicality of it all, but it just sound like a reasonable business transaction. I borrow money, pay the interest & principal and if I sell quickly on the front end, we both have something to walk away from the table with. I am just looking for a bargaining tool to approach lenders with as they are not wanting to negotiate and to just cut through this stand-off. My husband and I actually looked at two dozen foreclosures in the 5 mile square radius in San Fern Valley, most were priced between $480K-$580K and between 1000sq’ to 2100sq’. After some research, we found that all were priced below $350K before 2002. So with me and my new idea here, what if I purchase the $480K foreclosure for $240K (just for example) and I know that it was last sold in 2001 for $218K. Now with the credit market slowly coming back in line, properties will appreciate at a more balanced amount. This is where I get all confused wondering if the lenders even want to be involved in possible future earnings in addition to all the interest collected from me or are they just set up too much to get the money on the front end from each other. Is the possiblilty for fraud too much here, or can the lenders keep it in check by being more involved? I just don’t know and look to others much more in the know.

 
Comment by Housing Wizard
2007-11-28 12:19:02

“‘ While incomes have increased ,they have not kept pace with the run of prices of houses.’”

How could it be that you get a run up of prices in homes when the incomes didn’t keep pace with it ? Answer below :

(1) Fraud in lending
(2)Fraud in appraisals
(3) Low down lending that qualify borrowers on teaser rates .
(4) Speculator purchasing without higher down payments to offset risk, creating a short term fake demand for housing
(5) To much of a global easy money supply ,with buying on margin or leverage buying driving up housing prices beyond incomes.
(6) Borrowers buying out of fear that they will be priced out if they don’t buy a house they can’t afford now .
(7) Sometimes it’s because of lack of supply of homes ,so with speculators buying many houses ,it took the supply from real buyers as well as raised the prices .
(8) Locust speculators from other areas going to towns driving up the prices beyond local income levels or demand .
(9) Builders and sellers and their “special lenders/real estate sales people ” getting stretched borrowers into new homes by any means ,including cash-back fraud ,incentives and the like which drives up fake prices .
(10) Creative financing and time-bomb sitting up of loans that must be refinanced ,that are designed to screw the borrower down the road ,( even if real estate does go up ).
(11) Double escrow fraud that was pushed and taught by the market maker real estate seminars .
(12) Pre-construction flipper double-escrow deals in which projects were sold out to flippers just to increase the price to greater fools pursuant to double-escrows .

On and on …….Real estate market demand should be based on prudent lending ,based on local incomes and real demand .Speculators should not make up more than under 10% of the market demand ,but during a mania, speculation makes up 80% of the demand where even owner occupants are buying to speculate .

Comment by Asparagus
2007-11-28 14:41:04

I think you just listed Yun’s “fundamentals”.

 
 
Comment by EmperorNorton_II
2007-11-28 12:19:56

Old FTD: Flower Delivery

New FTD: Debt Delivery

“The fear factor grew as defaults of home loans made to those with risky credit histories popped up in all kinds of investments, in what has become to be called an FTD — a financially transmitted disease.”

 
Comment by EmperorNorton_II
2007-11-28 12:21:36

“‘The system has one chunk in it,’ Fascitelli said. ‘When you’re constipated, you’re not very hungry are you. Nothing goes in until something comes out. The Wall Street firms will not resume lending at the pace they did until they’ve cleared that big load.’”

The more you eat, the more you shit…

Woodie Guthrie

 
Comment by sagesse
2007-11-28 12:22:48

It’s spelled ‘principAL’, even in Canada. Where is the spell checker for that journalist.

 
Comment by EmperorNorton_II
2007-11-28 12:23:19

I see a Blue Swan, in somebody’s immediate future…

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

Comment by Flatlander
2007-11-28 13:09:51

Hey “Baghdad Bob” Bigelow . . . from what I see, funding growth is not the issue . . . your asset base is shrinking, you idiot. And another thing, liquidity goes away fast when your operational needs exceed your revenues. See you in Chapter 11.

 
 
Comment by EmperorNorton_II
2007-11-28 12:29:08

unsweetened Lemoine-ade

“State Treasurer David Lemoine, whose office made the investment based on advice from its financial advisers at Merrill Lynch, said Monday he believes the money will be repaid.”

“‘Virtually within days their assets were frozen and the rating went from top rate to junk bond status overnight,’ Lemoine said. ‘I haven’t booked it yet,’ he said, but, ‘I’m pretty confident, that with patience, we should get our money back.’”

 
Comment by Housing Wizard
2007-11-28 12:30:41

Wall Street needed mortgage brokers to peddle their huge money supply to the sheep . A borrower could go to a direct lender ,but the direct lenders were selling off their loans to the secondary market also . A direct lender would likely have more rules for their loan agents and more check and balances in place ,and a lender that holds their own loan paper would be very prudent in lending .

I think the whole system of easy money lending that came about during this housing boom is going to change because all systems became very corrupt ,including good appraisal practice .

 
Comment by EmperorNorton_II
2007-11-28 12:36:02

Amnesia has a head-on collision, with Deja Vu

“Amnesia about past credit mistakes is common in the banking business as banks compete for every deal that any other bank is willing to do. This amnesia is taking its usual blame for the current slowdown. But this time is very different. The handwriting has been on the wall for some time, and bank boards have made little effort to read.”

 
Comment by Fuzzy Bear
2007-11-28 12:46:04

“The fundamentals of the market don’t support a further decline in sales, said Lawrence Yun, chief economist for the NAR. ‘I don’t anticipate any further major sales declines,’ Yun said. If sales do continue to fall, ‘it would be a major concern’ and ‘would raise the risk of an economic recession.’”

The risk of an economic recession has been confirmed by Yun. Yun has not been correct to date on any of his information and we all know that the opposite of what he says often happens. Therefore, the statement by Yun, “I don’t anticipate any further major sales declines,’ Yun said” means that there will be further major sales declines and the strong possibility of a recession.

 
Comment by future expat
2007-11-28 12:51:16

Hold tight FB’s, help is on the way! (Fed azzhatz cavalry to the rescue):

“Federal Reserve Vice President Donald Kohn raised speculation that the Fed is leaning towards a rate cut in December on Wednesday in a speech to the Council on Foreign Relations in New York.
“To be sure, lowering interest rates to keep the economy on an even keel when adverse financial market developments occur will reduce the penalty incurred by some people who exercised poor judgment,” Kohn said. “But these people are still bearing the costs of their decisions and we should not hold the economy hostage to teach a small segment of the population a lesson.””

Comment by lazarus
2007-11-28 13:55:19

“We should not hold the economy hostage to teach a small segment of the population hostage.”

Come on now Mr Kohn. The people who are actually holding the economy hostage are that “small segment of the population” you referred to. We now know you don’t have the cojones to take them out and you will always negotiate with them thus putting the economy at even more risk in the future. Pray, why were you looking on when they were pulling the pins out of the grenade? Let’s face it, the economy would actually be better off without you and that small group of hostage takers. By the way I hear that there is a man named Paul Volker who carries a big gun and hates hostage takers. Anybody know where he is?

 
 
Comment by Wilson
2007-11-28 12:59:40

THIS IS THE BEST PART OF THE ARTICLE FROM MARKETWATCH (I DIDN’T KNOW THEY EDITORIALIZE LIKE THIS, BUT I LOVE IT)
“I don’t anticipate any further major sales declines,” Yun said. However, the NAR didn’t anticipate the sales declines of the past two years, and it’s been predicting a bottom nearly every month since early 2006.

Comment by Professor Bear
2007-11-28 14:48:53

“…and it’s been predicting a bottom nearly every month since early 2006.”

NAR = Serial bottom callers

 
Comment by WaitingInOC
2007-11-28 16:35:31

I wouldn’t call that editorializing - I’d call it proper reporting. One of the few times that reporters actually look at the past statements to see how correct they were in their forecasts. Good for MarketWatch. Hopefully more journalists will do this, to help expose the NAR lies.

 
 
Comment by Wilson
2007-11-28 13:01:47

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

So does that mean that regardless of the truth, Countrywide will just keep saying the garbage? They’ll repeat it until they are blue in the face, whether it’s actually true or not?

 
Comment by Salinasron
2007-11-28 13:22:26

“‘We said it back in August, we said it in September, we said it last week, we’ll say it until we turn blue in the face, but we have ample liquidity to fund our growth and operational needs,’ said David Bigelow, Countrywide’s managing director of investor relations.”

That’s like George Lopez saying you can tell a Mexican is lying when he says “who told you that?”.

 
Comment by EmperorNorton_II
2007-11-28 13:34:22

Afford McFarlane?

“A big benefit, though, is for the first-time buyer, who wouldn’t otherwise be able to purchase a new home with the rising prices in the city, says McFarlane. The average price for new single-family homes is expected to reach $475,000 this year and $550,000 next year.”

 
Comment by Isoldearly
2007-11-28 14:35:09

Neil — yes, I have popcorn (thanks to all the bloggers here) but I lost that dandy list of stages you posted over a year ago. Think you said at that time the real estate market was in the denial stage … where are we now? What is the time line for each stage? Please post that one again. Thanks!

Comment by Professor Bear
2007-11-28 14:59:20

“… where are we now?”

Hint:

Los Angeles. A number of organizations have launched a series of public actions targeting Countrywide Home Loans in cities throughout California—where it is estimated the company services 50,0000 (sic) loans. The first was in San Diego last week and the second is today in Santa Ana; another is scheduled in Los Angeles next week.

Who – Assembly Member Jose Solorio, MABUHAY Alliance, the Greenlining Institute, the California Hispanic Chambers of Commerce, the Mexican American Political Association and others—including those who have lost their homes.

What – Public foreclosure protests against Countrywide; Consumer, Latino, and Asian American groups are holding foreclosure protests against Countrywide Financial and its CEO Angelo Mozilo; approximately 100 protestors will gather, including many facing imminent foreclosure from Countrywide

When – Today, Tuesday, November 27, 2007 at 4:30 p.m.

Where – Countrywide Financial office in Santa Ana; 1840 N. Bristol Street, 92706; on the northwest corner of 17th Street and Bristol, across the street from Santa Ana College

Why – The coalition is committed to continue public actions in different cities throughout California during the remainder of 2007 and demand that its investors and shareholders step up to the table and demand accountability and transparency from Countrywide.

FYI – It is estimated that Countrywide alone will foreclose on 10,000 homes in Orange County and at least 50,000 statewide before Christmas. They are the largest sub-prime originator of home loans in California and the leading seller of risky, exotic, adjustable rate mortgages that have led to the present foreclosure crisis. As reported in the New York Times, Countrywide has one of the worst records in the nation in preventing foreclosures through what is known as loss mitigation practices.

http://www.lavoice.org/index.php?name=News&file=article&sid=2966

Comment by spike66
2007-11-28 16:34:40

“approximately 100 protestors will gather”

truly, BFD.

 
 
 
Comment by Professor Bear
2007-11-28 15:00:24

BoJ warns of ‘disease’ in world markets
By David Pilling in Tokyo
Published: November 27 2007 20:01 | Last updated: November 27 2007 20:01

The yen hit a two-and-a-half year high against the dollar on Tuesday as Toshihiko Fukui, governor of the Bank of Japan, expressed strong concern about the turbulence in world markets, comparing it with “a serious disease”.

The yen briefly rose to Y107.17 against the dollar, although it fell back to Y108 in Tokyo trading. Before July, when investors began to reverse some so-called yen carry-trade positions amid a retreat from risk, the currency had been trading at above Y120 to the dollar.

http://www.ft.com/cms/s/3059f9b2-9d21-11dc-af03-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F3059f9b2-9d21-11dc-af03-0000779fd2ac.html&_i_referer=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB119623408737006423.html%3Fmod%3Dgooglenews_wsj

 
Comment by Professor Bear
2007-11-28 15:01:24

Inflation fears hit eurozone
By Ralph Atkins in Frankfurt and Krishna Guha in Washington
Published: November 27 2007 18:02 | Last updated: November 28 2007 01:05

Soaring eurozone inflation is threatening fresh difficulties for the European Central Bank as it fights to calm tensions in financial markets that are casting a shadow over economic growth in the 13-country region.

Energy and food prices pushed inflation in Germany this month to the highest level since at least 1995, leading economists to forecast the annual eurozone figure, released today, would reach 3 per cent or above for the first time in more than six years. That would pose a serious challenge to the ECB, which pledges to keep inflation “below but close” to 2 per cent.

http://www.ft.com/cms/s/55ff8ca6-9d10-11dc-af03-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F55ff8ca6-9d10-11dc-af03-0000779fd2ac.html&_i_referer=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB119623408737006423.html%3Fmod%3Dgooglenews_wsj

 
Comment by spike66
2007-11-28 16:38:55

“even if people take out a 40-year amortization, they have the feeling they are investing in something that will increase over time.’”

Feelings,nothing more than feelings.

 
Comment by Dan
2007-11-28 18:32:43

http://www.floridarealtors.org/NewsAndEvents/n1-112807.cfm

About 12,000 SFH and condos sold in Florida, which would prorate to about 4,000 for South Florida.

In last week’s Miami Herald, it was mentioned there were 133,000 listings in SoFla.

So, this gives us about a 30 month inventory.

With a 30 mo. inventory, the prices ain’t going back up any time soon.

 
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