Bits Bucket And Craigslist Finds For December 6, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
December 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Quick question for you all….
We’ve been making offers on houses using a lawyer; it seems he is just filling out the form and charging for his time….could we fill out and present the offer form (VA) and then hand the work off to the lawyer once the offer is accepted. (We don’t want to do all the leg-work, but we are looking for a more efficient way of making offers, we have so many houses in the pipe-line our offers typically are only good for 3-7 days.)
-Lost is NoVa
I don’t know VA, but in the five states where I’ve owned real property, I’ve never made an offer through a lawyer; generally through the seller’s agent.
Good Morning..
If the house is listed with an agency, then just go through the listing agent (with you eyes wide open). If it is a standard listing (not REO, etc.) then just make sure that your interests are protected. These include, but are not limitied to: 1 - home inspection, 2 - financing commitment from bank up until closing, based on the appraisal as close to closing as possible, 3 - get a C.L.U.E. report, 4 - get and review any covenants, deed restrictions, easements, plot plan, association documents, etc., 5 - visit the property location during the AM, PM, twilight, get up at 3 AM and visit the property, do this on weekdays and weekends., 6 - if there is ANY open space near the property, you need to find out what is and who owns it, its zoning, etc.
In some states the Offer to Purchase is nearly as binding as the Purchase and Sales. If you are in one of those states, then an atty might not be a good idea. Here in MA, the Offer to Purchase is usually based a few contigencies and then things are tightened up in the P&S.
The key is to leave yourself an out, before giving the large deposit.
If you have a house to sell and you are putting that in as a contingency, then the wording needs to be crafted to protect you in the event the buyer of your property defaults.
How much is your atty charging you for wrting and presenting the offer?
Ask to be present when your offer is presented.
You can do this even with a REO. Banks, Fannie, Freddie, HUD/FHA and everyone else use a local realtor to peddle their properties. You can do directly to that realtor. In fact, that realtor is obligated to show you the property. Then any offer can be made directly through them.
I bought the house we’re living in now in this manner. Offered on two others before this which fell through, but did the same thing in all cases:
-Saw an ad,
-went to the realtor, -
-told them we wanted to look at it.
-Went back a couple of days later and offered.
No sense in paying lawyers for something you don’t need.
Many REOs don’t require monstrous initial deposits… I never put down more than $500 with the offer.
dude, just use the net and make it fill or kill for 2 hrs !!!!
lawyer, no way- you’re going to need one for settlement etc anyway.
They need 2k+ just to get out of bed
6 foreclosures/short sales in my hood 22151
Hmmm…yahoo foreclosures shows 20+ in 22151 (I say 20+ because some of their listings are redundant).
When we bought our house we just used a realtor and let her do the work. Then we hired an attorney to make sure all was as it should be.
If you DIY, make sure your offer has a “drop dead” date. Such as, “Time is of the essence. This offer is valid until (3 days ahead). If the seller does not respond in writing prior to that time, then this offer shall become null and void.” I am not a lawyer. You may wish to consult one, who would be able to provide ironclad language.
The purpose of this is to keep you out of long-term limbo, so you can look elsewhere quickly if nothing is heard from the seller. Otherwise, the seller could accept your offer a month or three from now, when you’ve already contracted to buy another house.
I get on the internet and email offers at 40% below the list price. I try to find ones that are bank owned or say they are in a short sale situation.
I tell them that I have cash and I can email them proof of funds if necessary. Most realtors will ignore the email but I usually get about 1 out of 7 responding. I just recently had to fill out 3 contracts.
Still waiting for the banks to see if they want to accept my offers. It doesn’t take much time to do all of this.
It’s funny that I have some realtors try to educate me on how “40% below list can’t happen here in San Diego.” I will let you know when I snag one.
On REOs: In general, the bank officer that approves your offer is the same dummy that made the loan. If they can, and they can, sit on your offer so they won’t have to make a decision that loses the bank (their boss) money. Don’t expect a quick response. Just my experience talking.When dealing with banks and or REOs you need the patience of Job.
You’re getting some bad advice here, whether it’s a lawyer or a Realtor get someone or something to represent your interest. If you have to ask the question here you don’t know what you’re doing and it can come back and bite you in the a$$ especially if it’s your first property and/or you don’t know anything about real estate. In the case of a listing agent he doesn’t represent you his fiduciary responsibility is too the seller. I would keep the lawyer if I were you especially if you’re resistant to using a selling agent which you can get for free.
I’ll add this is especially true if you’re dealing with R.E.O.’s they don’t have to disclose anything and are more than willing to pass off “lemons” to the unsuspecting.
Advise…
Be sure you hire your own appraiser for the house you want prior to offer.
Keep the findings to yourself.
If there is reconcilation between the appraised value and what you want to offer, then do you your thing.
Don’t rely on the bank/mortgage companies appraiser. There are still hordes of rubber stamper out there who are starving to death
and who will do anything to eat.
Get a copy of the bank/mortgage’s appraisal and compare reports.
Make sure things reconcile-file a complaint with both bank and your state appraisal standards board if you not major discrepancies in the report.
The rubber stamper appraisers are still out there.
“Be sure you hire your own appraiser for the house you want prior to offer.”
Also, if you are doing it yourself, try to insure that the house inspector (assuming you are borrowing the money, the lender will insist on one) is competent. We had a really good one (a civil engineer with a good rep as house inspector). He went over the place with a fine toothed comb and was able to force the sellers to make repairs and also got the selling price reduced by several thousand dollars. Some house inspectors, however, are very prefunctory…
Deal Reached…
http://www.nytimes.com/aponline/business/apee-debt.html?_r=2&ref=business&oref=slogin&oref=slogin
‘Congressional aides said today. These aides, who spoke on condition of anonymity because the details have not yet been released’
Biggest non-story of the year.
Your right Ben it is a non-story but the MSM will be all over is like white on rice, singing Happy Days are here again.
Politicians will to try to hold back the tide of foreclosures, but it’s akin to pissing into the wind. It may appear to offer some relief but it creates other untidy problems. An overdue economic correction is underway and mere politicians can’t do much about it.
You should have heard the moron Steve Leesman talking on CNBC this morning. The crowd that compares this to the S&L scandal is growing. They are basically saying, “bailout the whole thing”. Thank you comrade Leesman.
I love how the financial industry uses the old Soviet scare tactic of saying, “if you get rid of us it will be a lot worse”. Nothing is too big to fail. Let them all fail and see where we are at. In the future nothing should be allowed to get big enough to be “too big to fail”.
They need to switch the name from Squawk Box to Tool Box.
I’m fumin. so all the bs products, sales tactics ect…were rewarded by this administration. again, back to the bench i go. forget preachin safety/security/affordability. Everyone-go out and get the lowest rate program with the highest risk and dont even worry about it. This is an absolute travesty for ethics.
“Only after disaster can we be resurrected”
Tyler Durden - Fight Club
Agreed. There’s a necessary purging of the financial markets that desperately needs to happen right now. What we need is a little Darwinian ’survival of the fittest’ among banks. Those that can’t cut it really *need* to go extinct.
All this plan does is preserve the flawed elements of the financial industry that perpetuate this kind of irresponsibility.
Japan is a perfect example of how a failure to purge what was a clearly broken banking system ultimately results in an unfixed, no-growth economy for decades.
But instead we pour salt on the wounds by supporting the very system that causes the damage.
“They need to switch the name from Squawk Box to Tool Box.”
HA!
“It’s only after you’ve lost everything that you’re free to do anything.”
Tyler Dyrden, FIGHT CLUB
“What we need is a little Darwinian ’survival of the fittest’ among banks. Those that can’t cut it really *need* to go extinct.”
Those that are too big to survive SHOULD FAIL!
BUST THE TRUSTS!
Right. I finally found enough brain cells to study the outlines of this - blah - a lot of puffery so they can all claim they helped in next years election - actual impact - probably zero, not to mention the litigation that will ensue.
I don’t know if I have enough brain cells, but I find all the articles (including this NYT piece) maddeningly vague. What does it mean that the Bush admin “reached an agreement with the mortgage industry” ? Does it mean that particular institutional lenders have agreed not to reset rates? Does it mean that contracts between private lenders and FBs are nullified ex post facto? I am sure it doesn’t directly affect me, since I don’t write ARM notes; yet I would refuse to do any new lending if I believed that the govt would attempt to nullify legitimate mortgage contracts, and I hope all sources of mortgage funds would immediately dry up as a result of such stupid legislation.
my husband says it’s unconstitutional as well
How dare you ask questions, az. I hope you are well. Stop by any time for lunch.
Maybe it means the mtge industry was told to go pound sand.
What’s a “constitution”? Do we still have one of those?
Well if you didn’t “agree,” I don’t see how you’re bound by this. The thing is, I’m sure that there are enough bond-holders who haven’t assented to this that lawyers are forming them together for class actions AS WE SPEAK.
I believe it was Hoz and another or two here who said this would put 200 years of contract law at risk.
i cant wait to see the specials on 60 minutes regarding how the guy who owns 26 rental properties benefited from the Govt. plan to bailout homeowners.
Sounds like an overstatement. Federal and state law monkeys around with contracts all the time, including ex post facto situations. Best argument against this is not a constitutional one, but a policy one- it screws around with markets. Since the insiders have all colluded in a merket failure that was enormously profitable until all at once it wasn’t, they can’t credibly blow that horn.
This all about sweeping the mess (now known on the lefty blogs as ‘The Sh*tpile’) under the rug so the fiduciaries don’t end up as street-sweepers.
By the time any challenge to the “constitutionality” makes its way through the crappy US courts 5 years will have expired anyway making the whole thing ‘mute’.
Part of the senate hearing that I watched yesterday spoke about modelling the affordability on bankruptcy court hearing. I also heard that they will only be reviewing loans on borrowers with FICO scores under 620-660 (heard both numbers) and that those scores can’t have improved or declined by more then 10 points from the time it was initalized to bailout hearing. Add documentation and affordability requirements to all that and this may help 7% of the people still out there?
Seriously, the only people I seeing coming out of this well are attorneys ringing up billable hours.
Gwynster-
If what you say is true then the only ones who are going to benefit are the lawyers
Actually, because it is being presented as a “voluntary” program, there’s no constitutional issue. The power of the state is being used to coerce, but not, technically, to force. The corollary to this is, without teeth, enforcement is impossible and absolutely nothing can be done if the lenders cheat, evade, and generally try to bypass the agreement. I suppose there could be some side-deal involving the Fed and whether a bank which breaks the agreement can still borrow overnight funds…
The more crucial issue in play is Hillary Clinton’s proposal to place all forclosures on a 90-day moratorium nationwide. Imagine for a moment that this had not been tried in 1933, had not been declared unConstitutional, and had not contributed to the demise of some 3,000 banks during the Great Depression. What are investors in MBS, CDO, SIV or other acronym-mortgage investments going to think about 1) no cash flow for 90 days, 2) no equity extraction for 90 days, 3) no liquidity for 90 days, 4) no way out for at least 90 days plus turn-around, notices and procedural time to restart thereafter? What are the lender going to think about letting deadbeats stay in defaulted loans and properties for at least three more months?
Why can’t I have three months or more with no mortgage payment?
Intervention along the lines she is suggesting was almost inevitable from the start. That doesn’t make it a good idea.
RE: What are the lender going to think about letting deadbeats stay in defaulted loans and properties for at least three more months?
LMAO…They get to feel what it’s like to be landlord before todays’ dog and pony show court judges.
A number of year back while waiting to testify as an expert witness I watched some deadbeat female tenant who told the presiding judge she’s pregnant and had no where else to go.
He says to the landlord, “this being the onset of winter (November), you’ll acquiesce to a 4 month free tenancy for the defendant based on the will of the court for you to act in the role of a good samaritan….”
Whew…didn’t that ruling set off a surge of ugliness in the courtroom.
It was eviction day hearing between landlords vs. deadbeats)
In think the issue was settled when the building burned down a couple months later.
Like az_lender, the MSM stories I’ve read are quite vague and have little in the way of details. Is there somewhere else you’re finding info about this??
I think it is fair to say what the loan servicers can or can not do is largely measured by the terms of their servicing agreement with the loan’s owner. There isn’t a Con(stitutional) Law issue here, simple contract law. Will there be litigation? You bet. But I think it really comes down, not so much to rates resetting that triggers foreclosures, it is the fact that at a FB’s current rate, the costs (interest, taxes, HOA dues, etc.) of home ownership greatly exceed the fair rental value of the property. Couple this with the fact that the loan amount(s) exceed the value of what is now an asset with a value that is going down each day, and the only rationale business decision is to stop making payments, life in the home as long as possible, and take the hit to your credit score. Why? Well simply because it makes good business sense to do so. You can rehabilitate your credit score in seven or fewer years. This market downturn is going to last longer than that………
I think it was pretty easy for the govt to convince lenders to go along. Now they have an income stream from these loans for a few more years. The loans are performing, so they don’t have to be written down. That makes the banks’ balance sheets look better so the execs can get their bonuses for a while longer. Finally, the loss is still far less than the loss they would incur by foreclosing.
On the FB side, home prices will eventually begin to rise again. However, that’s years away. From a purely economic standpoint, most of them would be better off mailing the keys and finding a rental.
On the FB side, home prices will eventually begin to rise again. However, that’s years away. From a purely economic standpoint, most of them would be better off mailing the keys and finding a rental.
That will depend a lot on the ADHD builder boys. If they keep on building then the race to the bottom will continue.
Put yourself in the place of a construction guy’s perspective…
These were the guys that made the Great Deployment of Ponzi (GDP) possible, when you get right down to it.
Without them building a gazillion unneeded houses, the most important cog of the Game just isn’t there.
Maybe this continual building and completion of yet ever more homes, is a parting gift from the powers that be, to those that made it happen?
In the Central Valley, every small guy builder (used to build a dozen houses a year, ramped up to 50) is broke, and their 30-pack housing developments are stillborn, usually only the grading and compacting has been done and not much more.
I could take you for an hour drive-by and show you a baker’s dozen of them, they’re everywhere.
But somehow, the corporate housing developments soldier on, building.
Why?
RE: their 30-pack housing developments are stillborn, usually only the grading and compacting has been done and not much more.
I could take you for an hour drive-by and show you a baker’s dozen of them, they’re everywhere.
‘90/’91 bust re-deux.
How long does a lender’s memory last?
About 10 years.
–
Biggest story of the year is — falling prices. It is the falling prices that caused “the crisis.” And the “plan” will do nothing to stop the falling prices. If anything, it will accelerate the fall in prices. Govt. intervention is the worst thing, long-term.
Remember: Rise in prices lead to rise in prices and fall in prices lead to fall in prices. The reversal of a trend is an after the fact event.
Jas
Yep, get ready for long term rates to go up. This will just push off this problem into the future. They will default, just not while Paulson and Bush are in office. Make it Hillary’s problem. She seems to be using it to try and get elected. Then what? She will be worse than Jimmy Carter IMO.
We need a FED with a backbone like Volker who raised rates and killed the back of inflation and oil prices. Bernanke is a little dweeb. A creampuff who is Wall Street’s biotch.
“Yep, get ready for long term rates to go up.”
L-t rates are contained by the recession hobgoblin.
–
Hillary will be able to blame Bush just as Bush blamed Clinton for the 2001 recession and job losses during 2002. Ain’t the two-party system wonderful — a regime change after a the growth in the business cycle ends?
Jas
Jas - I don’t even see it as regime-change any more. They are just two groups of the same ever-bigger interventionist government and will at any cost protect Wall Street, Big Oil, the MIC and Israel. They all stink. This pre-election baloney is all as phony as a cheap line at one of those one-minute dating events.
oh please … you start to sound like a broken clock named Prechter. The big story is that the burocrats are no longer able to contain inflation despite their manipulations of the CPI. CPI is up bigtime everywhere you look, but Jas keeps talking about falling prices …
–
“but Jas keeps talking about falling prices … ”
There still is low level of inflation but there should be outright deflation by 2008Q3 (my longstanding forecast).
Jas doesn’t just talk about falling prices (I enjoy them too!) but I put my money where my mouth is — US Treasury market. I have the best record in forecasting the long-term UST prices and I have been selling naked puts on long-term USTs (a bullish position) for more than 15 years (the bull market started more than 26 years ago).
Jas
self-congratulation does not become you.
–
This sort of ridiculous comments are constant attempts to discredit my current low inflation view and deflation forecast and nothing more. I am simply stating my record.
Inflationists are the biggest dopes around and they are as bad as housing bulls a year, or two, ago that claim that home prices cannot go down.
Jas
At the risk of making myself not so anonymous, and except from a some comments I will make tomorrow to investors:
——-
That uncertainty, and uncertainty about what regulators can and will do, is causing a lot of volatility in financial markets. Choppy markets are bad for black boxes programmed to trade in last year’s environment. They’re great for traders who have an idea about where this all is headed.
My view is that we are in a Minsky moment. The expansion of debt has outpaced growth in people’s ability to eventually repay it, i.e., income. The broader money supply will now contract no matter how low interest rates go. Bernanke will continue to cut rates, but those rate cuts will not have the same effect Greenspan’s did in the early part of this decade. When banks have capacity to lend more, and borrowers have capacity to borrow more, a decrease in short-term rates can stimulate long-term lending, and thus spending, and thus either output or asset prices will rise (probably both, sometimes one more than the other). When banks are not sound, a decrease in short-term rates will help to make them a little better off, but credit will still contract. We are seeing that today. Even with a decrease in short-term rates, banks are no longer pouring money on the economy. The M3 has already been so far inflated that the only thing that could inflate it more at this point is a vast number of permanent repos of asset-backed securities. That’s the equivalent of printing dollars, and it would cause hyperinflation in the blink of an eye. I don’t expect that to happen. I expect contraction of credit and a long period of asset price deflation.
You might get the sense from some of my comments that I have a bit of hosility toward the Fed, and that’s true. I think we all should be angry, because this mess never should have happened. In his 1941 memoir, Herbert Hoover wrote, “There are crimes far worse than murder for which men should be reviled and punished.” These are strong words from a civilized man. It’s hard to believe he was referring to the actions of Benjamin Strong as President of the New York Federal Reserve Bank from 1914-1928.
What was Strong’s crime? Starting in 1925, he pursued a policy of artificially low interest rates in order to help devalue the U.S. currency relative to sterling and provide cheap financing to post-war Europe. The monetary easing also caused domestic credit to spiral out of control and fueled the stock market bubble that peaked in 1929. If it hadn’t been stocks, it would have been something else. In a monetary expansion, the money has to go somewhere. If the expanded credit is used to purchase assets, it boosts asset prices. The beneficiaries of credit expansion are those who held more assets at the time the expansion began. The losers are those who buy those assets at the peak and try to sell them later, when credit inevitably contracts.
To be fair to Mr. Strong, historical evidence suggests he was an idiot and had no idea what he was doing, so I doubt he truly had any criminal intent. I can’t offer the same defense for our Fed. Not only did the Fed know what was going on, it engineered what was going on, and it has as much as admitted that fact.
In a speech about monetary policy on November 5th, Fed Governor Frederic Mishkin stated, “Lower rates reduce the cost of capital for borrowers and therefore encourage investment. They also generally boost asset prices, thereby increasing wealth and encouraging consumer spending.”
Boosting asset prices is completely contrary to the Fed’s goal of price stability. Not only that, monetary shennanigans can exacerbate normal credit cycles. They are much like financial statement shennanigans. The Fed can manage GDP in the short run through misuse of policy tools. But the shennanigans can’t be sustained indefinitely, and the longer they go on, the bigger the mess that must eventually be faced. The Fed manipulated the wealth effect so that windfalls from higher asset prices would make people feel richer, and this would make them spend more. But saying this makes our economy as a whole better off is like saying a company that issues a million dollars in bonds is richer afterward because it has $1 million more in assets. What about all that debt?
And that is the central question now. What about all that debt? A credit expansion that fuels real investment brings future growth. A credit expansion that fuels current consumption brings future pain. As credit contracts, asset prices fall, and as asset prices fall, credit contracts further. This de-levering is a process that will go on for some time. It will wreak havoc with banks’ balance sheets. Most market participants will continue to be surprised by the extent of asset write-downs and by the effect of leverage working in reverse. Uncertainty creates market inefficiency, and inefficiency presents a lot of opportunities.
The view that the Fed will create hyperinflation is inconsistent with a view that house prices will go down. True believing inflationists should buy now, lest they be priced out forever.
Hyperinflation is the by-product of slipshod reasoning, gone wrong.
*hugs Anonymous coward*
Been giving the same speech for a while now. While people believed I was insane before are coming around regarding the housing market (I love those who STILL disagree - NOT), only close friends, associates, and select members of our portfolio mgt group here regard credit destruction and its effects on the currency as anything other than the ravings of a drunkard (who oddly doesn’t drink…)
Anonymous Coward, You state this is what you are telling investors. I, currently have 2 brokers who in my opinion have little understanding of what is getting ready to take place. They lack a true macro economic view and are too wrapped up in the details of charts and company driven analysis. I am a HNWI who has been looking for a new broker with similar outlook. I agree wholeheartedly with what you are saying. I live in Socal but 1 broker is in Kansas City and the other is in Chicago, any recommendations of where I can find a broker with similar views? If anyone else has ideas I am open to suggestions.
Shakes,
I’m sorry, I should have been more clear. I don’t personally manage other people’s money, only my own. I have a different role within the investment community. This talk will be mainly for investors or those with an interest in investing. I talk with a lot of people from various corners of the investment world, and the only people I’ve met who really seem to get what’s going on are at hedge funds. If you are a qualified investor and are looking for more yield than cash can provide (zero), you might want to look into hedge funds with contrarian/value or specialized strategies. Many hedge funds will die in this fall out, but some will make a killing. Obviously, I don’t know much about your situation, so I can’t say whether this would be appropriate for you. If you decide to look into it, either of your brokers could probably get you access to a variety of funds. You will have to bypass your brokers’ sell and look at all the marketing materials and PPM’s yourself to find one that seems to get it. Beware of “value” funds whose idea of value is buying at 10 or 20 or even 50% off. The discount from peak price isn’t what’s relevant. Make sure they are looking for true value.
Thanks, I didn’t think you managed peoples money but seemed to be in the financial world where they were not toting the party line “Fed will Save us” “Don’t bet against the consumer”. I appreciate the advice. I am already in some company driven hedge funds that are shorting housing, REIT’s, a currency Hedge fund but all these are ‘canned’ hedge products for the layman. I am looking for a broker/investment group where I can discuss macro economic issues and discuss direct investment plays in those areas. I have been accumulating cash as I have sold off my consumer discretionary, etc, and feel that time is running out on playing the coming change. I have been reading and analyzing things on my own and have come to the same conclusion as you but I don’t know any others who share the same beliefs other then those who post here. I don’t buy mutual funds unless it is an index fund in a very specific area that my knowledge is lacking. Thanks again! Shakes
Shakes,
If you find anything, please post it here (a few times, just in case some of us miss a thread).
Good luck!
Arnold Schwarzenegger’s + Shrub Bush = 21st Century Fox Premier:
“Twins ll”
’ssshrubery is like his Mussolini, i’d imagine…
More powerful @ first, a laughingstock later.
A nice shrubbery . . . not too expensive.
ARTHUR: We are looking for a shrubbery…
CRONE: Aggh! No! Never! We have no shrubberies here.
ARTHUR: If you do not tell us where we can buy a shrubbery, my friend and Iwill say… we will say… ‘ni’.
CRONE: Agh! Do your worst!
ARTHUR: Very well! If you will not assist us voluntarily,… ni!
CRONE: No! Never! No shrubberies!
ARTHUR: Ni!
CRONE: [cough]
ROGER THE SHRUBBER: Are you saying ‘ni’ to that old woman?
ARTHUR: Erm, yes.
ROGER: Oh, what sad times are these when passing ruffians can ‘ni’ at will to old ladies. There is a pestilence upon this land. Nothing is sacred. Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
ARTHUR: Did you say ’shrubberies’?
ROGER: Yes. Shrubberies are my trade. I am a shrubber. My name is Rogerthe Shrubber. I arrange, design, and sell shrubberies
keep your FICA low to qualify !
quick, think of a gov program that does not create a moral hazard
Port inspections
A rumor of an agreement to discuss a plan to explore some options to take some steps to develop a strategy to study the……oops, out of time. Next!
lmao…”you in the back of the room ..you have a question?…wait I can’t hear you…someone go back there with a microphone…I can’t hear the question damn it…I sorry sir… your three minutes are up…”
“‘Congressional aides said today.”
Congresspersons mostly leave the heavy lifting to their aides. Policy, writing of bills, etc. A lot of people don’t realize that. If you happen to have a chat with a congressional aide or two, as I have, you’ll realize how much trouble we’re in. Some of them can’t string two sentences together coherently. I think they just submit proposals and bills that the lobbyists give them.
I heard that. It’s hard for me to keep calling when these dimwit aides can’t even understand the topic I’m calling about.
Maybe I should just call and say “No bailouts. No bailouts.” over and over like “Om. Om.” Simple enough?
My concern is when this does nothing because Group 4 is a tiny group and most won’t qualify, then they’ll step it up to the next group, etc. Other concern is when this doesn’t really help the banks, will they do some emergency subsidizing like they did for the airlines after 9/11? I think what has some worried is it’s a big old slippery slope.
“Biggest non-story of the year. ”
MISSION ACCOMPLISHED… part 2
What does this mean exactly in real terms? Will forclosures now be significantly reduced? Will housing prices not fall so much anymore? Anyone have an analysis of what effect this non-sense will have?
-Lost
If it really happens, credit will tighten up further and faster than you would believe. There will be a fraction fewer houses on the block, but the ones that are being sold (for reasons other than forced foreclosure) will have to be even cheaper because of the much tighter credit.
This might bring on Popcorn Neil’s prediction of 25% minimum downpayments faster than he ever imagined.
And this might happen even if the deal doesn’t finally go through. Or if it goes through in theory, but only a few thousand work outs ever happen.
By the way, being leaked by “congressional aides” is the vaguest leak in Washington. It doesn’t even say “senior aides” or specify the committee they are connected to. This is what the aides demand to be called when it is supposed to be as untraceable as humanly possible.
And the howls from the FB’s who have already had resets they can’t afford will ring from the rooftops. The deal that was announced yesterday only kicks in for resets that start in January. It doesn’t rollback resets that have already happened.
The only group this “first plan” will help is Group 4. That group is so small that this is just a joke. But don’t kid yourselves. This will be followed by one stupid, naive idea after another. The blowhards will be blowing hard on this. You don’t need a weatherman to know which way the wind blows. It appears that Hillary will be blowing hardest of all.
It would be illegal for the government to provide “new money’ for refinance loans to FB’s because the value isn’t there, and they would need to have a bogus appraisal to do it . This is why they are going for modification of old money route on this bail-out plan .
I think no and yes.
“The administration plan is designed to deal with the crisis by letting subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is hitting many parts of the country.”
One thing that we have to consider is that the above plan is just the first bite of the apple. Expect more to come once the government gets a taste of breaching 200+ years of contract law unless the market reacts violently. Creeping socialism is very difficult to guard against when done in increments for the “good of the common man”.
So if they miss one payment does the rate reset? Is it like credit cards? What if you miss your credit card payment? Can your house price reset if your credit score changes?
Won’t work in Clownafornia! FHA rates are too low Bush and Terminator. If they raise the limits to $1,000,000 like Ben wants, I’ll take out a reverse mtg.Wait, my FICO is too high. Honey, don’t make the credit card payments this month so we can lower our score from 800 to 640. hehehehehehehe
Boy if I had a rate increase scheduled for two weeks from now - I’d be one pissed off dude.
Unfortunately, this deal will do nothing more than prolong the agony. Why postpone the increase for 5 years? Presumably the expectation is that some some equity will be built up by then. Wrong. Prices are going to continue declining, offsetting any meager equity gains from paying down principle the first few years of the mortgages. People with ARMs will still be underwater in 5 years, and they will still mail in the keys. The difference is now they have 5 years of anxiety and dread before that time.
Thank you Bush and Paulson - you just postponed the economic recovery for 5 years.
It may make the housing bubble deflate faster, if it kills the high-risk mortgage market. Government programs usually end up making a situation worse.
Meanwhile, all the bail-out hand-wringers can wallow in angst. Lots of good it will do them. I prefer to deal with facts as they come down the pipe.
I prefer to deal with facts as they come down the pipe.
——————–
By then it’s too late.
IMO, we need to figure out a way to bring all concerned parties together in one group (the people who hold these loans & attorneys & bubble-sitters & renters & “qualified” owners who can’t get a cheap loan, etc.).
We need to be heard, loud and clear, that the PTB who force this bailout will have to contend with a large group of people who object to it — and demand compensation for damages.
We need to fight this.
We need to fight this? As was said:
‘being leaked by “congressional aides” is the vaguest leak in Washington. It doesn’t even say “senior aides” or specify the committee they are connected to. This is what the aides demand to be called when it is supposed to be as untraceable as humanly possible.’
And it’s voluntary! No bill to oppose, no sponsor to call. Go ahead, call the White House, That’ll be a good use of time.
I got a better idea. Go on the Ellen DeGeneres show and call. Maybe then you can get through.
Jenna Bush to daddy. “Daddy, will this help my friend Lisa from losing her home by buying more house than she could afford.”
Daddy Bush, “Yes honey, this is designed to reward the wreckless and punish the responsible. That is what I have represented for 8 years and I sure ain’t gonna stop now.”
I am floored that in one year we have gone from NO housing bubble (as per the disinformation distribution system aka MSM) to a situation where the president is going to propose a bail out! But….as per the MSM there is no further effect on the broader economy, the stock market needs a cut in the FF rate because things are so bad but the indicies are close to all time highs and looking to rally further. Never seen anything so distorted from actual reality without taking LSD.
I totally agree ! This whole situation is surreal because its based on denial. Everything is deny, deny, deny, then panic. If we would just accept things as they are up front, we could react instead of panic !
It is one of two things
Ignorant is bliss or they
Can’t handle the truth, I guess it would be hard to handle, realizing your a idiot.
Got 25% down? or a 100 oz silver bar?
You are right, Ben. As individuals we can just keep doing what we are doing. Work hard. Save money. Educate the morons. Enjoy life! The rest will happen whether we fret or not.
Bush is the worst President that I can remember in my 48 years. I have all sorts of things to say, but I probably already said them over the last few weeks. I’m frustrated and fuming. I guess I was originally projecting the bottom of real estate prices to be 2012 and was not going to buy until at least that time anyway. That’s 5 years, the duration of the freeze on rates.
If I believed in God, I would kneel and pray my darnedest for this to backfire big time on those people who are bailed out.
“Bush is the worst President that I can remember in my 48 years.”
No argument here.
Gotta agree with you on that one Bill.
Sorry, I still put Carter as the worst, but Bush is certainly doing his best to place in the bottom three.
“Bush is the worst President that I can remember in my 48 years.”
Testify, brothah!
I’m not sure…. Have you forgotten about phase I-phase III, Nixon’s series of wage and price controls?
That’s right. We have the capital. The fools they think they are trying to help - do not. We have time. The fools they think they are trying to help - do not.
Stand pat, and in the meantime…don’t buy their garbage! (at least big ticket items and from big chain stores)
Jimmy Carter was president just 30 years ago. You have a short memory.
I can’t believe anyone ever fell for bush to begin with. I’m probably a minority that isn’t surprised by anything that has happened since he was elected - it’s just as bad as I thought it would be. I was surprised that more didn’t get it after the 1st 4 years and he was re-elected. I guess as long as people could use their houses as ATMs and live the so called good life, they didn’t have to see what was really happening with loss of jobs and wage stagnation.
I am not going to be very popular, but I think Mr. John Kennedy was the worst president. The current President is a close 2nd. Every current program that is swamping the country with debt was initiated by Mr. Kennedy. None were approved until after his assassination. Thus President Johnson gets credited with “War on Poverty”,”The Great Society”, “Economic Opportunity Act”, Medicare and Medicaid expanding governments role in social welfare programs. Today the unfunded portion of these actions are $44T. In 10 Years from initiation The Economic Opportunity Act tripled the size of the US government.
I’m not sure…. Have you forgotten about phase I-phase III, Nixon’s series of wage and price controls?
Our current president makes Richard Nixon look like a sweet, honest, thoughtful man.
My father disliked tricky dick with a vengeance and perhaps his happiest day politically, came unexpectedly in August 1974.
Funny, but you’re right.
Nixon looks like Einstein to, Bush’s Beavis
RE: I can’t believe anyone ever fell for bush to begin with. I’m probably a minority that isn’t surprised by anything that has happened since he was elected
The dog and pony show of Oprah, Obama, and the Clintons must just send you all ‘a tizzy!
I’d be in the minority who told my friends who voted for Bush “I will hold you personally accountable for everything which will happen.” I do hold them accountable, but all of them seem genuinely surprised and disappointed. They really didn’t seem to believe that he could do as much harm as he has.
This does nothing to soothe my ire nor to restore the damage done to the US, to the economy, or to the world, but it keeps me on speaking terms with them.
Also, before I get branded as a screaming lib, I’m nothing of the sort. I’m a rational, careful person who prefers to consider people on their merits, what they can and cannot do. “W” simply does not have the caliber to do the job correctly, and is not smart enough to realize when he is woefully out of his league.
People who defend the Bush administration by mentioning how bad other presidents have been are missing an important point.
The Bush presidency coupled with Republican control of the House and Senate were supposed to right the ship of state and clear away years of “liberal” abuse.
Instead we have never-ending wars, out-of-control health and energy costs, an unwinding economy, a tortured Constitution and numerous indicted and/or resigned, formerly highgly-placed public officials.
You’re doing a good job, Bushie!
And let me add that personally, I believe in the two-party system.
I think we get the best government when one party is control of Congress and another is in the White House. I don’t care which is where, but that way they spend so much time fighting each other that they have less time to cause problems for the rest of us.
I’m fiscally conservative and socially liberal.
RE: I am not going to be very popular, but I think Mr. John Kennedy was the worst president.
Ditto here, HOZ.
LBJ was no prize either.
And I always thought I was all alone in this.
Some people have figured out how to earn a decent living by wallowing in angst.
I’ve always prided myself on my persoanl ethics. I’m honest, hardworking and believe in being good to my fellow man. When I see all that has gone on in the US the last 10-15 years and how the majority of people are struggling to make ends meet and are falling behind more and more each passing day I began to wonder if I should be playing the game of life in a more malicious manner. If I keep doing what I’ve been doing I keep falling further and further behind like most people. I have a family to cloth and feed. I don’t want to be rich- but I cannot afford for my standard of living to constantly continue to fall. When you all say don’t worry about a bailout it won’t work- don’t you see that you are falling behind even more. The govt. both parties have shown who they are looking out for. It is people that are greedy and people that are irresponsible. I am realizing that if I don’t play the game as others are playing, I will keep falling behind. Now that I realize this, will I decide to play the game of life in a “cut-throat” manner? Food for thought…
gb - patience, patience. Wait for this little brou-ha-ha to wind down. By the time the dust clears, most of the people who play fast and loose will be bankrupt, but the honest and hard-working types will endure. If that turns out not to be the case, well, Bonnie and Clyde were folk-heroes for a reason.
I am realizing that if I don’t play the game as others are playing, I will keep falling behind. Now that I realize this, will I decide to play the game of life in a “cut-throat” manner? Food for thought…
The simple answer is don’t play the game they want you to play. My theory on life is “Be the contrarian”.
The massses buying expensive SFH’s that defy the traditional standards of affordability and sustainability and only pencil when appreciating? Buy multi’s that cash flow…
Wages not keeping up with inflation? Earn more: By choosing high demand, high barrier-of-entry jobs that will continue to experience growth in the future (hi-tech network/security/data is a good bet). By investing in higher education that makes financial sense (i.e. no ivy league education degrees). By having less debt and living below your means(i.e. more to save, earn interest/dividends on, and invest)
Been laid off numerous times or worried about your job security? See above, but if that doesn’t work, work for yourself… Start your own business. Be an entrepeneur. I know it’s cliche, but our economy is too dynamic and unstable to allow for consistent W2 employment for the individual. However, our economy has evolved into the real and the virtual… something that didn’t exist two decade ago, but that will continue to grow in size and importance. If you need an example, look at our fearless leader Ben Jones: he created a virtual job and real earnings out of his questions regarding the housing bubble.
Notice that I never said you need to be cut-throat to succeed in the game. Bottom-line: Play to win, but don’t sell your soul or conscience in the process. If you can’t win their game by their rules, change the game…
RE: hi-tech network/security/data is a good bet
NE~
With no disrespect…
Exactly WTF do jobs like tech net-working and data security throw into the physical goods consumption pie?
Exactly WTF do jobs like tech net-working and data security throw into the physical goods consumption pie?
hd74man,
My point was only to illustrate current jobs with strong current demand, likely high future demand due to growth and increasing complexity, and high barrier of entry, i.e. BA/BS, industry certs like Cisco/Red Hat/EMC/Oracle, and hands-on experience. These positions are difficult to fill and pay quite well (often six figures), depending on the market, industry, and level of experience sought.
I make no moral judgements regarding hi-tech work and productivity vs. “the real economy”, except to say that in my case my employer, which manufactures, markets, and sells lighting, is able to run it’s enterprise software with less downtime, better performance, and less cost due to my direct efforts. This allows for a more productive sales force, back office, and manufacturing floor as well as more timely business intelligence for the executives running the company and making strategic decisions regarding business expansion and hiring. I am but one cog in a machine, albeit one not easily or lightly replaced…
I don’t want to be rich- but I cannot afford for my standard of living to constantly continue to fall.
The question of “maintaining one’s standard of living” is not specifically tied to housing values or this bubble, but rather to understanding the nature of our economy and improving one’s chance of profitable employment/business with strong demand. There are no certainties in life except death and taxes I’m told. Hence, all you can do is try to improve the probabilities of success in your favor…
I don’t know… can this make the market for subprime mortgages implode any faster than it already is? Increasing risk perceptions mean that E-Z money is disappearing irrespective of what the government does. Of course this would seem to make it clear that the implosion is affecting ALL mortgages, not just “subprime.” Any system where people are only lent money if they have a reasonable chance of carrying the loan to term and paying it off ENSURES a popping of the bubbly markets. I have this unhappy suspicion that the intention is to give the government enough time to come up with a bailout plan.
Personally, I feel that this deal is driven by fear on the part of the large lending institutions and their investors. When one looks at the details of many of these sub prime loans, it’s obvious that the borrowers never actually intended to hold them for very long. The plan was either to sell the house for a profit before the loan reset, or refinance into another loan - “liberating” the increased equity. In the current environment these options have changed to financial ruin followed by foreclosure, or preemptive foreclosure (short sale, jingle mail, move away …) and ending up with enough to start over. Either way these loans are not going to be repaid - and Wall Street knows this (as shown by the difficulty in selling CDOs at any price). I believe that the possibility of mass foreclosures is a reality in some places, but the real danger is a change in the mentality of the FBs. If the “housing is always a good investment” mantra is replaced by “screw it - I’m not taking a fall for Wall Street”, the losses to the financial institutions will be enormous. The politicians did not push this deal on the lending institutions, these people are not stupid and realize that keeping a critical mass of FBs in their houses is in their best interest. IMHO, the terms of this agreement will be carefully tuned to minimize the losses to the lenders (and bond holders).
On a related topic, I find it interesting that the media always portrays FBs as victims fighting to keep their homes against overwhelming odds. Nobody seems to realize that their best move is to mail in the keys and move on. While I’m not one for conspiracy theories, it seems that a considerable effort is being made to support the assertion that housing is a good investment for everyone.
Victims of greed and/or stupidity is more like it. Many that never even thought of owning a house jumped in because they thought they could get rich quick. Buy, take out equity or sell, spend and repeat. These weren’t their american dream houses, they didn’t intend to live in them more than the time it took to extract their riches. Money for nothing and the chicks are free!
sorta like buying a convertable stock at yesterdays price- less downside and no upside
Why postpone the increase for 5 years?
Because Hillary would have JUST been reelected. After that happens, to hell with the FB’s. It’s all about appearances. Don’t forget the bushies and clintons are friends.
In 5 years on a 30 year fixed you probably won’t even be paid down $5k on a $100k loan. Remember, each month the difference in interest is added back onto the principle and the interest is calculated on that new number. Talk about backwards compounding. All this while the real value of the house is dropping 50%. Guess what we’ll be reading in the headlines 5 years from now.
This deal is designed to entise homeowners not to just hand in the keys. It gives them false hope but they will still get it in the end.
…and get it in the “end” they will
You don’t qualify if you are upside down, which will exclude a lot of FBs. And of course they are excluding flippers. I heard someone (can’t remember who) claim that it will only help 25% of them.
That means that inventories will remain high, thus prices will continue to fall. Just my theory.
Inventories? Right now, millions of construction workers are getting ready to go to work on hundreds of thousands of house sites. This will continue until prices fall enough that builders are forced to stop.
–
Ben,
“But Phillips sees an opening to revive the stricken business: plunging construction costs. He says that prices of finished lots, equipped with roads and utilities have fallen from around $135,000 to $75,000. The cost of construction has gone down around 35%, from $85 to $54 per square foot. “Developers can now sell their houses for at least 20% less than a year ago and still make decent margins,” says Phillips.”
Q: If land prices fall 80% (they went up four-fold, locally, in a 15-month period), materials fall 20-50%, and the labor falls 15-20%, what will it do to the cost of new homes for the builders?
Can’t builders sell homes 30% below the peak prices and still make some profit? Prices will have to fall minimum 40% to stop adding to the Vacant Units, no?
Jas
$54 per sq ft?
hahahahahaha…
I can’t wait to see the finished house.
Gosh, maybe this will let them follow the market down like the FBs.
To answer your question. Yes. The homebuilders need to build to eat, so they will help drive prices of existing homes lower and lower by building more and cutting prices.
And once that happens they will all be out of work and will default on their homes. That’s the fallacy in all of this. Where are the jobs going to come from? McDonald’s? Wal Mart? It would be funny watching the gov’t tout the jobs figure. To bad they don’t report salaries but again, that is skewed with the likes of Icahn and Wall Street getting richer at everyone else’s expense.
I read somewhere that the government tallies McDonald jobs as manufacturing…….
Yup.
Thats right they are still building home sections at the lumber yard near where I work. Forklifts and railcars dozens of workers lots of noise, etc. This is in AZ- Chandler blvd and the rail line just east of interstate 10. Next to the big auto Auction.
You don’t qualify if you are upside down
So is this more properly described as an Alt-A bailout plan?
Can anyone verify cynicalgal’s information that you won’t qualify if you’re upside down? Because the article says that this will affect mainly mortgages after 2005, and those mortgages are by definition underwater, unless they had very large downpayments (doubtful.) So nobody would qualify.
I think by “upside down” she meant not current on payments. Clearly, almost all recent subprime mortgages are upside down in the sense of being large than the current market value of the property.
I heard it on CNN this morning and now I can’t find anything on-line to confirm it. Except that the pols are whining that it’s too narrow. So the question remains.
Get public acceptance on the concept then change (backroom) the terms that were initially put forth. Standard ops, check history of Social Security for details.
OK, I’m not the only one who heard it, but I’d still like to see something in writing…
http://atrios.blogspot.com/2007_12_02_archive.html#4418914335136725009
I think this is nothing more than an excuse for a 275 point monster rally today.
Buy the rumor. Sell the news.
PAULSON VS. FREE MARKET
http://www.gold-eagle.com/editorials_05/pento120507.html
Great little article.
Thanks, wmbz, I feel better now.
I think very few will qualify under this program because the window of loan origination eligibility (Jan 05 - July 07) many sub-prime borrowers availed themselves to no money down loans (e.g. 80/20’s etc). Thus many of these folks are underwater, which excludes the borrower from the program. Many of the 06 vintage sub-prime originations defaulted already because they really could not afford the low teaser rates. Take away the speculators and those who can afford the adjustment (most likely to be adjudged by/from the lender’s perspective) and the fact that prime/alt-A borrowers cannot participate and VOILA you have political eyewash that helps virtually no one but the politicians.
1) Subprime borrowers are going to walk away if under water.
2) To prevent this from happening, lenders/bondholders will have to drop monthly payments (PITI) to less than equivalent rent.
I think very few will qualify under this program
True, but if this is a typical gov’t program it will expand over time to cover more and more FB’s.
I think you are right. I’m listening to real estate cheerleader shill Dave Ramsey as I type this (Fox Business Channel). He’s citing percentages. 1.1% of all mortgages, he claims, will be eligible for this bail out.
If it’s true that only owner-occupied homes, not specuvestor homes, are effected. it takes a lot of the greed out of the bailed.
I do fear creeping socialism. It’s another bad precedent from the political party that talks the talk of free market but walks the walk of the nanny state.
Tsunami of foreclosures
Waving false hope
Serfs wipeout
Is the payment frozen, or the rate? If I understand correctly, there is a big difference on a lot of these loans. I’m thinking option arms, where neg-am was being applied. Even if the rate is frozen, isn’t the required payment likely to take a big jump as loan/value increases (dropping values, interest accruing), and interest only periods expire?
..slap some lipstick on that ball-n-chain..
Even the San Francisco Chronicle (Kathleen Pender) is pounding this thing flat. Online vote is 90% against.
What’s useful is that all the comrades in Washington have shown their stripes: the socialists and the banksters have elevated our contract credibility to that of Argentina, almost.
With apologies to any Argentines on the board.
Hey, ya oughta apologize to Socialists as well … most lefties I know vomit at the thought of petty bourgeoisie receiving more “wealthfare” from the government so they could continue to piggishly chow down on an inordinate share of the national wealth.
How is a 2500 sqft McMansion “each according to his needs”?
The FBI today will launch a mortgage fraud task force in its Washington field office, joining a widening net of state and local investigators digging into the market crisis.
Investigators are seeking to uncover evidence of overvalued home appraisals, shoddy lending practices and alleged irregularities in the packaging and sale of groups of loans that were marketed to ordinary investors, state investment funds and big Wall Street banks.
Whether heightened government scrutiny following billions of dollars in investor losses will result in a spate of criminal and civil cases remains unclear at this early stage. People involved in the probes say the critical question is whether companies or individuals knowingly violated the law in a desire to make money or avoid losing it as the housing and mortgage markets soured. Without questionable e-mails, it could be difficult for investigators to make a case that higher-level bankers, lenders and others knew about the troubled investments, former prosecutors said.
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/05/AR2007120502612.html
Fraud! I’m shocked!
Let’s start building some new prisons. We need lots of room for the white collar criminals that always get off.
Just put razor wire around some of those crappy exurban developments, say in the inland empire. There’s plenty of space out there.
Send them to Maricopa county so they can wear pink underwear while sunbathing in 139 degree heat.
LOL, Jim! We had been speculating about what to do with the IE - your idea fits the bill perfectly.
Wait, why not just turn Manhattan into a prison and let them try to Escape from New York
“I thought you were dead.”
“Yeah you and everybody else.”
Kurt Russell returns as Snake Pliskin in: “Escape from Fresno”
Auto Loans…. I guess the next thing will be a “freeze” on past due auto loans. Just keep on rewarding the deadbeats, they have to have a car to get to work to make the frozen payment on the house and car they can’t afford.
http://online.wsj.com/article/SB119690536188815285.html?mod=hps_us_whats_news
At least to cram down a vehicle loan the borrower needs to spend a lot of money on bankruptcy reorganization.
Any indication as to what happens to the amortized debt under the teaser loans? An extra five years of 1% interest is going to leave the borrowers way, way underwater, and will hardly help CDOs become marketable.
Car loan cramdowns were common in the 90s in chapter 13s.
“Auto-loan defaults tend to be event-driven, like a job loss or an unexpected health-care bill or a divorce,” says Dan Berce, chief executive of AmeriCredit Corp., one of the country’s largest subprime auto lenders. “We watch quite closely economic indicators like unemployment rate, weekly job claims or hours worked.”
I think the “event” is that the home based ATM is finally empty. FB onversation- Marge. why don’t we both buy a $35k SUV and we’ll pay for them with another home equity loan! After all, home prices never go down!
Event driven? They forgot the classic: crash without insurance.
euro/dollar battle:
the euro took a severe plunge against the dollar over the last 24 hours or so. The question is if insiders know that the ECB is throwing in the towel and will not raise rates (as required, most of all because of raging inflation in Europe)? The other explanation could be that this is ECB currency intervention to ‘reload the gun’ in case of a 0.25% rate increase this afternoon. It’s decision time for the burocrats!
On another note: official inflation in most of Europe is now above 3%, even according to the heavily manipulated EU CPI calculations. Only in Netherlands the official CPI is just 1.9% and of course, that has everything to do with the Dutch housing situation. In the Dutch CPI calculation rents are very important, and at least 75% of those rents are under government control. Even while rents are often unrealistically low compared to Dutch home prices, they were not allowed to increase more than 1.5% this year (result of a deal between Labour and the conservatives to leave the HMD and other homeowner subsidies unchanged …). Very convenient for our Ministry of Truth, now they can wait another year before switching to a CPI calculation based on home prices instead of rents. I’m sure the proposed switch will occur after the housing bubble starts deflating.
Luckily all inflation is local, right?
China Business
Dec 5, 2007
THE BEAR’S LAIR
The coming China crash
By Martin Hutchinson
While the Chinese stock market, as measured by the China Securities Index 300, is down 18% since October 16, that follows a period of almost two years, since January 1, 2006, during which the CSI 300 soared 535%. Chinese economic growth is currently running at more than 11% and the big money is convinced that it will continue. At the same time, the country’s foreign exchange reserves have grown to US$1.4 trillion, the largest in the world.
http://www.atimes.com/atimes/China_Business/IL05Cb02.html
OK, so ECB keeps rates unchanged despite raging inflation. That seals the fate, from now the euro is TOAST just like the US dollar and Europe is set up for a repeat of Weimar (not that I think that is in the cards for 2008, but probably within a few years). Of course, the RE/banking mob will be very happy because this is certain to prolong the EU housing bubble :((
P.S.: de EU stockmarkets are plunging on the news, how nice!
Now that the ECB has shown that they don’t give a damn about inflation and it’s all about propping up housing and stocks (just like in the US), maybe after today they can try to prop up the stockmarket with a BIG surprise rate increase?
T.Bros $81.8 million…
http://biz.yahoo.com/ap/071206/earns_toll_brothers.html
I expect a nice pop on TOL stock at the open today, now that they have thrown the kitsch & sink into their financials.
Ben,
Re: “Loan Modification”… Paulson & Company are nearing this scene:
“When Cap’t Yellowbeard points the cannon down to the deck of his own ship while coming alongside of a ship that he’s fighting…he shoots the cannon and yells: “Now…Fight or die!”
I was watching some documentary on WWII. They were interviewing a sniper who was in a “blocking unit.” Her job was to shoot any other Soviet soldiers who started to retreat.
“The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.”
So how does one determine what a home “owner” can afford? I might me OK with this if I knew these people were stripped of the “necessities” like cable TV, large gas guzzler, eating out, etc.
They might use the guidelines the IRS uses or that are used to determine appropriate expenses in bankruptcy. Those can be pretty draconian.
Yeah, well how does the borrower convince the BK court, when it’s “discovered” that their monthly mortgage payment is 65% of their income?
“Argue for your limitations, and sure enough, they’re yours.”… “Illusions” Richard Bach
That’s what I heard in the little snippet of the hearing yesterday. They will use federal bankruptcy guildlines which are incredibly severe if you live in a high cost of living bubbly state - like CA.
So the prodigal son buys a McMansion and gets his payments frozen at below market rates, while the dutiful son, who bought a modest home that he can afford has his rates go up. We already HAVE a federal program of debt forgiveness for those who have signed up for more debts than they can pay, whethher through misforture or their own stupidity. It’s called bankrupcy protection. Instead of trying to keep people in loans for a larger principal amount than they can service, we should be aiding people through the bankrupcy process. People shouldn’t be stuck forever in an insolvent state, even by their own stupidity. But their credit report SHOULD be branded with the scarlet B as a warning to those who might think of lending them money again.
It’s called “The war on Savers” - responsible savers.
Excellent point Jim. But considering how draconian the bankruptcy laws were reworked in 2005, they might better start their “suprime relief program” by focusing on the bankruptcy laws and let the mortgage nonsense implode.
Try to envision this:
A “homeowner” dangling from the end of a 200′ rope..5 feet below, is the firm solid granite path known as “capitulation”… that leads you back to the humble village of “renters-again”,,, suddenly you hear a cry: “wait…don’t let go…hang on…help is on the way…you can stay right were you are for the next 5 years…please, don’t give up…you can do it…you don’t really want to become a “renter” again do you?…be strong…remain a “member” of America’s “ownership society”…oh, just forget about those collection calls from Home Depot…what like they are going to repo your granite counter top?…just hang in there…what’s 5 years anyways?…breathe deeply, close you eyes, and remember, whatever you do…DON”T LOOK DOWN!
Good one, Hwy!
So how does one determine what a home “owner” can afford?
This alone will eliminate 90% of the people.
How about we force all the players (personally) who facilitated (Wall Street crowd, especially) this bubble to buy bonds to fund these loans?
http://www.ibdeditorials.com/IBDArticles.aspx?id=281747860527698
Bad Medicine: Hillarycare For Housing Market
If you thought Hillary Clinton’s government takeover plan for health care was bad, wait till you see what she has in store for the housing sector.
As always with the Clintons, the market is the problem and Big Nanny is the solution. Unfortunately for taxpayers, Hillary has bipartisan company in the Bush administration on this issue.
GOP is not standing tall= Ron Paul
NO BAIL !!!!!!!!
In general ,I don’t believe in bail-outs for FB’s ,but this adjustable loan situation has a additional problem that isn’t discussed ,and that is “new money” verses “old money “.
You have a” old money” adjustable loan that is re-setting in which the borrower has no ability to improve that loan because of declining values and lenders who made those loans are either out of business or cannot make those sort of loans anymore ,which would be ‘new money ‘.The industry can’t get new money by investors in the secondary market . But lenders can modify “old money” if the current investors and borrowers agree .
The adjustable teaser loans were sold based on “new money” taking the “old money lender” out of the loop and putting “new money ‘into the loop at whatever the market would bear at the time . But, this loan product is not available anymore especially when the appraisal wouldn’t even hit ,so it’s impossible to get” new money “. Because real estate didn’t go up ,”old money wants out “,(unless the borrower pays )and new money isn’t there .it’s like buying a car and you find out 2 years later they don’t have the parts to fix the car anymore so you can’t fix the car .
Now its very wrong for borrowers to expect on a 30 year note that they are entitled to refinancing ,but this is the way the loans and real estate were sold during the boom years ,which was a scheme to put people on loans that needed to be refinanced every 2 to 5 years .The industry planned to make a lot of money on this sit up ,but you know what happened ,the ponzi scheme crashed .
I think the original government plan was to transfer the old money loans to the new money of the government backed loans ,and this might be the long term plan anyway . Now that real estate isn’t going up, the new loan has to be one that a borrower can live with longer term ,in spite of the property being below the value of the original loan. This buy now pay later plan through appreciation did not work out ,and this was the sole premise by which these loans were made . The lenders even qualified borrowers based on teaser rate with no regard to the borrower being able to qualify for 50 to 100% increase in payments ,(but the lenders expected to make money when the borrower had no other choice but to refinance ).
So ,the whole scheme was based on real estate always going up .
Now, no new money to keep the scheme going .
The attempt now is to keep the scheme going by loan modification of old money ,until of course the government can figure out a way to provide new money and take those loans off the hands of old money and make the tax payers take the risk .
As I see it ,these loans are bad loans because the value in the property isn’t isn’t anymore ,therefore those loans can’t be refinanced under any normal loan and appraisal standards ,yet the bag-holder are trying to pass the bag.
To add a additional problem to the whole mix ,the excess inventory out there is scary ,and it will take years to get rid of that ,in part because “new money” is only available to very qualified buyers .
So the whole mess was caused by faulty low down lending to unqualified buyers and now the government is trying to solve a problem that can’t be solved because the value isn’t there anymore in the real estate ,and easy money loans aren’t there anymore ,and qualified buyers are few .
Let the old money lenders modify the loan if they want if the borrowers agree and just keep the government out of it so the taxpayers aren’t the bagholders in the long run .
Oh gee, look who wrote that editorial: Michelle Malkin, rabid, hate-filled moonbat extraordinaire.
Yeah, she’s rational.
Hah.
Ya know, even people you hate can be right from time to time.
Ya know, even people you hate can be right from time to time.
True, that. I am far from a right-winger, but that essay was spot on.
It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops. . . . Shouldn’t we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?
Daniel Weintraub via Michelle Malkin
I think ‘Moonbat’ (typically, ‘barking moonbat’) is a term for someone on the far left, you would want to use ‘Wingnut’ in this case.
Undertaking recession hits SD. I see debt people.
Economic pinch becoming a bite for businesses in S.D. County
By Dean Calbreath and David Washburn
STAFF WRITERS
December 6, 2007
JOHN GASTALDO / Union-Tribune
Tony Alcazar, owner of Fox Tool Sales in Chula Vista, said yesterday that the economy has forced him to cut his staff from 12 employees to two.
Analysts at Wall Street investment firms and think tanks are debating whether the economy is slipping into recession, but that debate seems purely academic in many parts of San Diego County.
Recession or not, a growing number of shopkeepers, pawnbrokers, car dealers and even undertakers say they’re feeling the effects of a sharp economic slowdown caused by the real estate slump.
“People aren’t spending like they used to. It’s really changed drastically,” said Lauren Tammariello, owner of Bacio Boutique in Escondido.
http://www.signonsandiego.com/uniontrib/20071206/news_1n6econ.html
“…Analysts at Wall Street investment firms and think tanks are debating whether the economy is slipping into recession”
I take it these “experts” never watch “America’s Funniest Home Video’s”…I haven’t seen an episode yet when a “slip” hasn’t lead to a “fall”
“I see debt people”
I have a tee shirt with this slogan on the back.
“I see debt people”
I have a tee shirt with this slogan on the back.
Any reactions to report?
“But the UCLA experts are still relatively upbeat. Leamer argues that construction cutbacks will not be enough to push the economy into recession.”
“To have a recession, we are going to need a big contribution of job losses from manufacturing,” he said. “But . . . manufacturing is not primed for job loss.”
How much manufacturing is left in California? The housing sector seems to be more important, especially relative to the early 90’s, and hence declines in that sector a greater impact on the overall economy.
A housing led recession appears inevitable inasmuch as it appears to already be happening. Still in question are the duration and severity of that downturn.
RE: “But the UCLA experts are still relatively upbeat.
Always interestin’ how the fantasy world ivory tower intellects are always upbeat. Higher ed need to shit-can tenure. Let these cowards sweat a little for their incomes.
Forget UCLA, they couldn’t even beat USC! Anderson’s group is finished. Check out what Thornberg, Schiller, and Schiff have to say!!! Xmas is coming.
Hey President Push, somethings to chew on, besides your “wagyu beef short ribs”:
“where requests for low-cost cremations in a cardboard casket, without viewing or services, have increased by 30 percent.”
“…because local real estate companies would order huge bouquets for holiday parties.”
“I would say we are currently approaching the early 1990s as far as recoverability rates,…”
My dad wanted to be cremated. It was amazing when the funeral director showed us the differently priced caskets, all of which were destined to be burned the next day. I was torn between buying him a cheap cardboard one (which I know he would have chosen) and the expensive wooden one (which we ultimately chose.) I keep waiting for dad to appear to me in a dream, chiding me for wasting money. My mom took the opportunity to buy the cheap one in advance for herself! Now you all know why I’m cheap.
I wouldn’t be so sure it’s the real estate slump that is causing people to spend less money.
I have less money to spend because I am paying more for all my other stuff because of high gas prices. I am paying more for milk, laundry soap, toliet paper, etc.
=because of ethanol subsidies/govt interference
Ethanol does not make gas safer or more environmentally friendly. It does not even improve engine performance! But some people are making big buxx … and they voted for this administration. Win-win.
(Got osteoporosis?)
http://www.nypost.com/seven/11152007/business/insulted_judges_revenge_174283.htm
This has likely been posted before .
Boyko’s ruling came last month but is just now coming to light on Wall Street.
The judge - who sits on the bench in the U.S. District Court for the Northern District of Ohio - said Deutsche Bank “alleges it is the holder and owner of the note and mortgage.”
“However, the attached note and mortgage identify the mortgagee and promisee as the original lending institution,” the judge wrote.
Most mortgages are sold these days to investors.”
So Deutsche Bank couldn’t come up with a single piece of paper saying “ownership of this note and mortgage has been transferred from the lending bank to Deutsche Bank”? Wow. I love how the DB lawyers tried to pull a “smartest guys in the room” maneuver on the federal judge. Geez, I’m not some megabucks corporate lawyer, and even I could tell you that judges generally don’t appreciate being called stupid…
On the one hand, you’re absolutely right. They should have some paperwork to show the purchase or assignment of the loan pool. On the other hand, I can’t tell you how many times I’ve had to argue with a judge or a commissioner about whether my client is a “noteholder” when they are in actual possession of a note endorsed in blank. I say “Judge, the bare fact that they have this note and that the note was endorsed in blank makes them a noteholder by definition, QED.” Since the Commissioner’s Manual, however, a nonjudicial manual which has never been approved by the Supreme Court or the Legislature, says there needs to be a chain of assignments, they demand a full chain of assignments. So they reject the note, send it to me, and I have to send it back with instructions to go get ever intervening noteholder to sign their endorsements to the next one and somebody somewhere types in whatever is necessary. Situations like this are a ridiculous waste of time by unsophisticated or flat-out ignorant people.
BTW, if you’re going to tell me that judges are never ignorant or unsophisticated, I’ve got some land to sell you. It’s waterfront. Well, there’s water on it. Over it, actually…
Q: What do you say to a lawyer who got straight “C’s” in law school?
A: Good morning, your Honor.
Sounds like that crazy judge we had in Massachusetts who drove everyone nuts for years and then had the ultimate embarrassment of having her wayward teenage son arrested for an underaged drinking party while she and the father were away.
I think she got into some more pertinant trouble/scandals too, but the HS party bust was funnier.
Unlikely Freeze Fellows
http://www.stockmania.com/index.php?showimage=107
Who would have thunk these two would be pushing a similar agenda. I guess desperate times mean desperate measures. The phrase “leave well enough alone” comes to mind.
You got my hopes up — I was expecting to see them holding hands in the right frame…
Ha. that would have been funny. Wish I had thought of it.
RE: Bailout..
Just a thought..
Maybe we shouldn’t be so upset about this bailout, if GOV (our) money isn’t being used.
1 - The foreclosures aren’t going to drop all that much.
2 - Maybe the GOV is putting the banks on notice, meaning - “fix it yourselves, we aren’t going to bail you out”.
3 - Maybe this will reduce the need for more and more and more rate cuts.
4 - MTGE investors will demand more risk premium and better lending standards, driving rates up (prices down) and/or driving downpayment requirements up (prices down)
I don’t know, maybe this will give us some of what we want.
Pen,
Our moneys are being used.
People will need to be employed by the government to inspect loans. Lawyers will need to be hired to fight lawsuits “Why can’t I get bailed out?” There will need to be new offices of the Treasury department to handle the paper. I estimate total new government employment at 100,000. This measure may help 250,000 borrowers.
However this measure will give breathing room of $260B to the financial institutions. That is the cost.
WSJ (or LA Times - can’t remember which) says Hillary’s plan also include $5 billion fed program to assist communities hurt by foreclosures.
The Dutch tulip bubble has been debunked!
In the 1630s the Netherlands was gripped by tulipmania: a speculative fever unprecedented in scale and, as popular history would have it, folly. We all know the outline of the story—how otherwise sensible merchants, nobles, and artisans spent all they had (and much that they didn’t) on tulip bulbs. We have heard how these bulbs changed hands hundreds of times in a single day, and how some bulbs, sold and resold for thousands of guilders, never even existed. Tulipmania is seen as an example of the gullibility of crowds and the dangers of financial speculation.
But it wasn’t like that. As Anne Goldgar reveals in Tulipmania, not one of these stories is true. Making use of extensive archival research, she lays waste to the legends, revealing that while the 1630s did see a speculative bubble in tulip prices, neither the height of the bubble nor its bursting were anywhere near as dramatic as we tend to think. By clearing away the accumulated myths, Goldgar is able to show us instead the far more interesting reality: the ways in which tulipmania reflected deep anxieties about the transformation of Dutch society in the Golden Age. She shows how Dutch citizens became enchanted by the combination of art and science that made up a tulip bulb, and how experts in tulips appeared in communities of merchants and craftsmen. She also illustrates vividly how the plague, the concerns of capitalism, and the loss of trust among individuals in a rapidly changing society combined to create the cultural crisis that was tulipmania.
I’m extremely sceptical about this book. There is TONS of historical evidence about the tulip bubble (including the lynching of some high level politicians in the aftermath, a few years after the bubble burst and politics was unable to find a ‘fair solution’ to the problem of (hundred)thousands of debtors). Declaring it a myth is plain nonsense. I guess Anne Goldgar can be hired by the FED to write the story about the myth of the US housing bubble that never really existed …
TESTIFY! While I’m sure that the most extreme bubble pricing quoted, say for “flame?” tulips is bases upon few to no sales, and is not representative, there would seem to be little doubt that there was a tulip bubble.
obviously the bids/sales of more than 1000 florins for one tulip bulb were small in numbers, because (despite some crazy lending) far less than 1% or so of the population had such an amount of capital available. The highest sales prices were equivalent to the price of a luxury estate outside Amsterdam (equivalent to homes costing more than $20M or so in the current US market).
Although few US homes sell for more than $ 20M now, there definitely is a housing bubble …
It’s hard to imagine how far nhz’s ancestors went in search of nutmeg and other spices, and it seems silly now…
But that world was captivated by the lure of far-away items, and beautiful tulips fit the bill, coming from modern-day Iran, via a Dutch ambassador to Turkey, in the 16th century.
(full disclosure: we have around 30 tulips)
This just in: The word ‘bubble’ has been removed from the English lexicon as it has been proven not to exist.
All credit crunch fallout is local.
How the Credit Crunch Turned Local
By Craig Karmin and Karen Richardson
Word Count: 1,014
Thirteen years ago today, Orange County, Calif., sent tremors through financial markets when it filed for bankruptcy.
Today, that same county — and states and counties nationwide with troubled investment funds — face new worries. This time, they stem from the subprime crisis.
In Florida, the state-run Local Government Investment Pool is poised to reopen today after a contentious meeting with investors on Tuesday, letting local governments and school districts make withdrawals for the first time in a week. The fund was frozen last week by the State Board of Administration after billions of dollars were rapidly withdrawn because the …
http://online.wsj.com/article/SB119691112051615438.html?mod=todays_us_nonsub_money_and_investing
How the Subprime Mess Hit Poor Immigrant Groups
By Jonathan Karp and Miriam Jordan
Word Count: 2,168 | Companies Featured in This Article: General Electric
SOUTH SAN FRANCISCO, Calif. — Naira Costa, a 27-year-old housekeeper, met her husband at Message of Peace, an evangelical church that is a spiritual and social haven for Brazilians in the Bay Area. When the couple considered buying a house a few years ago, the church’s head deacon, Soario Santos, ministered to that need, too.
http://online.wsj.com/article/SB119690485447515265.html?mod=todays_us_nonsub_page_one
“Ms. Costa also maintains that no one ever explained to her that she was actually signing on to two loans to cover 100% of the home price: a $570,400 primary mortgage and a $142,600 so-called piggyback loan for the remaining 20% of the house’s price. The primary adjustable-rate mortgage had an initial rate of 7.15% for two years, after which it could eventually rise to as high as 13.65%. Both loans were risky because they entailed huge final installments — so-called balloon payments — totaling nearly $500,000.”
“The loan application falsely stated that Ms. Costa was a “U.S. person” and earned $12,500 a month — six times her actual wages. Ms. Costa, who had given Mr. Santos her Bank of America statements, says she was shocked to see them altered to fabricate how long she had been a depositor and how much she held in assets. One checking-account statement, dated July 19, 2005, showed a balance of $50,180.33. Her actual statement from that period showed just $42.22 on hand.”
What does Ms. Costa care? She never could have afforded the house, and California law protects her from a deficiency judgment. She just has to move out of a house she does not own.
Now if BankAmerica tries collecting, she can file a consumer fraud suit that would quickly shake them off.
The only losers here are BankAmerica shareholders. They should be out for blood.
What does she care? She wanted a house and put good money into this venture. That may have been utterly stupid on her part, but there are real questions about why such sales were ever allowed. At any point in the chain, the appraisal, the confirmation of her income and capital, and so on, this could have and should have been stopped. The real criminals are not the dumb immigrants, but the fraud peddlers who took their meager money and dreams and pumped it all up into a major bubble. Why was Ms. Costa sold a doomed product that makes no sense? And now she is not supposed to care about her housing situation because in your mind she did not do enough research to avoid the fraud peddler and did not loose enough money to be important like the banks are. That is pretty sick blame shifting, and also a good sign that we will be on with another bogus insanity driven bubble as soon as this one lands. As long as insane lending is considered socially acceptable and correct with borrowers taking full blame for any blowouts there is not much hope for any kind of fiscal sanity.
You misread me. Ms. Costa may care, but she has not put in anymore into that house than she would have spent renting it. Her credit may be tanked, but that is the only damages I can see her sustaining here.
Maybe I missed something in the WSJ article (I don’t get it online, and paperboy went AWOL this morning). Where is she out of pocket here?
Did these people really believe that they could afford an $800,000 house on their meager income? Or are they so financially illiterate that it came as a surprise that it was far beyond their means? Or did they simply toss caution to the wind because “everyone was doing it”?
“Ms. Costa, was shocked to see them altered to fabricate how long she had been a depositor and how much she held in assets.”
Shocked, I tell you!
Exactly.
AP
Stocks Look to Higher Open on Bush Plan
By JOE BEL BRUNO
AP Business Writer
NEW YORK
Thursday, December 6, 2007 05:54:38 AM PT
U.S. stocks tilted toward a slightly higher open Thursday with President Bush planning to announce new measures to contain the subprime mortgage crisis.
http://marketplace.publicradio.org/apheadline_detail.php?story_id=D8TBV7C00&group=ap.online.headlines.business
I think the larger concern is that if mortgage ” contracts” can be renegotiated and revised then ANY contract can be revised using this as the past practice.
If this goes through what is to stop lending institutions from opening up contracts and demanding higher interest or different terms?
IMHO This is treading on dangerous ground!
Two words: universal default.
SuperSIV to minisiv
Let me be the first to predict a parabolic son-of-a-bubble stock price blowout on the bailout announcement news.
INDICATIONS
U.S. stock futures showing mild gains
Retail results filter in; subprime rescue plan expected
By Steve Goldstein, MarketWatch
Last update: 8:19 a.m. EST Dec. 6, 2007
LONDON (MarketWatch) - U.S. stock futures nudged higher on Thursday amid hopes for the release of a plan to help subprime borrowers and the second overseas rate cut in three days, while sales reports painted a mixed picture of the retail environment.
http://www.marketwatch.com/News/Story/Story.aspx?column=Indications
Oil is down to $87.49. This could be indicative of a recession-driven lack of demand. Of course, the stock market is flying on the “good news”, but the bear market is just getting warmed up.
Third quarter of ‘08 is looking like a good entry point to go long on stocks.
Little Al plannin’ to buy the big dip?
I s’pose Yahoo will hafta do for MSM.
Finally getting out there…
http://news.yahoo.com/s/ap/20071205/ap_on_bi_ge/homeownership_myth;_ylt=AgZCMiFFzzlfaHCfre4yC2lv24cA
cheers
evildoc
Interesting that they used a Texas example. My understanding (which could easily be flawed) is that in Texas, home equity loans are limited to no more than 80% LTV. Meaning you are required to maintain at least 20% equity. That’s why the woman isn’t under water. Her problem isn’t taking out loans rather than living on credit cards during unemployment. It’s job loss and now possibly underemployment. She had several extra years in the house due to the loans. She could have sold earlier when the income was lost.
Not selling the home “investment” when a crisis hits used to be the thinking, since home prices always went up. This might change now, however it is also harder to sell a home, and anyone who can sell by dropping the price is giving up their own money.
Not selling the home “investment” when a crisis hits used to be the thinking, since home prices always went up.
…and of course if you’bd been paying your mortgage for 10 years or more,there was a good chance that your monthly payment was LESS than equivalent rent. You’d have to SERIOUSLY downgrade to save money on monthly expenses. Of course now with mortgages payments significantly higher than equivalent rent, there’s little reason to hang onto your house.
WSJ
Biggest mess since ‘29
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/04/AR2007120402186.html
Tranches of tranches = financial innovation, or worst Ponzi scheme ever known to man?
Stick with me now, because this is where it gets interesting. For it is at this point that the banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same “tranching” process, they could use these mezzanine-rated assets to create a new set of securities — some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.
Eyebeam comic back in mid 80s was pretty special. Went away for awhile. Sam Hurt seems to be reviving it a bit. Austin Texas is home. Seems he’s noticed some of the housing stuff. One of his regular strips…
http://www.eyebeam.com/new/index.php?num=29
Bank of England cuts rates
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4RpCu1m2rPM&refer=home
The bubble in England is larger than the USA. They were actually making 130% loans. Also popular is the ‘Buy to Let’….basically you buy and rent hoping to cover the payments and refi (if) and when property appreciates. Thousands were duped with this idea.
yeah, just like the ECB they are throwing in the towel and have decided to let inflation rage and support asset prices a little longer. Long live the EU housing bubble :((
This is from back on 12/4:
http://thehousingbubbleblog.com/?p=3822#comments
article: http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_baum&sid=aZyrM6xMhEko
“The way these CDO structures are set up, defaults in underlying mortgages trip certain triggers that serve to protect senior noteholders. If the plan inhibits defaults, ‘the cash flows that should be reserved for the AAA holders will end up going to the residual owners,’ Rosner said. ‘Treasury is pushing a plan that could cause more losses at already weakened Fannie and Freddie.’”
——–
Or, the long range plan to save the banks is to sacrifice Fannie and Freddie, which can be more easily bailed out at taxpayer expense?
Aren’t other big holders large pension funds? (Again, potential bail out repositories?)
I think your thoughts are correct in that this is to shift the losses to Fannie/Freddie.
It is to late for the financial firms to benefit. CDOs are collapsing and liquidating as I type.
401Ks are going to take a hit as are money market accounts.
RE: 401Ks are going to take a hit as are money market accounts.
State investment pools like FL’s are dip doo-doo too. All the town’s are gonna have to hike property taxes to pay for all those 16% CDO returns they were getting.
Kind of hate to be OT but this whole housing mess is coming apart much quicker than I thought. Technically, I don’t think the housing bubble has even burst yet. I won’t go into detail as to why but I wouldn’t be surprised if the bubble bursts next year instead of 2007. You’ll probably see something stupid happen in the stock market that will indicate this. I’m also doubtful that the USA will be able to handle another economic mess like the dot com crash. I’m even doubtful that the USA will have the same geopolitical borders in the next 5 - 10 years. How in the world do we clean up DC’s mess? The housing bubble is just but one problem and most of the genuine problems in this country aren’t covered by either the MSM or the ‘alternative’ media. One example is the possibility that we are really upside down financially as a country. About a year ago I ran the #s and in November 2006 collectively the USA had a net worth that literally went below $0.00. No joke. Right now the net worth of the whole country is maybe around -$4 trillion USD. In a year that value will be around -$11.5 trillion. Now how in the world can any bailout help that? I think the best bet is to move to a part of the USA that isn’t dependent on Washington DC for its substinence. If you’re in a gungho patriotic part of the country, move to a state or region that’s more civilized and real-world because if DC melts down, the nutjob patriotic areas will go Chernobyl as well. A good start would be to leave the western states.
(Technically, I don’t think the housing bubble has even burst yet. I won’t go into detail as to why but I wouldn’t be surprised if the bubble bursts next year instead of 2007.)
Or it has only burst a little, not enough to show up. No one is showing 20% price declines.
I agree with you, this is the first inning of a 9 inning game.
the bubble is global and the EU housing bubble, which is MUCH bigger and older than the US bubble, has not burst at all. In many EU countries prices are still climbing (although slowly compared to the previous 10-15 years) and lending is as crazy as ever (many countries still have 110-130% loans, 10x income loans, I/O loans etc.). As long as the EU bubble is alive there is plenty of munition for central banks to restart the global housing bubble. It ain’t over till the fat lady sings, and the fat lady is the EU housing market IMHO.
“If you’re in a gungho patriotic part of the country, move to a state or region that’s more civilized and real-world”…
“the nutjob patriotic areas will go Chernobyl as well”….
Gimme a break. Talk about nutjobs……
“If you’re in a gungho patriotic part of the country”
What does this mean?
I’m even doubtful that the USA will have the same geopolitical borders in the next 5 - 10 years. How in the world do we clean up DC’s mess?
This disaster may very well be the catalyst needed to spur the formation of the North American Union.
“WOVLERINES! “
Actually, I think the top criteria would be 1) close to food sources, farms, forests, rivers or other places where food can be grown, hunted or fished; 2) far enough from major urban areas so that waves of urban locusts cannot completely denude the area of food; 3) with neighbors who are solid, responsible and relatively self-sufficient, and 4) where firearms are not only legal, but common and owned and used by many. I think there are a lot of places like that in the Western States.
In Computer Science, there is a term called “Deadly Embrace”, or deadlock, where two processes are each waiting on the other. Many times, the only resolution is a system restart. Not serious for a personal computer, but a big deal for an enterprise server or mainframe.
I think the real estate market is in a deadlock situation. The main catalyst for restarting it are more lower prices.
http://en.wikipedia.org/wiki/Deadlock
In Computer Science, there is a term called “Deadly Embrace”, or deadlock, where two processes are each waiting on the other. Many times, the only resolution is a system restart
“kill -9 PID” or “alter system kill session ‘SID, Serial#’” works for me.
When things are really bad… “reboot” or “shutdown abort”
A Unix person! When I told my wife several years ago that I was interested in Unix, she thought I meant eunuchs. It was a tense moment.
Yes, if you know the deadlocked processes, the kill -9 PID technique would work.
I was just trying to use an analogy to the housing bubble. It seems to be deadlocked to me. Lower prices will fix it though.
Dennisd,
Actually, an Oracle person who runs systems primarily on Unix/Linux. I like the analogy re housing. I agree, affordability is the key, but I still think jobs are the lynchpin in many areas.
for i in `ps aux | grep reholder| awk ‘{ print $1}’ `; do kill -9 $i ; done
ps aux | grep reholder
pgrep reholder
Sure, but I think there’s a watchdog timer routine that’s gonna pop and is supposed to break the deadlock. The problem is that people seem to be screwing with that code as we speak to make sure that it (foreclosure) doesn’t lead to lower prices. If they succeed in their short-sited mission, a reboot may be required, and yes, we’re talking about the ultimate enterprise level, 100% uptime required system.
ECB stands ready to counter strong inflation
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRnQpfL_4094&refer=home
WTF cut rates in England but stand ready on the Continent
the ECB and the euro are history, EU inflation is above 3% which is WAY above the official ceiling of 2%. It is ridiculous that these ECB burocrats still dare to talk about countering inflation, they are stoking the inflation fire instead and should have raised long ago. By not raising today they are giving a carte blanche to the speculators. I hope this idiot ECB policy backfires, so we get a stockmarket crash and all ECB bankers are removed from office by the Euro Parlia(r)ment. Better no central bank than these gangsters.
apparently the ECB is now basing its policy on the ‘forecast inflation’ for 2009 - how convenient… (of course that forecast inflation is just below the official ceiling).
Gravedigger
When you dig my grave
Could you make it shallow
So that I can feel the rain
http://www.youtube.com/watch?v=tk0-wKSZI08
ben i hope this goes through:
CNBC.com Live Poll
Is the Bush administration’s idea to freeze mortgage rates necessary to insulate the economy from the subprime crisis? * 2989 responses
Yes — The danger to home values and the economy warrants government intervention. 16%
No — The marketplace should be left to resolve the issues on its own. 76%
Maybe — The answer is not yet clear.
8%
Not a scientific survey
It may not be a scientific survey, but it shows that public sentiment wants nature to take its course. Best policy, IMO.
well.. talk is cheap.
I don’t see where we ever let nature take it’s course. Ask them if they want to let rivers run wild.. Ask them if they leave their kid in jail when s/he fcuks up..
I don’t disagree with the sentiment, but let’s deal with reality.
“… public sentiment… ”
Of what? CNBC watchers? Or of CNBC.com perusers?
That’s nowhere near enough to call it anything like “public sentiment”.
“Homeownership” a myth, as equity disappears; an article about a topic long discussed here:
http://www.msnbc.msn.com/id/22117683/
“Homeowners started losing hold of their homes years before spiking foreclosures and the housing slump slammed the economy. Piece by piece, some gave away their homes by tapping equity to take cash out to pay for cars, weddings and vacations. Others never owned one brick. During the country’s most recent housing boom, the term ‘homeowner’ became a misnomer as lenders offered 100 percent or more home financing to some buyers.”
The small decline in the homeownership rate from record levels “masks a much larger plunge in the amount of equity homeowners hold. This figure, equal to the percentage of a home’s market value minus mortgage-related debt, fell to an average of 51.7 percent at the end of the second quarter, down from 62 percent at the end of 1990, the Federal Reserve reported, even as the average home value surged 139 percent during that period.”
As the article continues, the bigger problem is a generation that is used to spending a lot and saving very little. If they keep working, it may turn out OK. If they retire and have their way with public policy, younger generations are screwed.
As a side note to the freeze plan - it’s interesting and I’m guessing not coincidental that it was announced right before the heart of the holiday shopping season. I wonder if early results in retail sales are bad, and this is a way to try and prop them up over the next 3 weeks. That being the case, I wonder if after the holiday season the freeze plan will somehow come to naught - e.g. by virtue of lawsuits, or by the media all of the sudden latching on to how ineffective it will be. One big “psyche” to pump up holiday spending, and also the stock market - just in time for end-of-quarter and end-of-year bonuses. We may be in for a really big fall early next year.
Toll Bros. posts a loss
http://www.nytimes.com/aponline/business/AP-Earns-Toll-Brothers.html?ref=business
and their stock is up. This market doesn’t make sense to me. I know, the loss was already baked into the stock price. I just don’t buy it. Gap reported bad earnings and they are up also.
I am staying out of the market until this mess sorts itself out.
Saturday December 8 is Season Ski ticket sales day for my kids and G’kids favorite Midwestern resort. $99 season pass one day only - in God’s forgotten part of the country. Unemployment 12%. Underemployment 18%. hopefully we’ll get 90″ of snow by Christmas. Closest WalMart 30Miles.
(This is wonderful skiing/snowboarding - for the Midwest)
They are serious about the cautions. It is not typical Midwest skiing.
http://tinyurl.com/274pvg
love it up there. have done the Porkies on foot many times. love the lake.
Wow that’s cheap. I know a guy at work who has season passes for Steamboat, and IIRC they cost close to $1000.
Come up, visit, spend moneys - just don’t stay!
As opposed to Colorado and Utah, few of the trails are groomed. Most are black diamonds, no beginners or intermediate skiers/snowboarders allowed.
Hey Hoz, you wouldn’t happen to be the dairy farmer quoted in the NY Times review of the ski resort, would you?
Most are black diamonds, no beginners or intermediate skiers/snowboarders allowed.
Sounds like freakin’ HEAVEN! (If you live there.) Thanks for the link.
Oops…misread that as “no intermediate skiers, no snowboarders.
Never mind….
No grooming! Nothing for any city crowd - experts only! This is not okemo’nized by any standard! So price seems ok. - What I don’t think is ok are the ‘resorts’ (Alta) who don’t put bars on the lifts. Some scam to avoid upgrading while still charging almost competitively.
Thanks for the info. Hoz!
That’s neat, Hoz. I’m from Michigan and never heard of it. The terrain is so unique - must be something to do with the ancient glaciers that created it.
U.S. mortgage foreclosures at record high: Mortgage Bankers
10:00 a.m. EST Dec. 6, 2007
CHICAGO (MarketWatch) — A record number of U.S. mortgages were somewhere in the foreclosure process in the third quarter, with 1.69% of all residential borrowers facing the loss of a home, the Mortgage Bankers Association said Thursday. The percentage of homes that entered foreclosure in the third quarter also hit a record at 0.78%, the trade group said. Mortgage delinquencies, those loans with payments that were more than 30 days past due, shot up to a 21-year high at 5.59%, MBA’s quarterly survey showed. Although all types of loans showed an increase in foreclosure starts in the third quarter, subprime adjustable-rate loans remained the biggest problem, accounting for 43% of all new foreclosures, even though they comprise just 6.8% of all loans outstanding, the MBA said.
Wow, 5.59% past due rate. I was impressed when it was 2%. No wonder they’re scrambling to stop it.
Recession is here in Florida-easily-values are down more than 25% in many areas.(YOY) Condos especially….just finished one appraisal-PP 11/2006=$258,500…..value 12/2007=$155,000
On CNN.com, there is a talkback section asking for feedback regarding the “Rate Freeze” government bailout plan. It is a small thing, but I suggest everyone here posts their opinion. I hold no illusion that our elected representatives care for these “venues of public opinion”, but if enough of the public expresses outrage at this bailout, we may make some traction in changing policy.
http://cnnmoneytalkback.blogs.cnnmoney.cnn.com/2007/12/06/is-the-freeze-a-good-idea/
I see no problem with what some are calling “hand-wringing” over this issue. At some point the voice of the disapproving majority is too loud to ignore, a la Amnesty bill.
This was posted yesterday by Anachronist, and is worth repeating…
It’s a learned man’s experience of hyperinflation in Argentina, from just a few years ago.
I’m quite particular to oral history, as it tells me what the common man or woman was doing, not the overall scheme of things…
I tend to think we will experience the same thing here, the result of a rather sudden devaluation of the Dollar, by 50% or so.
____________________________________________________________
URBAN OR COUNTRY?
“Someone once asked me how did those that live in the country fare. If they were better off than city dwellers. As always there are no simple answers. Wish I could say country good, city bad, but I can’t, because if I have to be completely honest, and I intend to be so, there are some issues that have to be analyzed, especially security. Of course that those that live in the country and have some land and animals were better prepared food-wise. No need to have several acres full of crops. A few fruit trees, some animals, such as chickens, cows and rabbits, and a small orchard was enough to be light years ahead of those in the cities.”
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=24081216
I clicked on the link and don’t believe for a moment that this was written by a student from Argentina. Crap-detector was ringing loudly.
What leads you to say that?
It rings true with other accounts i’ve read…
Because of the writing style, language used, etc. Just a hunch, as it did not hold my attention. Some survivalist ideology. No concrete examples, hence not believable to me.
I do remember some remarks by my grandmother about German hyperinflation: how you would be paid and the money lost value on the way to the grocery. I also had some of the bills which said ‘one billion marks’ when young. I do remember my father telling about how he bicycled 20 miles each way to the country just to obtain a basket of plums during the war. My mother taking a bucket to the train station where molasses was distributed from a destroyed train car, and how that molasses helped my grandfather survive the winter after he had been released from
Dachau.
CIBC gets hammered on sub prime exposure.
Its larger than they previously reported. I wonder how good their hedges are ?
http://www.reportonbusiness.com/servlet/story/RTGAM.20071206.wcibc06/BNStory/robNews/home
Home Foreclosures Hit Record High
Thursday December 6, 10:37 am ET
By Jeannine Aversa, AP Economics Writer
Home Foreclosures Hit Record High in Third Quarter
http://biz.yahoo.com/ap/071206/home_foreclosures.html
Foreclosures reach record high
Mortgage meltdown strikes again - sharpest rise in foreclosures ever and highest level of homeowners late in payments since 1986.
http://money.cnn.com/2007/12/06/real_estate/foreclosure_delinquencies/index.htm?source=yahoo_quote
“CDO can’t repay note holders after liquidation-S&P”
“Standard & Poor’s on Wednesday said that proceeds from the liquidation of mortgage-backed securities by a collateralized debt obligation will be insufficient to pay back investors in the deal.
The CDO, sold by Credit Suisse Alternative Capital and dubbed Adams Square Funding I Ltd, liquidated its assets after a collateral trigger in the deal was tripped, which led to an “event of default.”
CDOs repackage assets ranging from mortgages to credit card receivables into bond structures designed to diversify risk. Many top-rated CDOs have been downgraded multiple notches because of deteriorating mortgage loan values.
S&P cut all of the notes in the deal, totaling $487.25 million, to default. On average, the assets and credit default swaps liquidated by the deal returned less than 25 percent of their par value, S&P said….”
Mark to Market
Reuters
http://tinyurl.com/2g34p3
here we go again!??!!!
Stocks Up on Growing Hopes for Rate Cut
Thursday December 6, 10:40 am ET
By Madlen Read, AP Business Writer
Stocks Are Modestly Higher Amid Mixed Retail Sales Reports and Ahead of Bush Mortgage Plan
http://biz.yahoo.com/ap/071206/wall_street.html
I’ve always been a VERY conservative investor. Up until a few years ago, my money went in the same ratio: 40% broad-market index fund, 40% bonds, 10% money market, 10% select hand-picked portfolio.
Even during the dot-com boom, this survived OK. For example, While all my friends lost money in Cisco and Pets.com, I took advantage of the fact that in 1999 you could put up to $120,000 (for a couple) into iBonds that paid 7%. (to comprise the “bond” part of my investments for that year)
But now, I have no faith in the US Stock market any more, or in “investment grade bonds” to hold up, or even in municipal bonds to be paid out.
So now it’s become:
10% - EU index fund
10% - Nordic Index fund
10% - Canada index fund
10% - China region index fund
5% - Japan Fund
20% - Hand-picked portfolio of dividend-paying low P/E high EPS US stocks with limited direct exposure to housing, retail, and finance
10% Gold and silver (ETF and a some physical)
15% US/Corporate Bonds of all sorts (direct + via funds)
10% Money Market
When I looked at the weighting of the broad market US index funds it was clear that a good chunk (25%, depending on what you think of as “housing/finance related) was directly tied to the bubble. I wanted to get the hell out of it before it was too late!
Fortunately, people have so much “faith” in the guv’ment to keep it propped up that there’s been plenty of time. I’m thinking of simply accumulating in Gold/Silver next year, and leaving everything else alone.
A reasonable investment plan, I would skip the 10% in the EU index fund - to many banks- IMHO the European markets are susceptible to a 40% drop - too close to the US. (I am short in Germany -The luxury and sports car automakers). Move 10-20% into South America and South Africa and switch some of your Asian investments into Vietnam,Malaysia and Korea. China and India are pretty pricey relative to potential exposure - unfavorable risk/reward ratios. The Nordic fund is good. Canada has some of my moneys, but I think they are to close to the US. I only own mining companies in Canada. I would also look at Australia non ferrous, non PM mining as investments.
Overall it is a safer plan than just sticking in US investments.
Dr. Phil or Oprah…care to comment about the “founders” attempts at pro-creation?…
FACTBOX: Facts about Mormonism, Romney’s religion:
“Smith took at least two dozen wives, historians say. His successor, Brigham Young, had about 20”
http://www.reuters.com/article/politicsNews/idUSN0517970020071205
–
December 06, 207
David Rosenberg, ML: “Alan Greenspan gave his blessing [to the Mortgage Mess] — With all due to respect to the “Wall Street helped create the crisis” election-trail motto, the reality is that former Fed Chairman Alan Greenspan, head supervisor of them all, gave the financial institutions his blessing in a variety of speeches he gave in the final years of his tenure, and he verbally encouraged households to take out short-term mortgage products. In one speech in late 2004, Mr. Greenspan said “improvements in lending practices driven by information technology have enabled lenders to reach out to households with previously unrecognized borrowing capacities. This extension of lending has increased overall household debt but has probably not meaningfully increased the number of households with already overextended debt”. Earlier that year, he came right out and said “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate ortgage may be an expensive method of financing a home.””
Does anyone doubt anymore that Greenspan was serving the interests of financial “Gangs of New York?” Sen. Bernie Sanders said that Greenspan was serving only the interests of the very rich (BFNYC very much among them) and the corporations. He is right.
Jas
Here is one reason we are here today.
Forget about hard work. Many of today’s teenagers believe they have to lie and cheat to succeed, according to a new ethics survey.
In today’s world, you have to break some rules if you want to stay ahead, according to nearly 40 percent of teenagers who took the 2007 online survey for Junior Achievement and Deloitte & Touche USA LLP, an accounting firm. That means plagiarizing and cheating to make good grades, lying when necessary and stealing when you’re short on cash, the teens said.
Junior Achievement spokeswoman Stephanie Bell called the teens’ attitudes “absolutely alarming.” Other experts feared what the findings could mean for the future.
Have similar surveys been conducted in the past? If so, were the results any different then?
Gee, I wonder where they picked up those ideas.
It is a myth that only this new generation is flawed. I worked for an eagle scout who was the most moraly debased individual, it has been my displeasure to work for.
The flaw of capatilism is that is it based upon the false assumption that people can be honest.
The other end communism is flawed on the premise that people can share.
Trying to find the middle ground has been a human failure since day one.
The apple doesn’t fall too far from the tree.
The cow has escaped… and now Congress is trying to shut the door, but instead, they set the barn on fire. Geez.
http://www.forbes.com/2007/12/03/predatory-business-act-oped-cx_yb_1204predatory.html?partner=email
Super senior equals 20 cents on the dollar.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9h3FZsrhiJ0&refer=home
Thank god the MLEC did not get funded! That would have been the biggest taxpayer bailout of all time.
Let Citi, Bank of America, Deutsche Bank et al take the loss, just don’t pass the loss to me.
Oops, looks like I may be wrong. Apparently Citigroup, Bank of America and JP Morgan may be bailed out after all.
The new Super SIV will only have these banks SIVs and funded with $50B “buy high-quality assets from the SIVs” (PB is that an oxymoron?). Apparently they believe it is worth a 40% discount, but since another CDO liquidated today (2 in 2days).
Under Basel II, the new Super SIV will be holding ~$300B in CDOs.
This is the largest scam in decades. Worthless crap that will be paid for by taxpayers when it goes belly up.
Leigh - Help, I want to send you a case of Wisconsin’s finest! Where are you!!!!!
Brave new acronym…
F.A.R.O. = financially acceptable risk option
already in use in finance to confusing
Finance and Reimbursement Officer
C.R.A.P.S. = computer regulated assisted program subsidies
A.djustable S.ubprime S.quid H.as A.dvancing T.entacles
A.djustable S.ubprime S.pread H.as A.nalysts T.rembling
A.djustable S.ubprime S.tupefies A.nalysts T.horoughly
Thought of those when I was in the shower this morning.
Fab4 4Ever
You never paid your money
You only signed some funny paper
And in the middle of negotiations
You break down
I never knew of your numbers
I only know of your situation
And in the middle of investigation
I break down the obvious
Out of lenders, money spent
See no future, might as well rent
All the money’s gone, nowhere to go
All the foreclosures got the sack
Monday morning, quarterback
Employment slow, nowhere to go
But oh, that magic feeling, nowhere to go
Oh, that magic feeling
Nowhere to go
Nowhere to go
http://www.youtube.com/watch?v=jpgFt46×6vY
Commissar Paulson must be congratulated upon his brilliant 5-year plan, to save state…
Could Cagey B have had anything to do with it?
As I recall, the Soviet Union was big on 5-year plans…
So is Iran.
Yesterday = time to buy the dip on REIC firm stocks?
http://www.marketwatch.com/quotes/quotes.aspx?symb=tol+kbh+len+ctx+dhi+fnm+fre+cfc+bzh+phm
I don’t think the bottom is in yet.
Don’t buy this one. Delta Financial bites the BK bullet.
http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=dfc&time=3&freq=7
Love him or hate him, shock-jock Tom Leykis has chimed in on the recent housing news. For those unaware, Tom has a syndicated radio talk show based in LA that deals mainly with social issues (with a heavy slant towards male prowess).
It is hard to deny that Tom is a bright guy and he often speaks plain common sense. Recently he brought up recent foreclosure news as a call in topic. Mortgage insiders and “victims” advocates rang in. Good stuff.
Some good shadenfreude here. These are about two weeks old:
Podcasts 1 & 2 below.
http://podcast.971freefm.com/klsx1/775971.mp3
http://podcast.971freefm.com/klsx1/775982.mp3
I almost got into a car wreck one time listening to his show. He is funny as hell.
Recommended reading for California used home sales industry group spokespersons on a topic on which they claim to possess expertise: affordability.
One final thought. How can any of this get repaired unless home values stabilize? And how will that happen? In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers.
Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes. To get housing moving again in Northern California, either all the exotic programs must come back, everyone must get a 100% raise or home prices have to fall 50%. None, except the last sound remotely possible.
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
http://www.storyofstuff.com/
15 minutes of reality. Most of you probably know this stuff, but maybe you have a sibling who needs it. I know that you can’t lead a horse to water, but still…
It’s a bit partisan, so don’t focus on that.
MrBubble
In Alfonso Jackson’s remarks, he just said “physical year 2008″ instead of “fiscal year 2008.” If this guy was overseeing housing policy, no wonder we’re in trouble. More incompetence from the Bush administration.
Brings to mind OB’s FFR remark a few months back (which indicated he thought Fed Funds referred to moneys, not an interest rate…).
So, what had been driving the “Goldilocks Economy” for the past 6 years?
http://tinyurl.com/yq4ywl
“Paulson and Fed Chairman Ben S. Bernanke are concerned that falling home values will choke consumer spending, which has driven economic growth since the last recession ended in 2001. ”
People buying toys. Spend, spend, spend. Uh-oh, that might stop. Better get house prices rising again.
What is that funny smell emanating from my computer screen? Oh yeah — rodent droppings.
ECONOMIC REPORT
U.S. households lost $128 billion on real estate
Net worth rose 4.4% as borrowing slowed to eight-year low, report shows
By Rex Nutting, MarketWatch
Last update: 12:53 p.m. EST Dec. 6, 2007
WASHINGTON (MarketWatch) — With home prices falling and mortgage debts climbing, U.S. households lost a record $128 billion in real estate equity in the third quarter, the Federal Reserve reported Thursday.
…
Despite the collapse of real estate, household assets increased $858 billion to stand at $72.8 trillion, while liabilities rose $233 billion to $14.2 trillion.
http://www.marketwatch.com/news/story/us-households-lost-128-bln/story.aspx?guid=%7B57D652B2%2D26CA%2D4318%2DB1FB%2D71506C274547%7D
OK, so we’ve already hashed out the big bailout plan, right? It won’t help because it’s predicated on the assumption that people could actually pay their mortgages at 7-8% interest. Truth is, they could only afford minimum pay option. If they could have afforded 7-8%, they would have just gotten a fixed-rate loan to begin with.
So … The crash is still on.
Yes and no –
- Still on (eventually)
- But postponed until after campaign season
So sub-prime will be frozen, but Alt-A will get foreclosed on?
Or do the Alt-A, having longer fixed periods, have more time before they fall into crisis? Help me, Prof!
There be winners and there be losers, and which you are depends on where the chips fall…
Um. Thanks…
(this had better not be on the exam or I am So screwed)
Wreck-re-um for many a heavyweight…
The Web 2.0 Bubble Song
blog blog blog it all
blog it if it’s big or small
blog at the cineplex
blog while you’re having sex
blog in the locker room
babies blogging in the womb
blog even if you’re wrong
won’t you blog about this song . . .
http://www.deeshaa.org/2007/12/06/the-web-20-bubble-song/
Support free markets? Support Dr. Paul?
Support the Ron Paul blimp!
http://www.ronpaulblimp.com
? Link won’t open for me. Went to his main site and there’s no mention of a blimp, that I could find.
Try the link again (the site was down momentarily).
This is a grassroots effort, not associated with the campaign, though Dr. Paul was heard saying just yesterday that he is interested and excited about the blimp. I think though, due to some FEC regulations, he can’t actually support it financially.
I’m so pissssssed about the bailout plan but deep down I know it’s not going to work. The best part of today is that the government officials, MSM, Bob Brinker, Kudlow, etc that have been telling us that we are nuts are getting their noses rubbed in a good dose of reality. What should concern most of us is that we are only seeing the tip of the iceberg if the banking industry has to take it’s case to the highest office in the land for help. Man this thing is running faster and deeper then any off us hear are privy to.
Now to add why this won’t work, look at the CC picture presented to Congress on the 4th.
“Most stunning, $3,478.39 out of $5,618 in payments had gone to Discover for interest accrued over the previous two years, Hard told the Senate Permanent Subcommittee on Investigations Tuesday. On a monthly level, about $176 out of her $200 payments went to finance charges. In the past year alone, Hard had paid $2,400 but reduced her debt by only about $350.”
“But congressional efforts to make all credit card companies discontue the practice is running into a buzz saw of opposition from the banking industry. Consumer risk profiles change as underlying costs to the lenders change and interest rates must reflect that, said Ken Clayton, managing director of card policy for the American Bankers Association.
Not considering changes to a card holder’s credit rating “is like taking the batteries out of a smoke detector,” said Roger C. Hochschild, president and chief operating officer of Discover Financial Services LLC. “It’s important criteria.”
“Sen. Norm Coleman, R-Minn., said Congress should be mindful of unintended consequences by imposing new federal regulations on the industry, such as the return of high annual fees and less access to credit for people with questionable credit records.”
(biz.yahoo.com/ap/071204/credit_cards.html?.v=2)
“
Depthless Debts Disregarded Daily
Game over folks. An artificial floor has been set for housing prices.
Bush said the rest of the economy was performing well and could weather the housing storm.
Really? why the Soviet/China move to freeze rates?
Im so pissed, Im getting dizzy from the bioling blood………Recession cancelled due to lack of proper planning from the Govt Ministeres. Recession next week.
“One reason for confidence is that the downturn in housing comes against the backdrop of solid fundamentals in other areas, including low inflation, a healthy job market, record high exports,” Bush said.
low inflation= BALDFACE LIE, its like he’s kicking me in the head with this BS
Healthy Job Market= BS service jobs paying BS wage….cant raise a family, just pay bills
Record high Exports= CODE FOR DOLLAR CRASH
I feel like Im in a nightmare that wont end.
That’s the way I felt in the summer.
We are short short short. Via spring index puts. Would get a few more on further liftage but I feel great about this.
With you.
txchick57:
You are still short? You have guts that I don’t have. I’ve almost gone in for those but this makes me change my mind.
Yes, was 50% coming in today, now 90%.
This bailout is a complete non-event. It may help a few 10’s of thousands of borrowers, is non-binding, and actually makes economic sense for the investors and servicers to freeze rates for the borrowers they are talking about (so they likely would have done it before), but now, it is more likely that the borrower will actually accept, since it is being done under the guise of “helping” by the government.
Smoke, mirrors, and screwing the little guy.
Now, don’t get me started on the “tax exempt bond” portion of the show. That’s a bunch of BS…
Well if it ain’t smoke and mirrors that makes the stock market continue to rally, then I am wondering what it is?
I give you a huge amount of credit.
I can see what you are saying from a technical perspective but I lack conviction regarding market manipulation.
Sure, acknowledged, but after about the first week of January, there is little catalyst to keep this going.
If the mkt is too high on Dec. 11, there might be a sell the news reaction then.
I paid for a lot of time here. I want to catch the full down move.
You don’t think there will be an attempt to manipulate the market until the election?
I didn’t think they could really do it until today.
I’m also conflicted b/c I see some great index put opportunities right now……
No asking for advice, just your opinion as to how long you think the manipulation will continue.
Thx.
I don’t think they can.
I looked pretty stupid diving in long last Monday at 1407 S&P too but that worked out
But bottoms are a lot easier to pick than tops.
LOL
I am just upset today, because while thinking about this BS plan of President Bush, I missed the major news. I slipped and lost a great opportunity!
But bottoms are a lot easier to pick than tops.
We’re talking about stocks, right? Not dating?
I’m suprised it took someone this long to jump on that double entendre
Well, if txchick57 is short, then I’m going to my shorts, and putting more money abroad. Been chatting with the Europacific folks… just read ‘Crash Proof’ …. so now that txchick is essentially shorting the economy, I’m in.
Don’t follow me with money you can’t afford to lose. I’m a trader and I’m trading on techicals with a little fundie sprinkled on the top for flavor.
Not to worry, txchick … I actually mean to say, “changing my medium term investments’ …. I don’t actually short on leverage based on advice from folks I don’t know. If I was that crazy, I’d buy a brand new million dollar home like the idiot next door. He bought last week.
I’ve live in the same home for 14 years. Not a gambler.
Anyway, I’ve been talking about investing money abroad for a while. I just think your sentiment confirms a few things I’ve heard, longer term.
Trading like you do, is a great way to make money. But for us amatures, it’s an even better way to lose it.
It would be great if you could post your experience with Euro Pacific. They seem a bit expensive - charging about ~3% for their services.
Chin up, bears. The devil’s in the details.
Of the 2.2 million subprime ARMS that are expected to reset through the end of 2008, only 240,000 of those would be covered by the freeze, according to an analysis made by investment bank Barclays Capital as reported in The New York Times. Other borrowers will gain relief through FHASecure and other, lender-initiated refinancing efforts.
“I think the plan is good in theory,” said Mark Zandi, chief economist for Moody’s Economy.com, “but, in practice, it’s going to come up short. There are too many impediments to its widespread adoption by investors and servicers.”
Obstacles include contractual obligations between servicers and investors as well as logistical difficulties. When loans have been sliced up and resold through the securitization process, it can be hard to determine who ultimately has the authority to decide what modifications are possible and still in the best interests of the investors.
Furthermore, said Zandi, “There’s no stick in the plan; it depends on moral suasion.”
Closed out my long in ICICI Bank and covered my shorts in Bank of America, Citigroup, And JP Morgan. Still short non SIV US banks.
Here’s a link that you can use to find info on interest rate trends over the past 5 years. A person with a 5/25 ARM resetting in 2008 would have taken the loan in 2003. At that time, prime rates for that type of mortgage were like 2-3%, so I guess subprime rates were like 4-5%? However, the resets actually happen little by little, with a big one at the end, so I’m not sure what rate these freezies may be getting.
http://www.bankrate.com/brm/graphs
Link doesn’t work. Go here: http://www.bankrate.com/brm/rate/mtg_home.asp, then click on the “graph trends” link in the left nav bar.
DOA
Critics from all corners quick on the draw
By Ben White and Saskia Scholtes in New York and Stephanie Kirchgaessner in Washington
Published: December 6 2007 20:59 | Last updated: December 6 2007 20:59
President George W. Bush had not even gone in front of the television cameras to introduce his subprime mortgage rescue plan before critics from all corners descended to attack it.
http://www.ft.com/cms/s/3a8c8be4-a43c-11dc-a28d-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F3a8c8be4-a43c-11dc-a28d-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Dear Uncle Sam,
Please bail me out on my high credit card interest rates. I was misled by unscrupulous lenders. I was enticed to buy a big flat screen TV and lots of other stuff by sneaky credit card companies who used subliminal marketing trickery to take my money. As you have found it in your heart to help other borrowers who were bamboozled by the mortgage industry, I know you can find a way to help me out too. Thank God there are those in the great US of A who enable us poor, misled consumers to find light at the end of the tunnel.
p.s. got any freebie HD DVD’s you can spare?
“I’m a George Bush fan, in case you are wondering.” - Dave Ramsey, real estate shill on Fox Business Channel. Also he claims it’s not a bailout. You are not going to pay for stupid people who do stupid things. - he said.
Elephants fly.
Why do you listen to that shyster.
Florida Fund Meltdown: Bad To Worse
Town and city officials in Florida struggling to make payroll are likely to face more big troubles–and more losses than they have been led to believe–an analysis of a state investment fund indicates.
The $14 billion Florida Local Government Investment Pool, which invests short-term assets for cities and other public entities around the state, barred withdrawals last week. The Florida State Board of Administration (SBA), which manages the fund as well as the state’s pension assets, froze withdrawals after investors became fearful of major losses and began taking out large sums of money.
The freeze left some towns struggling to make payroll and to cover other near-term expenses. Since last week, Investment Board Director Coleman Stipanovich has resigned. Looking to shore up confidence, the pool’s directors hired fixed-income giant BlackRock (nyse: BLK - news - people ) to analyze the troubled fund and take over management for a 90-day period.
The Florida SBA and BlackRock split the fund in two, putting the most troubled 14% of its assets, about $2 billion, in one pool, and the remaining 86% in another. The SBA began permitting limited withdrawals Thursday morning, with the hope that a promise of immediate access to newly deposited money would encourage investors to pitch in additional assets.
The opposite happened. In a show of no confidence, investors yanked another $1.2 billion, while depositing a mere $7 million, according to figures provided by the SBA.
http://tinyurl.com/26yfuv
OECD: Non-recession to result in sharp U.S. economic slowdown in first half of 2008.
PB: Helicopter drops of liquidity to lead to reflation of various bubbles by second half of 2008.
Last Updated: Thursday, 6 December 2007, 10:36 GMT
OECD warns of economic slowdown
The outlook for the US economy is set to worsen
The US economy will slow sharply in the first half of 2008, the OECD has warned, leading to weaker world growth.
The 30-nation group of top economies said that the risks of further financial turmoil could not be ruled out, but it expected recovery later.
The OECD said that strong company profits and high employment should moderate the effects of the slowdown.
But it said that rising commodity prices posed a dilemma for central banks who had cut interest rates.
OECD ECONOMIC FORECAST
US: 2.0% (2.2%)
Eurozone: 1.9% (2.6%)
UK: 2.0% (3.1%)
Japan: 1.6% (1.9%)
Real GDP growth, 2008 (2007)
The think tank for the world’s leading economies said that the most likely outcome was a “relatively benign” scenario where growth “picked up speed” in the second half of 2008 and early 2009, especially in the United States.
http://news.bbc.co.uk/2/hi/business/7130341.stm
Last Updated: Thursday, 6 December 2007, 00:13 GMT
Global shares hit as financial crisis spreads
By Jamie Robertson
Business presenter, BBC World
It is hard not to feel a touch of schadenfreude when looking at the mess the world’s banks have got into over the last six months.
But watching the 20.5% fall in Citigroup’s shares and the 11.8% fall in HSBC’s shares over the last month provides somewhat cold comfort as one begins to realise the implications of the resulting credit squeeze and their effect on sentiment generally.
Together those two banks have accounted for over half of the 150 point fall in the BBC’s Global 30 index during November.
The reasons of course lie in the sub-prime mortgage debacle.
http://news.bbc.co.uk/2/hi/business/7127246.stm
“It is hard not to feel a touch of schadenfreude when looking at the mess the world’s banks have got into over the last six months.”
–
This is a really annoying line. First, the apparently pernicious idea that this is a 6 month old problem, and then the use of “schadenfreude” without the article really describing (to my mind) who is seeing what joy in the banks misfortunes. First I thought it was European joy at US banks woes because it’s all the fault of the US, but then he spends a lot of space on HSBC.
Flowchart diagram of one of the stupidest ideas in financial history…
http://news.bbc.co.uk/2/hi/business/7073131.stm
Make sure to scroll down to the bottom where the highly dramatic “Housing Price Crash” graph is to be found.
Try not to catch yourself a falling knife next year when home prices are predicted to fall by at least 10 percent across the U.S. (more in markets formerly referred to as a bit frothy).
THE HOUSING PRICE CRASH
US house prices
The wave of repossessions is having a dramatic effect on house prices, reversing the housing boom of the last few years and causing the first national decline in house prices since the 1930s.
There is a glut of four million unsold homes that is depressing prices, as builders have also been forced to lower prices to get rid of unsold properties.
And house prices, which are currently declining at an annual rate of 4.5%, are expected to fall by at least 10% by next year - and more in areas like California and Florida which had the biggest boom.
The chart’s nice, but it’s missing a lot of “gain” boxes…
Madeye Cramer puts on his policy analyst hat and climbs back onto his bully pulpit to weigh in on the bailout:
9 hours ago
Stop Trading!: Bush Subprime Plan Not a Bailout
Posted By:Tom Brennan
Companies:Citigroup Inc
Cramer is tired of hearing that President George W. Bush’s plan to freeze subprime interest rates is a bailout, he told Erin Burnett during Stop Trading! Thursday. He chalked the complaining up to investors who shorted the financials.
“Everybody knows we’ve got to slow the [foreclosure] process down,” Cramer said, “so these companies can raise capital and therefore stay in business, and snap back like in 1990 when Citigroup was insolvent.”
The plan should help reduce some of the growing housing inventory and keep the system from collapsing, Cramer said.
http://www.cnbc.com/id/22133205/site/14081545/
Sample feedback to CNBC on Mortgage Freeze plan. Seems as though Madeye Cramer is in the minority who think it is a good idea.
“This plan may actually hurt borrowers who have no chance at all of paying back their loans. They’ll liquidate their retirement for a few years and then foreclose. It will also prolong the correction. Instead of amputating the gangrenous leg they’re going to keep the patient in the hospital for 5 years on antibiotics before the inevitable occurs. Subprime is a drop in the bucket when you consider the amount of people who bought too much house using prime and alt-a loans. This isn’t a rate issue it’s an affordability issue. Prices are dropping. Free markets work.”
– Kirk
http://www.cnbc.com/id/22129130/site/14081545/
Chrysler, others to temporarily halt truck production
SAN FRANCISCO (MarketWatch) — The Big Three U.S. automakers will temporarily halt production of full-size pickup trucks because of weak demand, according to a media report Thursday.
Chrysler LLC, General Motors Corp. and Ford Motor Co. will all shut down production of the trucks, The Wall Street Journal reported in its online edition. See Wall Street Journal story (subscription required)
Citing unnamed sources, the report said Chrysler plans to halt production at plants in Warren, Mich. and Fenton, Mo. before Christmas, and keep them closed throughout January.
http://tinyurl.com/24zkpg
“The Big Three U.S. automakers will temporarily halt production …”
Threeser freezer