The Housing Bubble

It appears charity contributions are down this year. Many organizations including the Salvation Army are having trouble raising funds. I would love to compare and contrast this seasons charity contributions to the retail sales. It has been reported that the day after Thanksgiving brought brisk sales. If sales are up and charity contributions are down, I think it will say a lot about our culture.

http://www.statesman.com/news/content/news/stories/local/11/30/1130toys.html

I’m so annoyed that these people are still running radio ads (seemingly only on the minority targeted stations). Is it any wonder that the DC/Baltimore metro market is so slow to wake up.

http://www.marylandrealestatesecrets.com/
http://www.therealestateinvestmentqueen.com/

And they also have another website out there that I can’t recall.

taxes.
http://www.suburbanchicagonews.com/heraldnews/news/672620,4_1_JO29_PROADS_S1.article
http://www.suburbanchicagonews.com/heraldnews/news/667055,4_1_JO26_ELTAXES_S1.article
http://www.suburbanchicagonews.com/heraldnews/news/638121,4_1_JO07_COUNCIL_S1.article

Looking like real money…

http://www.latimes.com/business/la-fi-econ30nov30,1,5933849.story?coll=la-headlines-business&ctrack=6&cset=true

I heard someone say yesterday that his credit union (one of the largest in our area) will not make a loan to anyone with a credit score of 600 or less.

Pigman Puppeteer
http://www.stockmania.com/index.php?showimage=103

This stuff is really hard to predict. Not!

So we may get a Helicopter Benefit, and some kind of rate-freezing bill. But isn’t the problem falling values? People didn’t stop buying houses because the rates weren’t low enough. They stopped because the values started falling faster than Larry Craig could tap his foot.

So if this all happens, the financial world at the top will Benefit, and the few homeowners who haven’t bailed might not, but prices will continue to free-fall.

Got falling knife?

http://www.larouchepub.com/other/2007/3446fla_collapse_returns.html

Return of the 1926 Florida Land Bubble Implosion, which helped usher in the Great Depression.

The WSJ announced the “mother of all cramdowns” today, with the Bush Administration agreeing with mortgage services that low introductory rates should be kept until Bush is out of office.

Investors and services evidently agree that individual workouts will overwhelm the system, naking the eventual losses greater.

Instead, some kind of rule will be used to divide people into those who can pay the higher rate, those who can’t even pay the introductory rate, and those who can pay the lower rate but not the higher rate. The latter group would get a reprieve.

The length of time has not been set. And the article said “subprime.” Not sure about Alt-A, etc. The thing is, under the new bankruptcy law those with lower incomes can just walk away, whereas those with higher incomes can have part of their future earnings seized for years.

http://www.larouchepub.com/other/2007/3446state_budgets_blow.html

States’ Budgets Blow as Housing and Credit Bubbles Crash.

Money Mania…

http://www.lewrockwell.com/rockwell/money-mania.html

“with the Bush Administration agreeing with mortgage services that low introductory rates should be kept until Bush is out of office.”

I don’t get why everyone coddles the worthless, incompetent shrub. It’s been the pattern of his life ever since he wuz a pup. Do-overs when he didn’t like the outcome of a tennis match, running companies into the ground, heck, even Carlyle group didn’t want him around. It’s like everyone’s afraid the spoiled brat will have a trantrum and thus they become enablers. I don’t get it.

Chick:

As asked on the Weekend Thread, how far are you planning to go out wiht your Puts once the double top is in?

I have a bit of a longer time horizon that you I think, I’m plannig on out three to six months on the SPY’s. What say you?

Pensacola, FL

I perceived a slight note of desperation by this seller:

http://pensacola.craigslist.org/rfs/494030464.html

Upper B-bands are 1525 spx and 13700 djx, this thing still has a ways to go.

Still so much denial in Bawstin (Boston)

http://boards.boston.com/n/pfx/forum.aspx?tsn=93&nav=messages&webtag=bc-yourmoney&tid=655

PPT RIDES AGAIN!

(Curious how they already know how the future will play out, aren’t it?)

Countdown to the close:21min19sec
November 30, 2007 9:08 A.M.EST
BULLETIN
CRUDE FUTURES BREAK BACK BELOW $90-A-BARREL MARK
Gangbusters open for Street

Data do little to dent optimism over Bernanke’s remarks
Fed chief, in speech Thursday night, does nothing to derail hopes for lower U.S. rates. Dell, though, won’t be taking part in the rally.

http://www.marketwatch.com/?avatar=seen&dist=ctmw

and here’s our friend again. another day, another reduction

http://dallas.craigslist.org/rfs/494149163.html

Chateau Clarendon Hills. Comes with “Freedom Fries”.
http://chicago.craigslist.org/wcl/rfs/494131028.html

Earlier this week I raised the issue of road building with respect to taxes and government. In response MrBubble asked an interesting question about whether building road networks may have lead to suburbanization in a way that has supported civil degeneration and endangers us as we hit peak oil.

I think this issue about how communities are built is very important for understanding the future of the housing market. To be brief I am leaving verification as an exercise for the reader, but all the facts I claim here are from a prominent study.

Preferences: In recent history preferences have been stable and are balanced strongly in favor of suburbs with roughly 50% in metropolitan areas and around 80% in some other area prefering to build and live in suburban communities. Of the remaining more than 30% choose rural living and only around 10-15% of people live in dense city cores. Dense cities are significant and that small demographic slice includes a high concentration of power players, but this distribution appears to be deeply rooted and unlikely to change greatly or quickly.

Density: Also, details matter as old streetcar suburbs and modern “New Urbanist” develpments enable easy access to walking paths, neighborhood retail, and parts that is usually missing from exurbs. Well designed dense surburbs also tend to fill out over time, zoning and building rules permitting. Garden cities are likely to start with around 6-8 units per acre, but grow over time add secondary units to reach 13-16 units per acre. That is roughly the same density as a geographically constrained urban area. Some kinds of development such as cottage or bungalow clusters can reach between 20-30 units per acre which is comperable downtown high rise densities. Suburbs can offer high density with better air and light.

Wheels: Walking paths and pedestrian streets are popular, but people do not like to give up on wheels. Already in my walkable streetcar suburb there are some who drive electric cars, and some of these are powered by the sun. This kind of thing is increasingly being considered cool in a way that gas guzzling hot rod types used to be.

Infill: Development used to be something done to raw land, but increasingly development is dominated by infill conversions. Farms are being converted to suburbs, with some efforts to save farms here and there. Open space and greenways can raise money for preservation by building homes with special CC&Rs in clusters around and in open space. Contested urban schemes can we favor by lower height. In wide range of infill situations suburban or “New Urban” development modes have a better chance of drawing investment, getting permits, and enduring once built.

Living: Planners see advantages to density and push it, but downtown condos are unlikely to appeal to more than the relatively small group who will live in dense cities. This has implications not only for development and appreciation, but also how communities work. This might mean over time more drunks and less DUI because of improved access. Road salt is wiping out ecosystems nationwide, so sticking with suburban development means better plows or heated streets or something.

Change is always difficult, but with respect to peak oil it is important to remember that urban living used to depend on whale oil when most US cities were being laid out.

County outlook drops on jobs, construction
By Dean Calbreath
STAFF WRITER
November 30, 2007

San Diego County’s economic outlook darkened considerably last month, driven by a large jump in unemployment filings and a sharp decline in residential construction, according to an index of leading economic indicators released yesterday by the University of San Diego.

It was the 18th time in 19 months that the index has dropped. It is now at its lowest point in more than four years. And USD economist Alan Gin, who compiles the index, said more bad news is ahead.

http://www.signonsandiego.com/uniontrib/20071130/news_1b30sdecon.html

Perspective

http://www.minyanville.com/articles/index/a/15052

Who bears the cost of this proposed policy (aside from folks who live in houses they cannot afford enjoying a more gradual financial death)?

PAGE ONE
U.S., Banks Near A Plan to Freeze Subprime Rates
By DEBORAH SOLOMON and MICHAEL M. PHILLIPS
November 30, 2007; Page A1

WASHINGTON — The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.
(RELATED ARTICLE
• Rising Rates to Worsen Subprime Mess
11/24/2007
• Economists React: ‘It’s a Big Deal, Maybe’)

An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.

http://online.wsj.com/article/SB119638615868608863.html?mod=todays_us_nonsub_page_one

Newsflash!

(single-b rated) has been down rated to (Arnold Ziffel)

http://en.wikipedia.org/wiki/Arnold_Ziffel

Mortgage fraud in AZ, and govt doesn’t want to pay to investigate.

http://www.azcentral.com/news/articles/1130crackdown1130.html

“Arizona’s mortgage regulator has shut down a handful of Valley firms for fraud and other illegal lending practices this year, but at least 40 other investigations are stalled because there is no money to fund them.”

“To tackle the flood of complaints this year, the regulator hired independent investigators. But a plan to keep paying those contractors stalled during the last legislative session because some lawmakers said the mortgage industry should self-regulate.”

Because self-regulation has worked soooooooooo well.

As someone in the discussion said, “New laws are fun to pass, but not so fun to pay for.”

Personal Spending Weakens As Core Inflation Remains Steady
By Jeff Bater
Word Count: 426

WASHINGTON — Income growth of Americans was below expectations for October, while their spending weakened, a sign of caution among consumers as the housing slump restrains the U.S. economy.

A price index for personal consumption expenditures rose 0.3% a second straight month in October compared to the prior month. The PCE price index excluding food and energy, or core PCE, rose 0.2% a second consecutive time.

http://online.wsj.com/article/SB119642854102409471.html?mod=hpp_us_whats_news

Well, it looks like the city of Lakeland, FL has 50 million dollars frozen in the big state investment fund. As you may recall, there was a run on the fund this week and Governor Crist had the account frozen….

As a result, hundreds of mostly smaller cities, counties and school districts will not be able to get money they had trusted the state to invest until at least next week. Some officials warned the move could mean missed paychecks for some public employees….

According to the article, the City of Lakeland was able to scrape up enough to pay its employees today; but don’t know if they will be able to meet payroll again in two weeks..

“If we can get payroll money out, we can delay paying the other issues for a few days,” he said. “If you can’t make your payroll, then you’ve got major problems tomorrow and this weekend.”

Merry Christmas, sheeple.

Crickey !!!!

http://www.theledger.com/article/20071130/NEWS/711300433/1039

I am so tired of seeing the word “upscale” (read: ridiculously expensive) in real estate ads and hearing people talk about “upscale” this and “upscale” that. My mother-in-law from Pottstown - Pottstown FCOL - talks about passing over some stores for other “more upscale” stores. Pretty snooty from someone who spent a good portion of her life on Welfare. What is it with people? /rant

if the teaser rates are frozen as proposed, three consequences will be:

1. The bondholders of the securitized mortgages will lose big, causing the bonds to plunge. Earnings at the big banks and brokerages will plunge again, sending their stock prices even lower. Pensions, endowments, 401Ks, etc. will all be hurt.

2. Lenders will tighten standards even more, sending housing prices even lower.

3. Homeowners will be stuck paying for houses that are wildly overpriced because the plan will reduce house prices, not sustain them.

Hey txchick,

It looks like your old friend nina has a new post up on her real estate empire. Looks like the aligators are chomping.

shakes in response to your wanting to pick a bone with me that I was way off with statistics about the homeless population being composed of one quarter vets-it was in last weeks NYTimes:

“The New York Times reported last week that though veterans make up only 11 percent of the adult population, they make up 26 percent of the homeless. If that doesn’t translate into despair, neglect and poverty, well, I’m not sure the distinction is one worth quibbling about.”

do a search in nytimes ‘homeless vet” and you will find the stats.
actually i found this:

“The federal government says veterans account for about a third of the country’s homeless population.”

This article

“120 War Vets Commit Suicide Each Week” posted yesterday:

http://www.alternet.org/waroniraq/68713/

amplifies even more the absurdist dysfunctions of our society when a ‘player’ like Chuck Prince of Citigroup infamy gets a 12 million parachute with 1.7 million per annum pension and a driver and car for 5 years.

managed capitalism anyone?

‘Cheap Chinese goods? Blame America’

China shrugs off EU calls to revalue yuan, blaming crisis on cheap dollar

“…The rising value of the euro has caused a huge political and economic problem for eurozone leaders. The EU is China’s biggest trading partner, but the exchange rate is contributing to a trade deficit with China that is growing at €15m an hour. It reached €130bn last year and is likely to be €170bn this year, surpassing even the giant deficit of the US.

The rapid growth of China’s economy is bringing cheap goods for European consumers but creating severe problems for manufacturers. Already disadvantaged by higher costs, they are now punished by the high value of the euro, which makes their goods more expensive in China. They are also hampered by barriers to European exports that are said to cost EU firms €20bn a year in lost trade opportunities.

Similar problems are affecting trade with the US after the euro’s rise to an all-time high against the dollar. Last week the chief executive of Airbus, Tom Enders, warned that the exchange rate would put the company out of business because it builds planes in euros but sells them in dollars.

Threat

Against that background, the threat of protectionism also hangs over EU-China relations. Claude Juncker, the Luxembourg premier who has headed the so-called eurogroup of ministers that has been in Beijing this week, said there could be “protectionist reactions” in Europe if China did not act.

There was some encouragement for the Europeans. Wen promised that China would further modernise the revised exchange rate mechanism introduced in 2005 in a “gradual, proactive and manageable manner” so it became fully convertible, allowing a greater free flow of capital into the world’s third-largest economy.

Wen, who agreed to set up a joint EU-China working group on the issue, appeared to bear out the ultra-cautious remarks of European Central Bank president Jean-Claude Trichet that China was “perhaps” moving towards revaluing the yuan against the euro.

“We were told that this is something which is being examined but I will not go further,” he told reporters after he, Juncker, and Joaquín Almunia, EU economic and monetary affairs commissioner, held unprecedented talks with China’s central bank governor, finance minister and Wen on the issue.

The EU’s leading anti-protectionist, trade commissioner Peter Mandelson, who has this week berated China for denying European goods and services access to its domestic market, welcomed moves by Wen and president Hu Jintao to recognise and take measures to reverse the ballooning deficit.

“I arrived unhappy and leave more encouraged,” he said. “There’s a clearly stated political commitment by the Chinese leadership at the highest level to address the deficit, including market access and intellectual property issues. This is what we were seeking.”

According to EU sources Hu said during the one-day summit that he did not favour a sizeable trade surplus with the EU. “I am ready to work with you to reduce our surplus and ready to import more EU products,” he was said to have remarked, agreeing to set up another joint working group on the issue.

Not all EU officials were impressed. “We invested heavily in this summit and all we’ve got is two working groups. It’s been a complete waste of time. The Chinese, who will change their government in March, bringing in new interlocutors, are doing the usual: playing for time and delaying decisions,” one EU delegate said.

No one in the EU delegation expected an overnight conversion of the Chinese to currency revaluation or cutting the trade deficit. Mr Juncker suggested it welcomed the role a revalued yuan could play in dampening the risk of inflation and helping to rebalance the economy away from overseas export-led investment towards private consumption.

But it remained clear that the EU still fails to understand fully the policy attitudes of China’s leadership as it grapples with 11.5% growth and promotes employment at all costs. José Sócrates, EU president and Portuguese premier, reasserted Europe’s “One China” policy and said Taiwan’s proposed independence referendum “might change the status quo for the worse.”

Guardian
29 November

“Freedom of the press is guaranteed only to those who own one.”

A.J. Liebling

Regarding Fed rate cuts, Elliott Wave has a scary observation:

– During the period between 1929 and 1932, the Federal Reserve eased rates from 6% to 2.5%, a rate-cutting crusade that did nothing to prevent the Dow Jones Industrial Average from plummeting 89% in the steepest stock market crash ever amidst a period of unprecedented economic contraction known as the Great Depression.

– From 1984 and 1992, the Federal Reserve slashed rates from 11.75% TO 3%. This period was marked by the worst stock market collapse since the Great Depression (October 1987), record-high unemployment, a debilitating savings and loans crisis, slow GDP, and economic recession.

– Similarly, a Federal Reserve rate cut from 6.5% To 1.25% from 2000 to 2002 proved impotent against the longest stock market decline since the Great Depression, the tech-bubble bursting, and a brief economic recession.

What’s up with ACA???http://finance.yahoo.com/charts#chart1:symbol=aca;range=1d;charttype=line;crosshair=on;logscale=on;source=undefined

I think it’s rather humerous that the OFHEO is making a big deal out of the “first quarter-over-quarter drop in home price index since 1993″. Quarterly drops are relatively meaningless, since they jump around so much - what matters more is YoY declines. Actually the closest we’ve come to YoY declines was in 1990.

Since they’ve been keeping stats (since 1975) there has *never* been a year-over-year decline. The way the downward curve is going however - we will easily hit that in 2008 Q1. Then we’re talking.

Just heard Brad Setser on NPR, worrying about the potential for non-U.S. allies in sovereign wealth funds using their financial influence to cause U.S. recessions.

Got trojan horse?

The caption-free caricature of Uncle Sam is worth at least 1000 words…

Who will pick up the thread after the great unwinding?
By Martin Wolf

Published: November 20 2007 20:06 | Last updated: November 21 2007 08:20

Is the US going to experience a recession? Two answers must be given to this question: nobody can be sure; and it does not matter. A much more important question is whether the US economy continues to experience a “growth recession”, by which is meant a lengthy period of sub-trend growth. The answer is that it will.

http://www.ft.com/cms/s/afd6e830-978b-11dc-9e08-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fafd6e830-978b-11dc-9e08-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.rgemonitor.com%2Fblog%2Fsetser

Alright, I need some help. I am renting a condo from a F’ed “investor” Capital F, little i. I think he is on the brink of foreclosure, and I want to be ready fo a contingency. How can I find out if he has stopped paying his mortgage on my unit?

I am so sick of this whole housing thing, I might just buy out of disgust.

Good stuff

http://www.minyanville.com/articles/socialism-banks-DJIA-Bernanke/index/a/15035

Here’s a question - with all this new talk about rate cuts - why is the dollar going up instead of down like it has for the previous rate cuts? What’s different this time?

I got this email via my SIL (about 4 forwards away from the realtor) who lives in Dallas. It’s for a place in Athens, TX. The email included a flyer (pdf) and the following email:

I have a house with a seller in Distress and I thought you might be able to spread the word and maybe help. I am attaching a brochure on this house in Safari Waters. The sellers have given me permission to disclose that they are losing this house into foreclosure if we do not sell it by the end of the year. It is on the Henderson Co. tax roll at $527,000 and we are trying to sell it for $380,000 which is what is owed plus closing costs and commission.

Thanks

Personally, I think it’s very generous that she is trying to save that house. Isn’t she nice?

Some info from Banc Investment Daily:

CRE Data: Our CRE data for Oct. is showing a faster decline
than expected. NYC now has the highest vacancy rate for
office buildings (at 7.6%) in some time. Meanwhile, nonaccurals
at many banks have jumped 40+bp and cap rates are
ratcheting up quickly. Normally, we see about $75B of building
sales under contract, but Oct. looks like it averaged around
$15B. New loan spreads have increased 21bp for the month
with about 50% of our data collected.

more very interesting information (sorry it’s a litte long but this is from a pdf):

Industry earnings: fell
nearly 25% from a year ago,
sinking to the lowest level in
4Ys. Overall, softness was
driven primarily by higher credit losses and lower trading
revenue. It is interesting to note, however, that most of the
decline was attributable to 10 large institutions that accounted for
more than 50% of the decline in industry earnings. Amazingly,
the number of unprofitable institutions jumped 46% YOY,
reaching just over 10%. Noninterest income slipped 5% from the
same period last year, marking the first drop in the prior 12
quarters. Noninterest expenses climbed nearly 7%.
Return: ROA for the 3Q quarter dropped to 0.92%, the lowest
level in 15Ys. ROE dropped 18% from the same period last year,
slipping to 10.52%.
NIM: Interest-earning assets climbed nearly 8% from a year
ago, as NIM benefited from a steeper yield curve. Overall, the
average NIM was 3.36%, up from 3.34% in 2Q, but remained
near 17Y lows.
Loans: Fire sales were common for the industry during the
quarter, as total sales resulted in a net loss. This is the first time
in 7Ys that a loss on sale has been recorded. Meanwhile, RE
construction/development loans saw the smallest growth
increase in 3Ys. Despite the slowdown, at the end of 3Q, about
25% of banks reported construction loan portfolios in excess of
100% of capital. Asset growth slowed sharply, coming in at
8.11% for the quarter vs. 9.84% thru 3Q 2006.
Loan Losses: Loan loss provisions swallowed up 11% of net
operating revenue, doubling over the same period last year and
soaring to their highest quarterly level in 20Ys. Overall, reserves
increased 12% over the 3Q of 2006. The percentage of net
charge offs to loans soared nearly 40% during the quarter, rising
to the highest level in 5Ys (0.50%). Meanwhile, the largest
increase occurred in C&I, where charge-offs were 91% higher
than a year earlier.
Noncurrent: Delinquent loans had their largest quarterly
increase in 20Ys, driven by construction/development (up 46%),
soft residential real estate (up 24%) and home equity lines of
credit (up 27%).

In tracking what’s reported on foreclosure.com, I see a new high for pre-foreclosures for Santa Clara County CA - 2,441 pre-foreclosures. Over 140 days of tracking what’s on foreclosure.com, the avg daily pre-foreclosure is 1897 homes.

“WASHINGTON (Reuters) - The Treasury Department is finalizing a plan with mortgage industry leaders that will hold interest payments steady for many subprime borrowers facing higher rates and possible foreclosure.”

Being irresponsible/greedy/stupid has it’s rewards in today’s environment of victimization. How many of these chums are your neighbors?

So…if I read this right. This guy is saying that the negative third quarter means prices AREN’T dropping…?!

http://yochicago.com/today/market-conditions/more-bad-news-for-the-home-prices-are-crashing-crowd_6258/

More bad news for the “home prices are crashing” crowd

The federal Office for Housing Enterprise Oversight (OFHEO) quarterly report is one of the most complete and reliable snapshots of the state of housing prices.

The report for the period ending September 30 (released today) shows a quarter-over-quarter decline of 0.4% in home prices nationally, and a rise of 1.8% over the previous year. Prices in the Chicago-Naperville-Joliet Metropolitan Statistical Area fell 0.11% during the quarter, and rose 2.16% during the year.

Read the press release and the full OFHEO report (pdf file).

Don’t expect any of these facts to have any more impact on the doomsayers than any other report that interferes with their wishful thinking.

–
Puryear: “We Are Still Adding 0.5%/Year to Housing Stock; 50% Homebuilders Will BKRPT”

November 30, 2007

Paul Puryear, Raymond James Director of Real Estate Research, appeared on Boob-berg this morning.

This means that approx. 600K more units, annually, are being built than the demand. This implies that with the Completion Rate of 1.3-1.4M, the current demand is 0.7-0.8M units. Economists have been misleading the public all along with the “estimate” for demand at 1.65-1.90M.

I have had a running feud with blogger at Calculated Risk (an excellent blogger with lot of good data, I must say), for the past 9 months, about his ‘estimate” of demand at 1.7M. He had repeatedly refused to reconcile his data with the Census survey data on housing stock and vacancies. I am certain that Mr. Puryear’s numbers are derived from the Census data.

For the past ten years or so the housing demand for new units has been close to 1.25M annual rate. At the peak Hopebuilders were building 2.0M. The supply would have to drop to 500K a year for few years to really clear the excess inventory.

Mr. Puryear is predicting that 50% of the homebuilders will go bankrupt. My forecast is for 75% to go bankrupt.

Jas

If the government freezes the teaser rates for FB in trouble how does this affect those who bought the MBS with the expectation of making a profit when they reset?
If I recall correctly some of them were at 1-2%.
Pension and municipal funds have them in their portfolios
Add to that they would have to take a loss if they tried to sell them.
Seems to me there will be some “very upset” people if this goes through.

Back in ciVILEization for awhile waiting out the big storm coming through (weather, not economic, that may take longer). Thought by now W. Colo. would start to drop more in prices, am seeing some reductions, but it’s basically just slowed WAY down and everyone’s hanging on to their high prices. The house I’ve been watching (in Utah, a remodeled farm house on 11 acres) has gone from 370k to 330k and is now 299k with only 1 acre (yeah, sleight of hand, I’m sure nobody noticed, scumbag realtors). People are just SO in denial out here, thinking the energy industry is going to save them. Like I’ve said before, most oil/gas guys do NOT buy homes, they’re too mobile. I’ve noticed several ENTIRE subdivisions for sale (infrastructure in, no houses). The writing’s on the wall, and it’s in every language – this bubble knows no boundaries.

The Grand Junction, Colorado, Daily Sentinel (sorry no link (maybe GJSentinel.com) , yest. paper, dead tree version) had a HUGE article (huge because it’s so contrary to what I’d expect from them) on how the housing industry there was set to lose most of the value it had accumulated in the past 5 years. Of course, it had the typical realtors (confident but clueless) denying it, blah blah blah.

If there were anything I could personally do to hasten this decline, I would. I’m really tired of bloated prices and having to live in substandard places just because I have pets (not to mention boarding my two horses, expensive) – though being mobile is starting to grow on me, may go spend the summer at Glacier. Someone in a thread the other day mentioned that buying cheap land and building may be the wave of the future, with contractors now working cheaper and material prices down. So far haven’t seen land really drop here. Went to Grand Junction yest. and it was hectic, people everywhere, like ants after you’ve stirred up the ant hill with a stick (not that I’d ever do that).

Went into a real estate office yest. to return some keys for my brother (rental) and heard two people yelling at each other in one of the back offices. Didn’t stay long – seems like there’s a bit of stress in the air along with the Christmas good cheer. OT, but I saw an ad for PAID Salvation Army bellringers – and all these years I thought they were generous volunteers, I’m disillusioned. To H-E-doublehockeysticks with Christmas consumerism (unless, of course, someone wanted to buy me a house). And my economic contribution on Black Friday was two cheese enchiladas at the Westwinds Truck Stop in Green River, Utah- pretty good stuff after being in the backcountry eating out of cans for weeks (oh, and later a big roll of Tums).

-Lost

On the government’s plan for the banks to voluntarily keep teaser rates for resetting ARMs:

The devil’s in the details. There are quite a few ways this could be structured, and the unintended consequences are all “interesting” with all of them. I’m taking a wait and see attitude; however, my take is that at best, any such plan will only prolong the crash, and actually *increase* the losses for the note holders. Why? Because all of the plans so far would only help a subset of those looking at foreclosure, and that is just not good enough to prop up the housing slide (for so many reasons).

Any voluntary program by the banks and reluctant investors is based on the thought (hope) that with the “fix”, house prices will start to go up again, after which they can *safely* (for them) take the houses in foreclosure without losing money. In ohter words, it’s better to take less interest $$$ right now, if it saves you big $$$ later…and if the person defaults later, so what, the house will have (hopefully) recovered its value, and you can safely foreclose.

However, if the plan doesn’t actually get housing values moving back *up* again (not just keep them stable), you end up with the situation of losing interest money each year, and then finally foreclosing on a house that was worth even less than when the ARM reset.

The plan is based on the hope of increasing home prices bailing them out…and by doing so, there is hope that home prices will start rising before the new day of reckoning.

E*Trade’s sale to Citadel creates a new migraine for banks. Since the securities traded to Citadel are the ones that banks Marked to Model due to lack of liquidity, there is now a new level II standard for pricing. A 73% discount. Full employment act for accountants. Wheee!

“Morgan Stanley (MS.N: Quote, Profile, Research) may face a fiscal fourth-quarter write-down of as much as $5.7 billion for mortgage-related losses, CNBC television said on Friday.

The pretax amount is $2 billion higher than the amount the Wall Street company said it will write down for mortgage-related trading losses in September and October. Morgan Stanley’s fiscal fourth quarter ends this month.”

Reuters

Don’t worry its all contained.

NEW YORK, Nov 30 (Reuters) - Citigroup (C.N: Quote, Profile, Research) and Merrill Lynch (MER.N: Quote, Profile, Research) are unlikely to fund Nelson Peltz’s bid for Wendy’s International Inc. (WEN.N: Quote, Profile, Research), according to sources, adding another challenge to the attempted sale of the company.

Citigroup and Merrill were expected to commit to Peltz’s bid but elected instead to sit on the sidelines, sources say. Peltz’s Triarc Companies Inc (TRY.N: Quote, Profile, Research) is trying to buy the struggling hamburger chain as the auction for the company nears its final stages.

The decision by the banks to take a pass on Triarc’s offer underscores the impact that the subprime mortgage meltdown and subsequent credit crunch has had on Wall Street banks, which in prior months jumped at the chance to fund buyouts….”
Reuters

They don’t have any moneys.

What me worry?

Canadian Imperial Bank of Commerce (CM.TO: Quote, Profile, Research) could have up to C$10 billion ($10 billion) in hedged exposure to the U.S. subprime mortgage sector, a newspaper said on Friday….”

Oops, only a 473MM writedown expected.

“Expectations are growing that many U.S. and European banks will sooner or later have to cut dividends and more will be forced to raise capital as writedowns on subprime-related exposures pile pressure on balance sheets.

While in public they are giving little away, privately some senior bankers say much of the industry needs to raise capital.

But it will take one major financial institution breaking ranks and announcing a dividend cut to persuade others to follow suit. After Citigroup’s (C.N: Quote, Profile, Research) capital injection from Abu Dhabi, others may also launch into full-blown capital-raising exercises.

The banks most exposed are those with large investment banking businesses whose capital ratios have started to feel the heat from the subprime crisis…..”

Reuters

“Much of the industry needs to raise capital” may very well be the understatement of the year.

I apologize if this is already posted….

U.S., Banks Near A Plan to Freeze Subprime Rates

We have gone through Goldilocks and now we are about to enter Never Never land.
“All you need is trust and a little bit of pixie dust!”

“…He said it was “hard to overstate the severity” of the effect of massive mortgage foreclosures on Wall Street, where exposure to subprime mortgages has been “spread like pixie dust….”

Treasury close to subprime aid plan: sources
Reuters

Dead cats bouncing…

http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=CFC&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=8&freq=1&startdate=&enddate=&hiddenTrue=&comp=fre+fnm&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013

He we are again into the dangerous “Countdown to the Close” part of the marketwatching day…

Countdown to the close:54min18sec
November 30, 2007 3:05 P.M.EST
BULLETIN
Street gets a pain in the tech
Earlier rally dampened by fall in technology sector; Nasdaq in the red
http://www.marketwatch.com/tools/marketsummary/

It was all a 3 card house monte game…

Remember Lance? He’s at it again on bubblemeter.blogspot.com

He writes:

This just in:

The biggest plunge in new home prices in 37 years was not enough to revive October sales, according to the government’s latest reading on the battered housing and home building markets.”

It would be interesting to see a major news organization do a story on how much the bubble myth is contributing to the slowdown. People thinking they’ll get something for nothing if they “just wait”.

You yell “fire” in a crowded theater and people run … even if there isn’t a fire. I’d imagine the people that run feel like real fools when the truth comes out.

My response:

Lance –

Please come back to thehousingbubbleblog so that we can crucify you and your alogical, data-free bon mots some more. We miss you!

Remember readers, if there’s a panic, it’s best to be the first one to panic. If you’re out on the street after somebody yells, “Fire”, maybe it’s time to go home. To your rented or paid-off home, of course.

MrBubble

So much for inflation.

Where is the deflation?

First the mopes hit my supply of chocolate up 120% this year.

Now the price of beer is about to soar.

And the price of Single Malt is going up.

The basic staples of life. Chocolate, beer and Islay

Does anyone feel uneasy about the huge chucks of American businesses (Citi, etc.) that are being bought up by foreign interests who have large numbers of citizens that want to lynch a schoolteacher for naming a teddy bear “Mohammad? This is a far cry from the Japanese buy-up situation circa 1980’s/90’s. I heard a report that if the largest Middle East owners of American debt securities wanted to freeze out economy in one swift action they could do, albeit at great loss to their own interests too. Religious fanatics - I don’t like/trust any of them.

Top 6 banks worldwide by market cap after subprime fallout:

1) Industrial & Commercial Bank (China) $228.7 bln
2) China Construction Bank (China) $153.6 bln
3) HSBC (Great Britain) $134.4 bln
4) Bank of America (US) $134.1 bln
5) Bank of China (China) $132.0 bln
6) Citigroup (US) $108.9 bln