A Downturn Unlike Anything Seen Before
Some housing bubble news from Wall Street and Washington. Bloomberg, “Toll Brothers Inc., the largest U.S. luxury-home builder, reported its first quarterly loss in 21 years and said the housing slump is the worst the company has seen in decades. The company took a pretax expense of $314.9 million to write down inventory and land in the fourth quarter. The number of homes Toll delivers in fiscal 2008 may fall as much as 42 percent to 3,900 from a year earlier, Chief Financial Officer Joel Rassman said in the statement.”
“Rassman estimated the average sale price in fiscal 2008 will be $630,000 to $650,000, down as much as 9 percent from 2007. In fiscal 2007, the average price of a Toll home fell to about $694,000, or 2.4 percent.”
“The number of contracts signed in the fourth quarter fell the most in Toll’s West region of Arizona, California, Colorado and Nevada, where orders tumbled 87 percent. The second largest decline was in its South region, which includes Florida and Texas, where orders slumped 44 percent.”
From CNN Money. “‘By many measures, fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business,’ Chairman Robert Toll said in a statement. ‘1974 was perhaps rougher, but the difficult times only lasted one year.’”
“The one area where Toll saw a jump in revenue in the latest quarter was land sales, as the company paired back on its holdings to just under 60,000 lots, down more than a third from a peak in April 2006.”
“Besides having land sales increase more than eight-fold from a year earlier to $2 million, the company said it has continued to renegotiate, and in some cases, reduce its optioned land positions.”
The Scotsman. “Housing sales at Crest Nicholson, the housebuilder bought six months ago for £715 million by HBoS and Sir Tom Hunter’s West Coast Capital private equity firm, have fallen 15 per cent since September. Buy-to-let investors account for about 35 per cent of Crest’s apartment sales, but numbers across the country have fallen by half since October.”
“Royal Bank of Scotland Group Plc, the U.K.’s second-biggest bank, reported 1.5 billion pounds ($3 billion) of writedowns from slumping credit markets and said earnings will exceed analysts’ estimates this year.”
“Rabobank Groep NV, the biggest Dutch mortgage lender, will bail out its Tango Finance Ltd. structured investment vehicle by taking on 5.2 billion-euros ($7.6 billion) of its assets to avoid a fire sale.”
“‘There is no immediate prospect of the funding situation for SIVs improving in 2008,’ the bank said. ‘To prevent a potential fire sale of high quality assets, the bank has announced that it is prepared to take the remaining assets of Tango onto its balance sheet.’”
From Reuters. “Canadian Imperial Bank of Commerce noted that conditions in the troubled U.S. residential mortgage market have worsened since the end of its financial year, and it projected C$225 million in additional writedowns for the month of November.”
“The bank also said that it could face ’significant future losses’ in U.S. mortgage-related derivative contracts that are hedged with counterparties, depending on changes in market and economic conditions.”
“‘Conditions in the U.S. residential mortgage market have continued to deteriorate since year-end,’ the bank said.”
“‘In addition, we have exposures to the U.S. subprime residential mortgage market through derivative contracts which are hedged with investment-grade counterparties,’ CIBC said.”
“As of October 31, the notional amount of these hedged contracts was C$9.3 billion. The related on-balance sheet fair value was C$4.0 billion, the bank said.”
“‘We’ve been suggesting for some time that the gross exposure would be a more relevant number, particularly since a number of global credit insurers have been under a lot of market pressure because of concerns about their ability to honor their counterparty contracts,’ said Blackmont Capital analyst Brad Smith Without knowing who the counterparties are, and the size of the bank’s exposure to each one, it is difficult to do further analysis, Smith said.”
“MBIA, the largest bond insurer in the world, said on Thursday it is looking at ways to shore up its capital base, a day after rating agency Moody’s Investors Service said the insurer was “somewhat likely” to require additional capital.”
“U.S. mortgage assets in collateralized debt obligations have lost so much value that the top classes of the securities may be worth as little as 20 cents on the dollar in a liquidation, Barclays Plc analysts said in a report.”
“About 20 percent to 30 percent of principal would be covered for the ’super senior’ portions of mezzanine asset-backed bond CDOs, which mainly contain mortgage bonds and other CDOs initially assigned low investment-grade ratings, Barclays said.”
“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.’”
“Proceeds from the asset sale, in addition to collateral held in the deal, will not be sufficient to pay back the CDO’s most senior noteholders, originally rated ‘AAA,’ and no proceeds will be available for any other noteholders, S&P said.”
“Freezing rates on subprime mortgages may lead to further deterioration in ratings of bonds backed by the loans despite its goal of reducing losses, Standard & Poor’s said on Thursday.”
“The credit ratings agency’s statement came amid a federal plan to staunch soaring foreclosures on U.S. adjustable mortgages by freezing interest rates ahead of scheduled resets.”
“‘Absent any real offset to default frequency and loss severity that may result from the enactment of any loss mitigation proposal, simply freezing interest rates on some U.S. first-lien subprime mortgage loans would have a negative impact’ on ratings of certain bonds, it said.”
“‘Standard & Poor’s supports appropriate loss mitigation strategies to prevent foreclosures and allow subprime borrowers to remain in their homes,’ the unit of McGraw-Hill Cos. said. ‘In certain instances, the negative effects may outweigh the positive benefits.’”
From CNBC. “I was reading the report from the Mortgage Bankers Association this morning on delinquencies and foreclosures. None of it was particularly unexpected, but I was struck by one aspect, and that is the amount of prime loans that are going into foreclosure.”
“The headline of course is that 43 percent of all new foreclosures are subprime adjustable rate loans, but that means that 57 percent are not. They’re prime and Alt-A loans, and all the bailout plans we’re hearing seem to have nothing to do with them.”
“The Mortgage Bankers Association reported that 0.78 percent of mortgages entered the foreclosure process in the three months ended Sept. 30. The homeowners entering foreclosure brought the total percentage of loans in the foreclosure process to a record high as well of 1.69 percent.”
“The report also showed that 5.59 percent of borrowers are now at least 30 days late making their mortgage payments, which is just below the record high of 5.68 percent set in 1986. And a record 1.26 percent of the borrowers were 90-plus days late, putting them at significant risk of going into foreclosure.”
“Doug Duncan, chief economist for the lenders’ trade group, said those rising delinquencies rates suggest that the problems have not hit bottom.”
“The survey shows more than 20 percent of the seriously delinquent loans in the nation are in California and Florida, while more than 15 percent are in Michigan, Indiana and Ohio.”
“‘As go Califorina and Florida, a lot of these numbers will go,’ he said. ‘We’ve probably not seen this combination of factors before, and that makes it difficult to forecast.’”
“The surge in foreclosures is expanding the inventory of unsold homes and contributing to the decline in housing demand. Sales of new and previously owned homes probably will drop to 5.09 million next year, 32 percent below the 2005 peak of 7.46 million, according to Frank Nothaft, chief economist of Freddie Mac.”
“‘These are the first numbers we’ve seen that combine the meltdown of the credit markets with the drop in home prices,’ said Jay Brinkmann, VP of research and economics for the bankers trade group.”
“There is a ‘substantial‘ risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report.”
“Price levels of the RPX Index, a derivative index based on home prices in 25 U.S. metropolitan residential property markets, indicate an expectation that prices will decline for the next three years, with a recovery likely to occur between three and four years from now, Morgan Stanley said.”
“‘The property derivatives market seems to be suggesting that we are in a very different environment, on the heels of market events that could force a housing recession like none ever imagined or experienced,’ Morgan Stanley analysts said.”
The Associated Press. “The amount of equity homeowners hold in their homes slipped in the third quarter to just above 50 percent, according to a report from the Federal Reserve Thursday.”
“Economists expect this figure, equal to the percentage of a home’s market value minus mortgage-related debt, to tumble even further as falling home prices eat into equity. It could easily drop below 50 percent by the end of next year, some experts say, marking the first time homeowners will owe more than they own since the Fed started recording the data in 1945.”
‘It could easily drop below 50 percent by the end of next year, some experts say, marking the first time homeowners will owe more than they own since the Fed started recording the data in 1945.’
This is a direct result of the housing bubble, IMO. IIRC, before the bubble it was in the 60%s, and it should be noted that the lowest equity and homeownership percentages can be found in the big ‘bubble’ states.
Were it not for mass insanity, the bubble should have INCREASED equity. Yes new buyers put less and less down, but if existing homeowners hadn’t done cash-out refinancing, higher prices would have increased their equity but not their debt.
Gee what companies Encouraged borrowing ..banking, credit cards, just about everyone who could put a commercial on tv was PUSHING for people taking equity out.
Now they should not have in most cases..but golly, perhaps the MSM PUSHED to hard all these yrs.Making it seem so darn SEXY to BUY STUFF.
The MSM is only concerned about one thing:
DOES THE ADVERTISER PAY HIS BILLS ON TIME. It happened in the 90’s with rare coins, total fraud. So why not with mortgages.
Imagine FOX, CNBC, MSNBC turning away advertising dollars by having standards.
Cashout, multirefi helocs based upon falsified, computerized or “driveby” appraisals caused the massive bubble.
The money is GONE, spent on the niceities of life.
Your equity went along with it but
too bad, so sad
y’all didn’t get nuthin’
The real headline today is rising and record breaking foreclosures. Sheeple manipulating PR will not stop this crash.
RE: “I was reading the report from the Mortgage Bankers Association this morning on delinquencies and foreclosures. None of it was particularly unexpected, but I was struck by one aspect, and that is the amount of prime loans that are going into foreclosure.”
Imitation high roller’s livin’ large in houses they couldn’t afford who all swallowed the NAR’s big lie, hook line and sinker, that real estate can only go up.
When the music’s over, turn out the lights…turn out the lights, turn out the lights.
The news gets worse by the day.
With the stock market taking off today, I wondered for a while if we (HBBers) are the only sane thinkers left in this great country. Or, may be we have it all wrong? Then I realized whatever was predicted on this blog is turning out to be true so far. So, let us have faith in our sanity. Year 2008 is going to be ugly!
The sad part is I believe it will become ugly for everybody whether an FB or not. Lot’s of spoiled, self centered wannabes that have been living the high life will be miserable when they have to go back to living within their means. They’re going to be bitter, angry and resentful and naturally will feel like life did done them wrong. And those folks will be your neighbors, co-workers, drivers on the road, people in the supermarket. Add to that all their spoiled little darlings that are going to find out the truth about their parents and it’s going to be a really toxic atmosphere. A good time to plan to nest - stay home as much as possible. People do strange things when they feel like they have nothing left to lose.
Can the stock market be an indicator of anything lately? I mean, c’mon. Here you some of the financials like Novastar doing better today because of the “plan”. How can Bush’s plan be anything but disastrous for finacials. These guys are going to take it in the shorts harder than before if this thing goes through. And as for tight credit, look out! Bill Gates won’t be able to get a loan.
No, the stock market is a joke. The problem is that it’s starting to become so obvious that even the idiot sheeple are starting to get it.
Not to worry the U.S.A. can not go into a recession, we are to big to fail or correct…. The Chi-coms, Nips, Arabs, and even Putin’s new U.S.S.R. have to much invested and won’t allow it! Hang in there help is on the way, if necessary we’ll just “freeze” everything. No wait that won’t work with this Global warming, never mind we may have to re-think the situation.
That last part, besides the blatant discrimination, was great.
This is part OT, part “tin foil” and also part mortgage fraud history. Here is a missive from Catherine Austin Fitts (former HUD assistant secretary under 1st Bush).
Anyone here who has paid attention to the “tin foil” being put out by the various personalities posting here will definitely get a kick and further insight from reading this short book (about a 4 beer read). I dare say that the US is fully screwed and the fraud described in this essay, if true, puts to rest any idea of altruism from our leaders. All I can say is WOW.
http://www.dunwalke.com/
You just have to laugh. Exactly how stupid does this Morgan Stanley Analyst think people are?
Morgan Stanley just acquired (in a brilliantly structured joint venture) 11,000 properties from Lennar at 40% of their book value. It is absurd to think that MS would have invested well over $500 million in a market sector that will continue to decline for the next three to four years. The firms beleagured Board of Directors and skeptical shareholders would undoubtedky crucify the exec’s who made such a monumentally stupid decision (which, if one is to believe their own analyst, it would rate as one of the stupidest investment strategies ever, bar none)
ITtseems like Morgan Stanley needs to make sure their people get their stories straight. I hope that analyst who made those “enlightened” comments doesn’t have an ARM, one can imagine it getting infinitely harder to make those payments once the boss’s get wind of that … er, uh…fine analysis and kick him or her out onto the street.
Sounds like the freeze in ARM resets is further tightening credit. It also makes all the loss provisions shakier than before.
So, debt growth will slow and deflation will set in very quickly as buisness can’t make loans or take risks (premiums should skyrocket).
This is about to get pretty ugly
It’s all good. Just ask a Wall Street bull.
Countdown to the close:14min20sec
December 6, 2007 3:45 P.M.EST
BULLETIN
Bulls cheer subprime plan
Stocks extending gains with the Dow up 150 points as investors weigh retail results and financial sector’s rebound, and as the White House offers plan to help curb foreclosures.
http://www.marketwatch.com/
I just put on some lotion. I feel so much better.
Yes, I have been doing some hand wringing… Is their a 12 step program for this???
“It rubs the lotion on it’s skin or else it gets the hose again.”
“It puts the lotion in the basket. …. It puts the lotion in the basket…..PUT THE F$CKING LOTION IN THE BASKET!!!!”
LOL
Someone on another blog said this fix is a way to stall until February when it becomes someone else’s problem. What does that mean?
It means politics are at play…I’m assuming they meant Feb 09, however.
I had always though Bush Co. could keep all the balls in the air during this juggling phase until they got out of office. Last August or so I decided they couldn’t and made a bunch of investment decisions…now I’m back to thinking they might be able to keep most of the balls in the air and I should have stuck with my original hunch.
Your original hunch was right, evidenced by todays fiasco.
I dunno, Viking, things seem pretty shaky right now — though they could string us out until January, ‘09, it seems increasingly unlikely.
There have been a lot of fat little guys in suits frantically running around behind the scenes to plug all the holes in the dike. But there are a lot of holes, and a finite number of fat little fingers.
GWB = FDR
No. GWB=Hoover
Hoover with a head injury.
Hoover with a head injury and a shameless propensity to deceive.
Hoover with a lobotomy.
Hoover was a freakin genius compared to the chimp.
Thanks to you, Michael, and Mr. IncomeStream. I thought he meant this coming February and I was wondering what terrible thing was comng up that I didn’t know about.
It means by February enough primaries will have occurred that the candidates for both parties will be set, IMHO.
Is this still more of a short squeeze that started last week? I don’t believe this rally can continue because it was essentially started by Vice Fed Chair Kohn’s statements that the Fed is going to cut rates. Beneath this however, the housing and credit markets still suck. When does the top of this rally happen, before or after the new year (when the market starts to focus on 4th qtr earnings)?
Lots of fresh IRA and 401k money is due to go into the market after the first of the year.
401K money goes in every 2 weeks
No, some people try to load up 401K in first few months if their company allows it. But I don’t think it is a huge no of people. About IRA, yes, people try to put in more during Jan-Apr.
That will be more than offset by people that have no possible way they can afford to contribute to a 401k right now.
NeilT, true that the number of front loaders is very small because that hinders the company match. Re: IRA, agreed that much goes in at tax time, ie April.
401k money stops being withdrawn from paychecks when the employee is maxed out for the year and restarts at the beginning of the new year.
I am a partner at a law firm. In such an arrangement, a mandatory contribution is required at the end of the year. It’s usually substantial. Also those that get big bonuses at the end of the year like the wall street types wait until the end of the year to make their contribution, they got mortgages you know.
Lots of fresh IRA and 401k money is due to go into the market after the first of the year.
I don’t think it will have a major effect. Ironically, I max my 401k and my IRA every year. In the first week of January I put the entire new year’s contribution into a stock mutual fund. In fact, I will probably put $10,000 into equities in January.
I’m not an optimist, but that also means I’m not optimistic that my precious metals and government securities will do well the next few years. I hedge against my bad decisions and do not like my net worth to take major swings of any direction.
‘Bulls cheer subprime plan’
-Heehee hee.
Nothing will stop the market from selling off - all of this ‘Deficits don’t matter’ is BS.
These short lived rallies belie the lack of confidence going forward - they have already priced in the Fed Cut.
Today’s rally makes .50 on 12/11 look really stoopid. What about employment #’s tomorrow?
i listened to Bernanke’s talk the otherday.. i didn’t think a cut was in the bag. He said that, among other indicators like inflation indices, a cut would depend on employment #s’…
and if things keep going the way they have recently, i wouldn’t be suprised if there is no rate cut next Tuesday.
A cut is in the bag. The point of leading you to believe otherwise is to make sure the cut is a “surprise.”
Surprise parties are usually NO surprise!
yep, anything he says is a shake. look at the 10 year..it manuevered lower and has drifted up. you go in they take it out…for the next cut.
Gee, I don’t know Professor Bear? Perhaps we should check with our “next move is up”, “I do this for a living”, “Don’t try this at home” Hedgefund Analyst?
Bwahahaha, I sure miss that guy! I need some comedic relief!
So long as the U.S. stock market keeps on rallying, there can be no recession, the world economy will be just fine, and the current credit market problems will turn out to have been a major tempest in a teapot. Gloomsters like this hand-wringing Legg Mason chief can be safely ignored. He should go out and buy himself a case of Jergen’s lotion.
Legg Mason chief sees dire credit market
By Deborah Brewster in New York
Published: December 4 2007 23:36 | Last updated: December 4 2007 23:36
Chip Mason, chief executive and founder of Legg Mason, one of the world’s largest money managers, said on Tuesday that the credit markets were in the worst state he had seen in his 47 years in the business.
“It is a very unusual situation. I have not seen anything like this, where nothing is traded,” said Mr Mason. Legg has more than $1,000bn in assets under management, including several large money market funds.
http://www.ft.com/cms/s/567cb7cc-a2be-11dc-81c4-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F567cb7cc-a2be-11dc-81c4-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
All these people including Bill Miller and Legg Mason are bagholders. Yep, you and Blackstone, and KKR just overpaid for all this crap. Ah, the price of super low interest rates and cheap money.
“It is a very unusual situation. I have not seen anything like this, where nothing is traded,”
Then I guess to can downsize those trading desks. For if it walks like a duck and talks like a duck… Stop trying to milk it and anounce the start of hunting season.
Got popcorn?
Neil
Any news is good news for the permabulls. Of course, this proposed plan is nothing but an ill advised hail mary to try to stem foreclosures in the face of declining prices, and illiquid assets. If there was a market for these homes, they’d put the sheeple out on the street naked, if they could. It’s a disguised bail out for the rich. It’s a sick world.
Wow….just finished watching the Bush and Paulson song and dance. The masses have just been served a bag full of $hit filled M&M’s and from my email box it seems like the masses are eating it up like they are starring in there own personal version of 2 Girls and a Cup. Unbelievable, people are sheep. Can they really be that stupid and not see this for what it really is…
What is your read on this??? I was pissed beforem, but now I am cooling off…
Crispy, I would write a novel telling you what I see…bottom line it helps everyone but the FB. It’s political someone is looking ahead. They are gambling on the fact that the market rebounds or comes back to center within 5 years. The mistake they made was the data they used had never seen a mania in housing before so the plan is faulty. It will fail. It’s the same kind of thinking that got us in this mess in the first place.
One thing I’m curious about however, is who is going to do the appraisals to determine whether or not a FB is underwater. I also would like to see the street guidelines of the FHA loan they are proposing.
If I was an investor holding the paper on the 2 million borrowers they are talking about I would be jumping for joy the government has just guarenteed 5 years of yield where “yesterday” I was looking at severe loses.
They’ve fixed the market and put a floor on losses without spending a dime of taxpayer money. It was a good move…politically. But the data that was used is going to fail them.
Who’s to say the yeild is gauranteed? My bet is that as soon as the bailed-out FB’s see that housing is still in the tank, and the recession is upon us full bore, many of these so-called bailed-out homeowners will end up walking anyway. Now that’s going to be fun to watch. Pass the popcorn Neal.
Ex-
We just had this discussion, think about how many kitchen tables you have sat across from a FB and you couldn’t believe what you heard coming out of their mouths. If they freeze at the teaser for 5 years, most are going to bite on that. Also did you miss the part about moving them into a FHA secured loan? They are about to raise the limit. 10 to 1 they do it like a Title 13. no appraisal required.
RE: no appraisal required.
LMFAO…Then WTF should any company or corp. ever have to have it’s book’s audited to any accepted standard?
Whatta sick joke.
RE: One thing I’m curious about however, is who is going to do the appraisals to determine whether or not a FB is underwater
One of the provisions is that the FB has to have a 3% equity position which all of here know is ludicrious given the value situation and 0% down purchase positions.
My guess that negotiated under the table pay-off’s and kickbacks to appraiser’s to fudge reporting accuracy and value numbers will be enormous.
And if FHA/HUD, Fan, Fred come to the forefront as buyers of all the swill , the underwriter’s will be given instructions to let it all ride from their politically appointed bosses.
The appraisal fix will be in, bigger than before.
So now their appraisals will be higher? So property values do not go down?
I agree I also agree it’s a sick joke.
I think we are witnessing PPT meet the housing market.
Guaranteed? I just saw a report that said it was voluntary. I dont know what a voluntary agreement though as contractual parties always have the right to amend. Is this merely a suggestion?
Yes, I know it will fail, but I just dont want to see one F’n tax dollar used on this mess. The time for action was in 2004-2006. Too late now!
One word to describe the plan- Horsesh@t! These jokers in the white house have blown it once again.So who are we going to invade next to take out our problems on?
The Treasury has nothing but the largest debt ever known to our country. The money used will be created anew by the Fed. Those who get access to that new money last will be taxed via inflation (assuming they-Fed and Treasury-can avert the rapid destruction of credit/deflation). Either way, any remaining semblance of a market economy has been crushed (not that we had one prior, but most folks believed we did).
What system of governance will come out the other side will be determined by the knowledge and actions of the sovereign/people.
“Those who get access to that new money last will be taxed via inflation…”
Trickle down taxation theory.
I think I need to remind everyone that “mission creep” is the word of the day.
You can’t go on TV and tell the sheeple that the greed will be socialized. You have to start small, and escalate in small steps to achieve your goals.
Did you really think they were going to wash the dirty laundry all at once?
Look for more “fixes” as other shoes fall. Little by little more and more of the mess will end up in taxpayers hands. First they will pick the low hanging fruit (Braindead FB’ers that can be refied).
They are more busy trying to figure out how to keep a lid on the option ARM’s that are coming online for reset. That will be the real fight.
“…They are more busy trying to figure out how to keep a lid on the option ARM’s that are coming online for reset…”
They’ve already figured it out. They just presented it to you at the news conference today.
I asked on another thread: when will they announce the plan to save the banks, investors and housing industry, with some sort of subsidy and tax relief similar to the airlines after 9/11 all in the name of national security? We need to have strong economy so we don’t fall prey to foreign governments. I’ve come to the conclusion that this whole freeze plan is nothing more than a way to scare the sheeple into thinking it’s a crisis and that the government must take action.
Exactly. This bailout that some think won’t be a big deal has opened Pandora’s box. This is a multi-step move.
Welcome to the United Soviet States.
Absolutely correct, HO in LA!!!!
And I’m pi$$ed about it!
I see this as a big non-event. All talk, no action. They are encouraging investors and servicers to bleed more money out of those in-trouble borrowers most likely keep paying (they’ve paid so far, and are not underwater on their loan). Big deal. Servicers and borrowers should be doing that anyway, this just might help get to those borrowers more easily, as those kinds of borrowers might be more pro-active in calling the servicers to make the change happen.
Now, the tax exempt bond matter is another entirely…
People whose life, housing, future prospects of food, depending on it cannot see it.
Like, I am going to jail for a long time in a few months, well just like 6 months but I am not the criminal type so it a long time. Since I am very introspective person, I can just see how those people emote, rationalize will be a bad word. See, they have some psychological factors that you don’t in order to understand them:
-They are screwed.
-Their life is screwed.
-They will never be able to live as in the past few years, and as a friend of mine once said, doing crack for 5 years, you need to do something else for at least another 5 to be able to get over it completly.
-The financial future of the dying kid they send a buck in 99 in Africa looks better than their own
-All their “Ohh, a 14 people jacuzzi in a million dollar house, without even working. You must be the big cheese” sex and friends going to shutters. Just knowing how those people obsessed about the material and put it as NUMBER 1 means now they are going to fail in NUMBER 1.
-Making a bunch of babies thinking you are in a 4bdr and then having to move to a 1-2 bdr apt is going to be HAAAARD.
-Altough rents are cheaper than mortgages without teasers and interest only crap, and huge 4-5-6bdrs you can subrent, with beachhouses and converted garages and so forth, rents are actually pretty steep for two people making 10-12$ an hour that have to watch 4 kids. A small 2 bedroom in LA is like over 1200 easy! With 1600 - taxes for 10$/hour or 800/per child a month welfare you are screwed.
Marty
Did anyone understand this post?
I did. Basically, when you are the one screwed majorly you start believing in things like miracles. And also numbers. If many are like you, they cannot all be stupid and naive. And last you believe in equality and justice because you deserve to live the way those people did. So, they will not believe you, just like a sick person healed by the power of Christ won’t. We’ve all seen the nut cases refusing treatment in hospitals because of some obscure believe.
And when u tell someone, ‘You are done for the rest of your life!’ they don’t just roll up and die. If they believe what we are telling them, they will need to do that and people don’t.
Apparently, Marty is going to jail for six months… ‘Nuff said.
LOL…rough crowd.
I resent that. I’m not going for mortgage fraud. Too bad, maybe it could have been worth it a bit more.
Anyhow, I was just answering why those people have a hard time seeing reality. Of course you can look up the whole
1)Denial
2)bargaining
3)acceptance
or whatever the order was psychology mumbo-jumbo.
As for jail, with crap going down, hopefully, they won’t have place for me
Yes. Marty is upset. Also, something about cheese and sex? I don’t recommend that– it’ll ruin the carpet and the ceiling, and also the cost of dairy is rising so much as to make that a wasteful choice. Unless you’re talking about those tidy and precise Velveeta slices. That, of course, is a different matter.
The words “cheese” and “sex” shouldn’t be used in the same sentence. It conjures up images of objectionable personal habits.
Gal,
the simple fact u are posting here makes you different than some five-state ladies that never got around the whole ‘how to value s**t’ thingie. Like a friend not being able to buy socks, so poor, but buying 1.5 mil of houses. Without socks. I don’t know your experiences but after seeing a guy without socks, again he couldn’t buy any, not that he was eccentric, purchasing 2 houses in one day for 1.5 mil is like, LOL.
And yea, I am a bad boy, going to jail. Too bad I didn’t do anything at least sounding like jail. A guess I escaped from custoday and had a 5 hour manhunt but still…
Did anyone understand this post?
To me it looked like incoherent rambling.
Thanks Sammy
It screamed substance abuse, to me.
That meth kicked in………..
Naa, only weed, alcohol, books, and the occasional line
Seek help, Marty. Seriously.
RE: Unbelievable, people are sheep.
You forget your adjectives-stupid and gullible.
BTW- I am talking about myself.
That’s pretty funny.
OK, who saved Bob Toll’s quote about American bubble house prices being cheap compared to Europe and from now on kids will live at home until they are 40 and can barely afford over-priced RE.
Bob Toll was one arrogant bubble booster!
“It’s all just logic,” Toll said. “In Britain you pay seven times your annual income for a home; in the U.S. you pay three and a half.” The British get 330 square feet, per person, in their homes; in the U.S., we get 750 square feet. Not only does Toll say he believes the next generation of buyers will be paying twice as much of their annual incomes; in terms of space, he also seems to think they’re going to get only half as much. “And that average, million-dollar insane home in the burbs? It’s going to be $4 million.”
http://www.neighborspac.org/Toll-brothers-chasing-ground.htm
… and Toll probably lives in some 8,000 sq. ft. monstrosity (and that’s just his primary residence — doesn’t take into account the place on the slopes or at the beach)
Toll is a complete piece of bernanke, IMO.
Not in the Bay Area, you don’t. More like 10-12 times……..well, back in the day, that was.
From CNBC. “I was reading the report from the Mortgage Bankers Association this morning on delinquencies and foreclosures. None of it was particularly unexpected, but I was struck by one aspect, and that is the amount of prime loans that are going into foreclosure.”
“The headline of course is that 43 percent of all new foreclosures are subprime adjustable rate loans, but that means that 57 percent are not. They’re prime and Alt-A loans, and all the bailout plans we’re hearing seem to have nothing to do with them.”
Wow, just wow.
Wait til this really sinks in, damn I wish I wuz a lawyer! There’s gonna be litigation in every direction.
What’s next Prime sob stories?
I don’t call it the “Alt-A Bay Area” for nothing!
the new fashion for this spring is prime. prime is the new subprime.
RE: What’s next Prime sob stories?
You just named the next reality show-the other bookend for Flip this House.
She forgot about subprime fixed rate mortgages. They make up 12%.
Subprime makes up 13.1% of all loans, but 55% of all new loans entering foreclosure.
http://www.mortgagebankers.org/NewsandMedia/PressCenter/58758.htm
It’s going to huuuuuuuuuuuuuurt.
Serious question for handwringers and non-handwringers alike: Several siblings have homes on the market at the moment (both my and my wife’s side of the family). Will the Bush bailout make it easier or harder for them to sell? And how would you advise your brother or sister about pricing to sell in this market? (We are talking Co Sprngs and Wasatch Front here…)
Harder to sell because people won’t be able to get financing. Also, people who were going to walk away might have looked at buying or even renting a new house. Demand is just gone and what little demand there is cannot get financing.
You pinpointed the exact reason for my question. I have great comps for my sister’s home in “The Springs”, right up until 2007, when almost nothing has sold. How do you price to sell in a market where there are no comps available? (My personal instinct says to go with Dutch auction, but I am not sure my sister would be so keen on that idea…)
I agree, but most people don’t understand. All they can do is start lowering the price until they get nibbles. (An effective Dutch auction.) If they get below the current real market price, multiple bidders will apear and bid it back up to market price.
Good luck to them…
Neil
Agree with Tom on this one. I have said all along with the banking industry in liquidity shambles, no investors buying the MBS crapola, housing waaaay overpriced, and now an interest rate freeze, if even for a samll few FBs. Are you kidding? You will see the market lockup like never before since, I don’t know, the depression.
PB, you know my sstand on this always comes from the debt side. Well, with literally no one, except us and three other people, having no cash, and no access to mortgage loans, EXCEPT through very stringent hoops to jump through, goodbye market.
Case in point, was talking to some guy over the weekend about this. He works for BofA and he said that all the hoops from 15 years are slowly making their way back into the system.
Got 20% down, 6-12 months reserves in bank and VERIFIABLE, 2-3 years income taxes, secure job or secure career advancement within a given profession, and, oh by the way, NO FREAKIN OTHER DEBT, like 33% gross-28% net?
With this freeze, no one is going to want to loan their brother or mother 20 bucks.
Got toast?
“With this freeze, no one is going to want to loan their brother or mother 20 bucks.”
Any day now the chorus of politicians agreeing with your point will swell to a volume which creates overwhelming support for federal sources of loanable funds.
(Disclaimer: This is merely my prediction; act on it at your own risk.)
Prof Bear, and just where will they get this money: FED prints more, making it even more worthless OR more taxes OR sell off fed assets, like state toll roads, OR and combo of the above?
“FED prints more”
Other options are politically visible and unpopular.
I once loaned my mother 20 bucks, but she had to put 15 bucks down and I charged her 20% interest.
Where will these loans come from? Maybe similar to college loans. I guess. I can easily see it happening.
How do you price to sell in a market where there are no comps available?
——–
If there is little supply on the market, price at something slightly below the last comp and try like hell to get your buyer, dropping price over time. This is much like your Dutch Auction concept, but without a lot of bidders, you have the risk that your most logical buyer simply isn’t around when you hit their point of indifference.
If there is a ton of supply on the market, it’s going to be a race to the bottom, with the ultimate backstop being value as a rental. If your sister needs to sell, and assuming there is traffic walking through homes, it would be best to drop your price below the lowest on the market and try to make a deal.
it would be best to drop your price below the lowest on the market and try to make a deal.
———————–
Here’s your answer, PB. I’d recommend 5-10% below lowest current comp on the market & be sure it’s well below the price for last home sold.
PB,
I had to sell two properties in SD County since August. No problem (though certainly more difficult than when we sold our home in 2004).
Just price it right.
If you need help with it, I’ll come up with a price that would move it!
Neither…. This rate freeze won’t make a bit of a difference.
Oh, yes it will you are mis-reading what is going on.
what’s going on is FBs are being encouraged to remain F’d.. how does this change things for a buyer or seller in the overall market?
I tend to agree with you, on the theory that the rate freeze will tend to dry up what little flow of investor-provided loanable funds are left going forward. The one wild card I can envision is a call by policymakers for the GSEs (or other federal agencies) to step up to the plate when private sources of loanable funds dry up entirely.
Did you hear Bush’e speech the fis is already in on the GSE’s
http://www.cnbc.com/id/22129665
LITERATE PEOPLE (E.G. THE TYPE WHO RESPOND TO ONLINE NEWS POLLS) OVERWHELMINGLY THINK THIS BAILOUT PLAN SUCKS.
CNBC.com Live Poll
Is the Bush administration’s idea to freeze mortgage rates necessary to insulate the economy from the subprime crisis?
* 7845 responses
Yes — The danger to home values and the economy warrants government intervention. (13%)
No — The marketplace should be left to resolve the issues on its own. (80%)
Maybe — The answer is not yet clear. (6.4%)
Not a scientific survey.
Mr Incomestream..please clear up the “Mis-reading” for me..
Thanks,
I disagree, not because it is effective but because lenders are scared of more government involvement and it sends a huge message to the sheeple that housing is totally f*ked right now. All this talk about ppl underwater and not able to make payments, it should even be sinking into the last remaining ignorant sheeple. The cash cow is dead. The meat is still too fresh for the vultures, however. The body is growing stiffer but decomposition has not arrived. Three years to reveal the skeleton. I would set it 5% below the best sale comp, and lower if it does not sell. If they have to sell, it’s only going to get worse.
It will be harder for them to sell, because any new buyer will NOT be getting any help from the bailout, and will probably be expected to make up for the lost lender profits by paying a higher rate (for now). Also, the cat is out of the bag, and only a fool would buy now without doing at least some of the math concerning valuations, debt ratios, etc.
I hope your siblings and in-laws bought more than four years ago, have equity, and are realistic. If they price at 2003 levels they should be okay.
“It will be harder for them to sell, because any new buyer will NOT be getting any help from the bailout, and will probably be expected to make up for the lost lender profits by paying a higher rate (for now).”
And I also wonder, will we see adjustable loans disappear? What bank would want to underwrite an adjustable loan that could be “modified” at will by the government? Will this bailout plan in effect eliminate everything except 15, 20, 30 year fixed products?
Perhaps the adjustable will get front loaded, start at 15% and go down to 3% towards the end of the period. We’ll call it a “gauntlet” loan. This way the lenders won’t care if they freeze the “teeze”.
“Will the Bush bailout make it easier or harder for them to sell? ”
It will be harder for any of them to convince me to buy. Look at it this way. With no doc loans gone, no or low interest loans gone, I can now only afford a 20/80 mortgage, which means despite my much higher income, I can only afford to buy in a neighborhood of disfunctional low income trashy families.
On the other hand, I can rent in large corporate apartments among better people for a low price. The bailed out people are going to be able to stay in their houses for a few years, so they are unlikely to trash apartment complexes for a few years. I do not like living among noisy people.
Pretty soon (if not already), only low income people who qualify for teaser freezers and other New Deal Republican programs will be in the market for McMansions formerly priced above $1m. As for myself, I am happy to be a renter, as the risk of nice neighborhoods going bad seems extreme given the destabilizing nature of the current administration’s housing policy, and it is much better to be able to move away and rent somewhere else if property values in your hood suddenly turn south than to get stuck owning a falling knife in a blighted area. (The latter actually happened to a friend of mine a few years ago!)
They are all wrong bear, pricing is easy. Price it to be the next to sell based on current similiar inventory for sale. When new inventory undercuts their price they must adjust. The key is to be the least expensive comp for sale. Looking at previous sales prices is useless. Buyers don’t look at sold homes! They look at what’s for sale, if they are real buyers they will make the best deal they can. Your kins homes must be that “best deal” and price to sell now or never sell.
Like dipshit Krammer says “hope is not a strategy”, being the lowest priced home in the area is.
You are incorrect. The sold prices are on avg less than the wish list prices, and thus, more accurate. That’s what you need to undercut.
Alright I googled it.
NYtimes article with Bob Toll from 2005…
http://www.nytimes.com/2005/10/16/magazine/16brothers.html
“In the past couple of years, Toll and his deputies have begun analyzing European housing data to see if they hold any lessons for a maturing American housing market. Toll has been talking up the research to stock analysts and the financial press for the past year. His conclusions carry a whiff of new-paradigm thinking, but he nevertheless seems convinced that Europe’s present-day reality is America’s destiny. I asked Toll what our children - my kids are both under 8, I told him - would be paying when they’re ready to buy. “They’re going to live with us until they’re 40,” Toll said matter-of-factly. “And when they have their second kid, then we’ll finally kick them out and make them pay for the house that we paid for. And that house will cost them 45 to 50 percent of their income.”
I grew alarmed. Was he kidding? He assured me he was not. “It’s all just logic,” Toll said. “In Britain you pay seven times your annual income for a home; in the U.S. you pay three and a half.” The British get 330 square feet, per person, in their homes; in the U.S., we get 750 square feet. Not only does Toll say he believes the next generation of buyers will be paying twice as much of their annual incomes; in terms of space, he also seems to think they’re going to get only half as much. “And that average, million-dollar insane home in the burbs? It’s going to be $4 million.”
Look like London housing prices are coming down. It’s stupidity, greed, and fear like this that caused so many to rush in a buy.
These people should be regulated like stock brokers.
That does not have to be anyone’s destiny - provided they can think for themselves of course. Toll’s views come drenched in elitism.
“It’s all just logic”
That’s what the REIC has used locally to back their asinine statements. There is not a one of them who can explain away the fundamental disconnect plainly seen in affordability analyses… though they try.
Yep, it’s logic alright.
Then why the F does he build 4000 sq ft McMansions, if he’s so prescient about where we’re headed?
Toll made a pretty silly assumption.
The likely outcome of all the construction that took place in the last 5 years is that future Americans will have in excess of 1,000 ft sq per person, especially once the McMansion prices dip into the old 2-bd/1 ba category.
And everyone will have the second home too.
“…we are in a very different environment, on the heels of market events that could force a housing recession like none ever imagined or experienced”.
More insights on this enviornment in Herb Greenberg’s
You all might especially enjoy the insider’s insights into the problems with prime loans.
This guy nailed it. About time someone gets it and puts the real story out there. I am also a career mortgage banker and his outlook may be understating the problem!
One of the many comments posted to Herb Greenberg’s blog entry linked above - a must read!
“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.”
*****
10% of households? How many of them are buyers?
A 50% fall in some neighborhoods certainly seems plausible.
I live in the Bay Area and even talking to so-called sensible, intelligent people, they refuse to see that prices can come down here.
Call me crazy but I’m getting an itchy trigger finger. The wife & I have been scoping some rather nice homes that have been languishing for a while - some 6+ months. We’re seeing some houses that are definitely out of our price range, but with an indecent proposal they could quickly be in the zone. Then there are the ones that are already in the price range, which if dropped further would be like a gift (meaning we’ve already set our expectations for payments of $X, and if we can get them to 20% under $X it will be beautiful from a quality of life standpoint.
Anyways, if I can swing a price that is in the 2001-2002 range we might just pull the trigger. Unfortunately that necessitates some of these sellers accepting a 30% haircut on top of the prices they’ve already been reducing.
Through work I have access to some sub-market pricing, which could help the cause even more.
This could get interesting….
xmas eve, all cash ,no agent, and they have 10 minutes to accept the offer
=2001 a REAL ESTATE ODESSEY
xmas eve & 10 minutes to accept the offer .. . LOVE IT !! But make ‘em leave the presents under the tree behind too .. and no drink of water for Cindy Lou Who.
Okay, you’re crazy. 2 years from now So Cal will be living in the aftermath of a meltdown the likes it’s never seen. I wouldn’t want to stake a claim in that mess. But if you have cash 2 years from now, you’ll easily be picking up deals 40%+ lower than TODAYS prices.
If you have kids, make sure you have at least $10K/year/kid for private school or can live on one income so one can stay home and home school. Public education will take a large dump with less funding and teachers that can’t afford to commute or live near the school they are teaching in. Out migration will leave schools with less students and, therefore, less funds.
Good points, ATC.
I’ve always been a fan of keeping expenses under the 1 income limit.
ex-
I’m not so sure now. I have to see how this plays out in the next few days. I may even have to back off of my 1Q08 mass slide. I’m going to investigate who is participating in this new “bailout” I see Wells Fargo has already sent out a press release. Considering their position in the sub-prime mess I would have to…
Why would you want to buy now, especially in the OC? Even at 2001-2002 price range that area is still crazy, and I think it will be a little longer before sellers there consider 30% haircuts.(Hummers to pay for and all that.) Besides, being a homeowner is so overrated.
Get some numbing ointment for that itchy finger……..if not the next itchy region on your body might well need Preparation H.
Have some fun lowballing, OC. It will pass the time waiting for prices to fall on their own. My fondest wish is that sellers will be on their knees begging you and your wife to buy their homes. I’m sure that will happen in 2009, and I would hate for you to miss out on that kind of fun by actually buying now.
True, I first became an agent in the early 90’s in Stockton. Showing property was irritating because for days after showing buyers several homes the listing agents would call reapeatedly begging for offers, ANY OFFER. We used to say “those sellers arn’t ready for an offer, they haven’t been listed for a year yet”. Thats a no shitter, sellers were so hosed that as a standard procedure we would demand 3-5k (on a 60k home) before close over some bullshit problem and get it every time.
I used to advise my buyers to let me do this and offer to split it with them if the seller accepted and if it killed the deal I would give them half of what we asked for. Prolly 90% of the sellers caved and gave us the money and I never lost a deal over the demand.
To take those dollar ammounts out and make the situation relevant to you consider the homes you are looking at today being listed for 30-40% less than they are today (gonna happen), getting an accepted offer 10-15% lower than the list price and then jacking the seller for a 5-10% reduction in price the last day of your inspection period (giving them only 1 day to decide or risk losing the only real buyer they have seen in a year!).
OC I saw the same homes (literally-same addresses) that foreclosed in 89′ consistantly selling for 50-60% less in the mid 90’s. This takes all the bullshit stats, inflation, interest rates, etc. factors out. I am talking the same address selling for $170k in 89′, then again for $80k in 93-94′. And the market didn’t really bottom out till 95-96′ here.
This doesn’t address the fact that our bursting bubble now makes the one in the 90’s look rather tame in comparrison.
I understand the itchyness well, but we have just begun this collapse. If you give it a year you will feel like the smartest guy in the room for not buying now. If you wait till 2012 ish (after these shit loans crap out) you will be the smartest guy in the room.
Never think it can’t get worse, it can and will. MUCH WORSE.
I think most of the folks here believe there’s more potential downside in prices over the next year or two (or even longer).
My advice is — don’t worry about missing the first 5% of a true correction up. Really wait to see a bottom confirmed — you’ll have plenty of data if you keep looking at inventory and asking prices for houses you like on a regular basis.
I agree 100%. As I told my wife, we have our down payment in cash, making tax-free money in municipal bonds (I don’t trust any equity markets until the ARM adjustments all take place), which pays approximately a third of our monthly rent.
The alternative is to put that money into a non-appreciating asset (at BEST), and after taking into account the loss in the muni income, pay 3-4x more per month on an after-tax basis.
If you want a better quality of life, rent a better house…
Hopefully whomever you are trying to get to buy your investment real estate also has an itchy finger, not to mention lots of cash on hand.
When you roll a boulder into a stream, the water will rise up behind it until it spills around and goes its merry way.
Some smart developer somewhere will take a risk and buy some land cheap that another builder let go. He’ll build some smaller homes than have been built in the past several years and take advantage of falling material prices and competitive labor cost. These will be offered to a market of buyers who qualify for a mortgage at the price they can afford; folks otherwise priced out of the market. He’ll sell at a reasonable profit in head-on competition with another such developer, undermining the “value” of existing homes still languishing on the market that are priced at what the owners need out of them.
Wait until that builder shows up.
Are you implying that a free market will provide cheaper housing in the face of reduced demand for expensive housing?
Strange how that works, isn’t it?
By the way, lots of those builders were pushed aside by the big boys in the past several years in the great land grab and have been biding their time…
Smaller houses, yes…but the lots must be larger. The developers/builders keep missing this very important point.
Also, no HOAs or Mello-Roos.
As Hetty Green is supposed to have said, “Never buy anything just because it’s cheap. Wait until it’s cheaper.”
“There is a ‘substantial‘ risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report.”
These duration estimates are starting to approach the estimates we have given all along on this board.
and that’s when we’ve been feeling nice.
It’s not just “a substantial risk”.
It’s a reality. They’re going down - for a long time.
I’ve been saying the inner Alt-A Bay Area would bottom in 2012. Though now I’m not as much a believer in that any longer because all kinds of crazy loan resets are happening between now and then - which could push the bottom farther back.
And those Alt-A buyers shouldn’t be “bail out-able”, right?
“I’ve been saying the inner Alt-A Bay Area would bottom in 2012.”
The teaser freezer should make you want to up this estimate.
“Up” meaning which way? Later or sooner?
“Up” = later
Agreed.
Dear SF Jack:
I don’t think any of these bailout efforts will have a substantial effect. First of all, in order for one person to get money, someone else has to give it up. In this case, the President has made an agreement with the “banking industry” that said banks will ASK the investors to give up their own money. Since the investor is the one who owns the mortgage, it is unlikely that Baby Bush or his Banking Cartel will save one red FB from this mess.
Secondly, this bubble just has too much momentum behind it. Newton’s law still applies, no matter how rotten the apple.
What’s happening now not been seen by the majority of living Americans, but it has happened before, on smaller scales, then called crashes or Depressions. What’s now happening is the unwinding and unravelling of a boom economy primarily built upon debt and leverage rather than production. It is aggravated by our present collective incapacity to formulate effective policy change, and our reliance upon vertically integrated sources of supply and capital, much of which is foreign-based. We now have, domestically, an oversupply of housing, labor, manufacturing capacity, and consumer goods. Our chief export recently has been fiat currency-backed debt. Were it not for the weapons of mass destruction we can deliver globally, we would probably not have the domestic standard of living we enjoy. However, we will not be able to strong-arm our way past the coming economic collapse. We should expect the Fed, Treasury, Congress, Administration, and Wall Street PTB to use all known and soon to be invented tricks, to delay and disguise the inevitable. However, the Invisible Hand has much more work to do. The human misery will be great; the lives changed innumerable, the financial landscape changed forever.
“Chip Mason, chief executive and founder of Legg Mason, one of the world’s largest money managers, said on Tuesday that the credit markets were in the worst state he had seen in his 47 years in the business.”
Right, the situation on the debt side is absolutely scary. Yet stocks are high. Sounds like August of 1987 to me.
1987 you say? So the right move it to short, wait for the 20% crash, then buy stocks like crazy, right?
But it’s different this time. In 1987, AG flooded the stock market with liquidity after the Black Monday crash. This time, the precautionary liquidity flood has been administered preemptively.
From today’s Austin Business Journal:
Centex pulls out of 1,400-home projectAustin Business Journal
A plan that would have brought 1,400 new homes to northern Travis County has been eliminated as problems in the national housing sector force one of the region’s biggest builders to cut back on its projects.
Centex Homes has decided not to close on 465 acres of the 750-acre Pearson Ranch near Parmer Lane and State Highway 45. The company, which had announced plans in February to develop a 1,400-home community on the tract, said in a statement it would not close on the purchase of the land after a strategic review of projects companywide.
“While nationally many housing markets have experienced extreme shifts, Austin continues to remain in healthy standing with positive employment growth and supply and demand dynamics staying balanced by industry standards to date,” the company said in a statement, adding that it would continue to invest in future and existing communities around Central Texas that better align with Centex’s long-term objectives.
Like many national homebuilders, Dallas-based Centex has been trimming staff and delaying projects across the country amid the decline in the housing markets.
Damn. I would have been delighted to see another 1400 homes dumped on the Austin market. The capital has got the be the most overpriced market in Tx.
After reading the coverage of our esteemed idiot leaders response to people asking for a life preserver when they don’t deserve one I really decided I don’t care anymore. I opted out of buying a house with a toxic suicide loan because I knew in the long run I couldn’t support it…..now I guess I’m the fool because I didn’t act irresponsibly so the government would bail me out.
I read an article in the Valley Times here in East Bay Area reporting on the newest tactic, pricing entry level homes at or near the $417,000 conforming loan amount. Because the jumbo loan is now a jumbo no-no prices in the Bay Area can no longer continue their ascent in their stratospheric climb into the heights of unbelievably stupid unaffordability.
Since people can no longer buy homes using I/O, Neg. Am, Adjustable Rate or piggyback loans the market will continue to decline because more than half the potential buyers aren’t potential buyers anymore.
Prices will continue to stagnate and/or fall because the money tap has just been completely turned off because investors won’t buy the mortgage backed securities because they have just been given the government intervention black plague.
This truly is in my opinion a blatant attempt by the Bush administration to delay the inevitable until after the elections and Democrats and the next President will be left to try and clean up the mess…….it’s too late for that….the carpet is already stained and the dog is too old to be house broke…it’s okay though in a few months or years the bank will own the house and it will their problem to replace the stained carpet…
I guess I picked a bad week to quit sniffing glue.
“I guess I picked a bad week to quit sniffing glue”
I prefer Testors lemon scented airplane glue on days like this……..
“I read an article in the Valley Times here in East Bay Area reporting on the newest tactic, pricing entry level homes at or near the $417,000 conforming loan amount. Because the jumbo loan is now a jumbo no-no prices in the Bay Area can no longer continue their ascent in their stratospheric climb into the heights of unbelievably stupid unaffordability.”
*****
Pricing entry level at $417K?
We here in the Alt-A Bay Area now have places that should be named “Near Jumbo for Dumbos”!
My thoughts exactly…..entry level? But the article was clear that if the loan is a conforming loan people with good credit can still get 100% financing or a piggyback loan…..
There’s no doubt about it…America is addicted to housing money. Going cold turkey will surely mean the collapse of the banking industry as we know it.
“The headline of course is that 43 percent of all new foreclosures are subprime adjustable rate loans, but that means that 57 percent are not. They’re prime and Alt-A loans, and all the bailout plans we’re hearing seem to have nothing to do with them.”
———————————————————-
As I’ve said before, the amount of loans prior to the year ‘00 has changed. Before the whole fiasco began we had 4.6T on the books. When it started we accumulated another 5T. Now, the assumption has been that only the second 5T has been mostly sub-prime and bad.
On the other hand I believe, no had data there, that most of the initial before-the-bubble have been converted to after-bubble loans during the last 7 years. And if they have not the equity has probably been drained which puts them in the same boat as the adjustable guys and so forth.
I believe that many of the situations worked as such: guy buys a house in ‘95 for 100k. In 2004-2005 his house costs 300k+ since most of the houses in ‘95 we’re not in “new” suburbia so their prices were a lot higher.
In any event, this fellow, starts getting quite a few ideas:
-Sell now for 300k, buy a mansion for 700k for great montly payment, possibly less than the one you are making now. Keep the 300k for “investing”, start smooching off equity on the 700k for living.
-Sell now, buy a few houses and fix them with the 300k from your sale, sale again and be rich forever.
-Get 200k equity on your house and buy more houses to rent/sell later on
-Prices are going up, get equity/keep getting equity forever and live like a king, just as you deserve it. As you see, that is what the RE ppl were probably telling you: The wisest decision to buy in ‘95. Do something NOW and you will be a king.
-Do NOTHING.
As you see, even the ones around this blogs, mostly bought before the bubble and sold after. We moved to rentals and saved the money under the mattress, but just as we are a huge minority around, this would mean the ppl choosing this are as well. So most of the others, did one of the above. And just a few days ago there was the story right here about the 90 year old lady that did a second mortgage and whatnot on a paid house and lost everything.
Marty
Go here and click on “graph more trends” in the left nav bar. You can get info on what the best mortgage rates have been over the last 5 years. We still need more details on the plan to figure out what the frozen rates will be, but this is a good place to start.
http://www.bankrate.com/brm/rate/mtg_home.asp
Hopefully not OT, but I just got a report from my brother who lives in Modesto, CA, and he said that foreclosures are popping up everywhere around him.
To make matters worse, it seems that people are walking away from their houses and leaving their pets behind and it’s apparently becoming a real problem for animal control down there.
How pathetic. Lose the house, leave the poor pet behind.
Sometimes I really despise people. If what he’s saying is true, this is one of those times.
That is sick.
Really horrible.
Pets are not material possessions to be thrown away.
These Modesto A-holes are truly living up to my expectations of them. I always knew that all those “homeowners” out in the sticks were really just rednecks with option ARMs. Poor little pets. And at Christmas time, too!
What’s probably happening is they are having to move into an apartment or home that does not allow pets. Why they don’t take the animals to a shelter is beyond me. Losers.
“The homeowners entering foreclosure brought the total percentage of loans in the foreclosure process to a record high as well of 1.69 percent.”
Does this mean that 1 out of every 59 mortages out there all across the country is in some part of the forclosure process? (1/59 = .0169). That seems incredible to me.
Yep, good math there. And when you think those are really concentrated in 5 states. A simple math like 50 states / 5 = 10% concentration. Which would mean foreclosers in those 5 states can be around 16.9% which is 2 houses of every 10 which sounds more than right, or should be soon. Of couse the 1.69 will be going up more and more.
Only true if US population evenly distributed amongst states and no all foreclosures are in the 5 states.
California has 11% of US population by itself.
From Long Island:
Delta Financial to File for Bankruptcy
http://www.newsday.com/business/ny-bzdfc1207,0,5997952.story?coll=ny_home_rail_headlines
But also: Suffolk House Prices Up Slightly
http://weblogs.newsday.com/realestate/blog/2007/12/suffolk_house_prices_up_slight.html
Go figure.
“…liquidated its assets after a collateral trigger in the deal was tripped, which led to an ‘event of default.’”
The “collateral trigger trip wire”…”Predatory” lending is being “consumed” by the CDO Predator…sight unseen…kinda of a ugly looking creature, when it shows it’s face.
Wait until you see the collateral triggers that are hit after this President Plan starts having an effect. Who do you think bails out the Super SIV formerly known as MLEC?
“Still, M-LEC is going ahead, the two people said. Term sheets detailing the plan are scheduled to be distributed next week, they added.”
Marketwatch
It is done and I am upset, time to go to “The Dew Drop Inn”! And we the people of the US get to pick up the tab! Bailout the banks before New Year’s Day.
Mortgage Plan Could Help Thousands of Homeowners-from CNBC
this insults my intelligence.
“Freezing rates on subprime mortgages may lead to further deterioration in ratings of bonds backed by the loans despite its goal of reducing losses,..
Where did they get the idea that this rate freeze plan was about helping the bond market?
The headline reads:
Bush subprime plan offers help to 1.2M
But then there’s this inside:
Of the perhaps 2 million subprime ARMS that are expected to reset through the end of 2009, 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.
I don’t read where they account for the 960K difference.
http://money.cnn.com/2007/12/06/real_estate/Bush_plan_is_limited/index.htm?postversion=2007120616
Hey. Suppose I’ve maxed out my home-ATM for that last vacation and don’t like the idea of paying a higher rate when my loan resets next year - even if I can afford it. If the going refi rate is higher than my current pre-reset ARM rate then I’ll just default now!! Then I’m certain to qualify for the freeze.
So why would ANY ARM borrower , whose loan resets next year, send January’s payment?? To stay current precludes oneself from the freeze!
Right or not?
I don’t think that’s right. I think the rate freeze is only intended for people who have shown that they can afford the current rate on the loan. They want to bleed people dry, or sell the asset if they can’t get any blood. You need to prove that you have something to bleed.
“This truly is in my opinion a blatant attempt by the Bush administration to delay the inevitable until after the elections and Democrats and the next President will be left to try and clean up the mess…….it’s too late for that…”
It was rough after that speech, but I finally have a Happy Thought.
Any FBer who takes the bait on a bailout stays out of the rental market for now, and continues to exhaust his reserves (if any) and prime earning years.
If it’s going to be awhile, I want decent rentals to be affordable. The idea of my OWN rent going stratospheric thanks to the same idjits who made buying untenable…(shudder)
“Any FBer who takes the bait on a bailout stays out of the rental market for now, and continues to exhaust his reserves (if any) and prime earning years.”
If this does keep some in a house, those persons better hope they’ve bought a top notch house in a top notch neighborhood. 2015 will come quicker than they think and by then a whole new crop of houses (likely better built) will be out there - and this turmoil will have done a lot to sort out the enduring quality of some neighborhoods and towns too.
They may rue the day they ever heard of the Teaser Freezer.
Godfather Henry Paulson and the other guy, the one “I- never-even-bother-listening-to-anymore”, invaded our tv screens to tell us not to worry about the disasterous housing mess because the “economy is in great shape.”
Generous and wonderful people that they are, they told us how they are going to rescue the housing market with the aid of the financial instutions, lenders, banks, etc. After all, it’s only a small % of the population who are in trouble (according to them.)
Let’s peel back the layers of their b.s starting with the title they have given this endevour. They have named it “Hope Now” (lol). What a joke. They figure if they stick a tv show name sticker on it we will buy it. I suspect their were lots of Madison Avenue style suggestions before they came up with that one. How about, “FB Rescue!” or “FB’s Saved.” I suppose something like “Pulling your sorry ass out of the Crap”, wouldn’t work.
Then Godfather Paulson and the other guy, went into their usual spin and b.s mode. How the economy is great, full employment, no inflation (lol), etc, etc. Of course, if you are not one of them and NOT living in their fantasy world, i.e: getting up in the morning, having your breakfast served by minions, climbing into a gas guzzling chauffeur driven limo, going into your freshly cleaned office where morning coffee awaits (after all it was a tough drive), have a dozen attendants to cater to your every need (I thought America got rid of the British aristocracy and especially the Kings), you really don’t know what’s going on in the real world except by looking at the numbers the bean counters put in front of you.
Well, here are the TRUE numbers. Inflation is running at around 7%. I don’t care what Bernanke and the other Washington hacks come up with. They don’t fill up my gas tank, buy my food, pay for my health care, etc. I do. Gas prices are up, food prices are up, restaurant prices are up, health care costs are up, etc, etc. THAT is inflation. If we threw in the rise in the cost of housing, even with the current melt down, that number would go through the 10% inflation number at least. The employment numbers are 100% total crap. For starters, 11 million adult illegals are not counted. They include the THOUSANDS of illegals who worked construction for the past 6 years are not counted. They are now out of work. Sure, the Federal employee numbers are through the roof. Personally, I don’t call Federal employees productive people. Also thru the roof - the minimum wage retail jobs. They are needed to sell the Chinese goods we buy. Goods which used to be made by Americans who now earn $10 an hour when they used to earn $40 an hour in manufacturing jobs. Very few of the retail jobs include health care which is why more Americans are without health insurance than ever before. Millions in fact. Health care is now at a crisis point. However, not for Paulson, his pals and the guy-I-never listen-to-anymore. I hear Cheney has 5 doctors with him when he steps out of the door and enough medical monitoring equipment to fill a small hospital.
Something isn’t adding up and something is going to give. It’s only a matter of time.
I agree with you 100%. I would add I hope the other guy makes it to the Hague.
I will watch then!
Well said, Mike.
I have no doubt that the current economic numbers are manipulated to disguise what is obviously rising inflation, a debased currency, and a weak labor market (other than crap retail jobs). Politically, I am fiercely independent, but I can’t help but thinking there is market intervention/management going on here that serves no other purpose other than to delay the nastiest effects until January ‘09, handing it all off to someone else.
This morning on CNBC I heard that the freeze would only apply to people who don’t owe more than their home is worth. It would therefore seem to me that very few, if any, would be eligible.
Everyone, homedebtor and bubblehead alike, call them up and tie up the phone line. I don’t care if it’s for 30 seconds. That’s 30 seconds that they are not bailing out a FB.
You trust the mortgage industry to follow the rules?
As Leigh says - you just can’t make this stuff up: As he announced his plan to ease the mortgage crisis for consumers, President Bush accidentally gave out the wrong phone number for the new “Hope Now Hotline” set up by his administration.
Was it dial-a-prayer?
1-800-BEN-DOVR
When did it become the government’s job to protect people from their own stupidity?
Ron Paul in 008!
Expands on the AP story Ben posted.
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1196916909104200.xml&coll=7
Highlights:
-the U.S. homeownership rate rose steadily in recent decades. It peaked at 69.2 percent in 2004 before backing down to 68.2 percent…But that small decline 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.
-The Standard & Poor’s/Case-Shiller index, a key measure of the U.S. housing market, reported its biggest quarterly decline in its 21-year history.
-The drop in average value is particularly bad news for homeowners who treated their homes as piggy banks instead of as savings accounts. They drained $468.7 billion out of their homes in 2004 through home equity loans or cash-out refinancings…Fifty-eight percent of that cash went to home improvements and personal spending, while another 27 percent paid off credit card debt.
-According to Moody’s Economy.com, nearly one-third of homeowners who took out home equity lines of credit had a savings rate of minus 9 percent this year. The rate hasn’t been positive for this group since the turn of the decade.
-The long-term ramifications could be worse. As prices continue to decline or remain flat, homeowners’ total net worth could be wrecked, especially for those who sucked money out of their homes.
Residential real estate represented 39 percent of a household’s total assets in 2004, according to the Fed, whereas retirement accounts made up 11.4 percent and stocks only 6.3 percent.
-No type of national bailout will replace that lost equity. Those who depended on it will have to rely on meager savings and other investments. Younger homeowners have more time to replenish the equity. But for Baby Boomers who took out cash from their homes every time home prices went up, their retirement income may not cut it.
-The drop in average value is particularly bad news for homeowners who treated their homes as piggy banks instead of as savings accounts.
What’s odd is a house is NEITHER a “piggy bank” NOR a “savings account.”
In many cases, buying a home is simply a way of making your housing costs predictable so you can plan for retirement. However, that’s become a poor plan with sky-high property tax rates that are comparable to rent in many areas!
Historically, housing tracks wage inflation. And that’s if it’s maintained, which costs money.
I’m no bitter renter! I have a paid-for house in Sunnyvale, CA. But I never for a minute thought if it as anything but a place to live in. Frankly, if we didn’t own a house, we may have been quicker to jump on opportunites to live overseas for a couple of years, etc.