The Revolving-Door Flow Of Customers Has Vanished
Some housing bubble news from Wall Street and Washington. Bloomberg, “Citigroup Inc. will take over seven troubled investment funds and assume $58 billion of debt to avoid forced asset sales that would further erode confidence in capital markets. The biggest U.S. bank by assets will rescue the so-called structured investment vehicles, or SIVs, taking responsibility for their $49 billion of assets, the New York-based company said in a statement.”
“The decision to bring the SIVs onto the balance sheet marks a turnaround for Citigroup. In a Nov. 5 regulatory filing, the company said it ‘will not take actions that will require the company to consolidate the SIVs.’”
“‘After considering a full range of funding options, this commitment is the best outcome for Citi and the SIVs,’ Vikram Pandit, who was named CEO on Dec. 11, said in the statement.” “Citigroup said its decision was independent of the Treasury plan to create the $80 billion so-called SuperSIV that would buy assets from other funds that couldn’t finance their investments.”
“‘The need now has completely gone away,’ said Joseph Mason, associate professor of business at Drexel University and a former financial economist at the Office of the Comptroller of the Currency. ‘They were the only ones keeping it alive.’”
“Citigroup follows HSBC Holdings Plc, Societe Generale SA and WestLB AG in bailing out SIVs to avert fire sales of assets. ‘That was really the last major outstanding piece of the SIV problem,’ said Peter Crane, founder of Crane Data LLC. ‘The SIV problem is very close to resolution.’”
From Reuters. “‘It says the super SIV is dead in the water. That shows it was a bad idea in the first place and as with (British bank) HSBC they have realized they have to sort their own problems and not seek help from someone else,’ said Alan Webborn at SG Securities in London.”
From MarketWatch. “Interest in the fund has waned as several banks concluded they couldn’t wait for it to become operational, and decided to bail out their own SIVs.”
“SIVs are funds that use money borrowed under short-term agreements — typically commercial paper — to buy longer-term, higher yielding debt investments, which have included subprime mortgage-related assets.”
“As the credit markets have tightened in response to growing instability in the subprime mortgage market, SIVs have struggled to secure financing, which in turn has sparked concerns that they may have to sell their assets into a weak market.”
“The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success. Policy makers are reacting to more than $70 billion of losses announced by financial institutions this year and estimates of about $300 billion more on securities linked to subprime mortgages, collateralized-debt obligations and structured investment vehicles, or SIVs.”
“The rates banks charge each other for three-month loans held at seven-year highs for a second day after policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed to ease the logjam in short-term credit markets.”
“‘The market clearly doesn’t believe central banks can do anything about this crisis,’ said Nathalie Fillet, senior interest-rate strategist at BNP Paribas SA in London. ‘This is not going to be a magical solution to the problem.’”
“The concerted central bank effort to ease the liquidity crisis may do no more than shine a spotlight on the other problems faced by the financial markets — including a growing concern about fundamental asset quality.”
“While the move has undoubtedly eased tensions into year-end and will allow frazzled nerves some respite over the Christmas and New Year period, bankers and investors will return in January to face largely the same problems.”
“The central banks may have raised more questions than they answered. ‘The next leg of bad headlines will be real losses,’ credit analysts at Royal Bank of Scotland warned on Thursday. ‘Forget mark-to-market on CDOs, CDO of ABS, RMBS and the like, 2008 will see real losses.’”
“‘You have a slowing U.S. consumer,’ Jeffrey Immelt, CEO of General Electric said this week. ‘I’m not going to put a happy face on this…clearly consumer delinquencies in the United States are increasing.’”
“Analysts at UniCredit asked whether central banks had a realistic chance of fighting the crisis with the measures announced.”
“‘It is becoming more and more apparent that this is not the case,’ they wrote. ‘The stressed liquidity situation is not the reason for the crisis, it is just one symptom. The liquidity the central banks provide is absorbed quickly by banks that pile up cash on their balance sheets.’”
“This does remove pressure from the market to provide funding, and is highly welcome in stabilising those institutions that might face liquidity risk. ‘But funding a bank’s balance sheet is truly not the business of a central bank,’ they said.”
The Financial Post. “With the deadline for a restructuring proposal for $33-billion of asset-backed commercial paper hours away, a roomful of investment bankers and lawyers are still struggling to come out with a document that will enable investors to put a value on their holdings for the first time since the market melted down in early August.”
“Sources close to the investor committee overseeing the negotiations said that while some noteholders might get most of their money back, others will likely see losses of more than 50%.”
“‘There are some pretty bad trusts,’ said one source, adding that the worst of the losses are focused on just three or four trusts, including the now infamous Apsley, whose assets include nearly $1-billion of investments linked to subprime mortgages in the United States.”
The Associated Press. “The phones don’t ring off the hook any more at Spanish real estate offices, once the giddy beneficiaries of a sizzling property market. In fact, they hardly ring at all. And the revolving-door flow of customers has vanished.”
“Sharply higher interest rates, a glut of homes and newly jittery banks have come together to stall the engine that has driven one of Europe’s top-performing economies for more than a decade.”
“Promoters who just a few years ago could sell new homes just by showing crude blueprints, they didn’t even bother to build pilot houses or apartments, are now desperate. ‘The market has become paralyzed. Things are just paralyzed,’ said Javier Martinez de los Santos, manager of a realtor’s group.”
“Banks used to trip over each other competing to throw low-interest rate mortgage money at anything that moved. Interest rates have jumped nearly three points in as many years, however, which means much heftier monthly payments for homeowners because the vast majority of mortgages in Spain are adjustable-rate.”
“So banks worried over the prospect of defaults are now much more miserly, ending the once-common practice of financing 100 percent or even more of a home purchase, and raising the threshold for what people need to earn in order to qualify for a loan.”
“‘There is still demand. There are more people looking for a house now than before. The problem is the banks have turned off the spigot,’ said Jesus Duque, vice president of a Spanish real estate chain with 600 offices around the country.”
“Malena Garcia Mexia, a dance instructor in Torrelodones, 30 kilometers (20 miles) northwest of Madrid, knows all about it. She and her husband put their 3-bedroom apartment up for sale in November 2006 and have got nibbles but nothing serious.”
“‘People try to take advantage of the situation,’ she said, recounting how they’ve lowered their price three times only to have prospective buyers now ask them to come down as much as 20 percent more.”
“For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008. Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year.”
“The housing market collapse has been anything but the ’soft landing’ that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.”
“Median home prices declined in the U.S. this year, the first annual drop since the Great Depression, according to forecasts from the National Association of Realtors.”
“‘I’m not going to sit here and tell you it’s going to turn real strong next year,’ said Jim Gillespie, CEO of Coldwell Banker Real Estate LLC, the largest U.S. residential brokerage, according to Franchise Times. ‘It’s not going to turn real strong next year.’”
“Moody’s Economy.com Inc. says home sales will hit bottom next year, declining 40 percent from their peak.”
“‘I know we weren’t predicting things would get this bad,” said Frank Liantonio, executive VP for global capital markets at New York-based Cushman & Wakefield Inc., the largest closely held real estate services provider. ‘There were some signs there, but I don’t think anyone anticipated the level of dislocation that was actually created.’”
The New Depression will soon be the thing to be appearing to avoid for most politicians. For most everybody else it will be how to appear solvent.
Stay tuned for the latest on the insolvency crisis.
One day my grandson will tell his grandson that the stock market crash of ‘08 was caused by an orange-faced monster.
And the Senate has vote 93 - 1 to help “homeowners” (mortgage holders). It looks like the goal is to dump a bunch of toxic $hit into FHA.
http://tinyurl.com/2jxjy4
If things are really this bad then the senators are going to be expected to go after those that caused it. Why is Countrywide even allowed to make new loans? The RICO statutes seem like they could come into play at some point. I don’t know if the FHA plan will do anything or go anywhere. I know Ben’s feelings on bailouts. But I think there are a lot of people going to jail over this and they know who they are. I bet a lot of wealthy guys are very nervous. They will get thrown to the wood chipper no matter how big their donations of the past.
I wouldn`t bet on it.
Yeah? That’s what they said about the Enron guys, Ebbers, etc. How did that work out for them? This disaster is 10 times as big. Start knitting those orange jumpsuits.
CityBoy — I sure hope you are right about this. Man the pitch forks!
I hope he’s right too, GS. This was the greatest rip-off of all time. Leatherface is done.
Why do I keep saying GS? I mean PB!
The legislation will help the Federal Housing Administration “be a source of salvation for those families who were tricked into unaffordable loans,” said Sen. Charles Schumer, D-N.Y.
And yet one more opportunity for pandering and bloviating by the elected gasbags. I wonder why the reporter didn’t ask Senator Kyl, the lone dissenter, for comment.
” tricked into unaffordable loans,” said Sen. Charles Schumer, D-N.Y.”
I wrote Schumer asking if, at this late date, he is aware of the amount of fraud perpetrated by borrowers faking their income and lying about their debts and employment. I got a form letter from his office thanking me for my support.
Schumer thinks this is his ticket to reelection–gasbag is far too polite for this worthless schmuck. Neither facts, nor economic reality get in the way of his personal ambition.
I haven’t written to any of my legislators yet, though obviously both PA senators voted for this window-dressing
bill. Specter (R) Casey (D)
so it really is a bipartisan move to show voters that their government is “doing something” to help them keep their house.
I should write to my senators just to see if their response is as incoherent as Schumer’s reply to you.
Schumer knows his constituents well. They are the banks, not poor people.
“I know Ben’s feelings on bailouts.”
And I echo Ben’s feelings. Let them hump the football ’til doomsday (which ain’t far off), it won’t do anything or go anywhere.
In the playoffs, Manning will be ‘humping the football’ when they play the Patriots again. In fact the Cowboys and the rest of the NFC will be hurting their backs humping it as well.
…this is a first step…and a good bipartisan step.
Because, you know, seeing as how the Dems and Reps are such bitter rivals, any bipartisan action must be sent from the angels themselves and above reproach.
When you hear some Politician using the term “bipartisan” immediately put your hand over your wallet.
But I think there are a lot of people going to jail over this and they know who they are. I bet a lot of wealthy guys are very nervous.
You’r assumptions are correct and I know that for a fact, but can’t discuss it any further if you know what I mean!
(Sound of uncontrollable giggling.)
Man, that’s not funny. We’re talking about the wholesale destruction of the American Dream here!!
December 14, 2007 - Peter Schiff
More Gasoline on the Fire
This week’s announcement by the Fed that it will create a new mechanism to provide funding for credit challenged banks has been lauded by Wall Street as an innovative approach to solving the credit crisis. In truth, it is really just the same response the Fed has had for all problems great and small: crank up the printing presses, shower money on the problem, and hope that financial pain can be obscured by the balm of inflation. Both the Fed and Washington politicians are completely clueless regarding the ill effects of the plan, and are simply acting in desperation to keep a ticking time bomb from exploding before the next election.
The Fed and other foreign central banks will provide this liquidity by auctioning low interest rate loans to holders of U.S. mortgaged-backed securities. The loans will be made under the same terms currently in use at the Fed’s “discount window”, with the added benefits of even lower interest rates and anonymity (borrowers wish to avoid the public stigma that comes from utilizing the discount window). Since the loans can be collateralized by mortgage-backed securities, the Fed will be on the hook should these loans not be repaid. In other words, the losses will simply be monetized, or more precisely socialized, as they are passed to the public in the form of inflation.
To get a sense of the losses that potentially await the public, in a recent transaction, E-Trade Financial liquidated its entire portfolio of subprime mortgaged-backed securities for a mere 27 cents on the dollar!
The hope that this additional credit will somehow alleviate the problems in the U.S. housing market is extremely naïve. Virtually none of this newly created credit will find its way back into the domestic mortgage market. With our real estate prices still too high, the gathering potential for lenders to be forced to assume liability for “unsophisticated” borrowers, the added uncertainty regarding mortgage terms, and the persistent weakness in the U.S. dollar, such loans will be far too risky for most foreign lenders to consider. Instead, these banks will take this cheap Fed money and invest it in higher yielding assets overseas. Off-loading risky U.S. mortgages to the Fed in exchange for cheap loans that can be used to finance better yielding foreign investments could well develop into the next carry-trade of choice.
The real losers will be ordinary Americans, who do not get the benefit of the newly created money, but merely suffer the consequences of rising domestic prices and a falling standard of living. With this new plan, the Fed is laying its cards on the table and its hand is a loser. If mortgage losses are socialized through inflation, this new cure will be even worse for the economy than the “housing bubble disease” the Fed infected us with in the first place.
Now that the Fed has upped the inflation ante it’s time to press our bets on gold. About two weeks ago Goldman Sachs predicted that shorting gold will be the best trade of 2008. Call me cynical, but knowing Goldman Sachs, my hunch is this shrewd investment bank, recently criticized for shorting the very subprime loans it was touting to its customers, may be perusing a similar strategy with gold. Perhaps Goldman has a current short position it needs to cover or wants to buy a lot more gold, but needs to convince others to sell it to them.
Maybe Goldman will be right after all. Shorting gold could turn out to be the best trade of 2008, but not for those who short it, but for Goldman Sachs as it takes the other side of the trades. Recent moves by Paulson and Bernanke virtually guarantee that gold will rise. It’s good to be the king.
“Citigroup said its decision was independent of the Treasury plan to create the $80 billion so-called SuperSIV that would buy assets from other funds that couldn’t finance their investments.”
“‘The need now has completely gone away,’ said Joseph Mason, associate professor of business at Drexel University and a former financial economist at the Office of the Comptroller of the Currency. ‘They were the only ones keeping it alive.’”
Cognitive disconnect strikes again…
PPT hard at work right now, GS, trying to stem losses.
Mark to Atrociti
“Citigroup Inc. will take over seven troubled investment funds and assume $58 billion of debt to avoid forced asset sales that would further erode confidence in capital markets. The biggest U.S. bank by assets will rescue the so-called structured investment vehicles, or SIVs, taking responsibility for their $49 billion of assets, the New York-based company said in a statement.”
Send in the Arabs; CITI needs another liquidity injection.
There is something I don’t understand.
1. Citi Bank borrows Arab money at 11%
2. The rates that banks charge each other to borrow money is now the highest in the past 7 years.
3. The best CD rates I can find are 5.2%
Banks are desperate to beef up their cash reserves, yet they are not putting much effort into using my money? Does anyone know how CD rates and bank exchange rates are connected? The seem to be moving in opposite directions.
Well, CD’s are FDIC insured and whatever the particular agreement between Citi and the arabs, it’s certainly not gauranteed. That increased (lack of insurance) risk would imply a higher rate.
Start pumping oil out of the ground and you will be amazed at the doors that open for you!
Here’s some more “customers” for you, but how many will really be “helped”??
http://www.detnews.com/apps/pbcs.dll/article?AID=/20071214/METRO/712140349
Heh, the TV networks won’t be able to resist that scene. Quick, Couric to Detroit for on-the-scene-coverage & color commentary!
I remember when Katie Couric pi$$ed and moaned about being called “cute”. That problem seems to be solved. Last night I saw a glimpse of Maria Bartiromo on CNBC. Yikes! That is a face that belongs on radio.
Can you imagine what the flood of the “victim” articles is doing to Paulie Lunch Pail and Sally SUV? The psychology of “real estate always goes up” is getting destroyed. I hear it changing at work. Of course everybody knew “this had to happen”. Bwahahaha. Keep lining up victims. It’s a good thing they aren’t working, trying to actually pay off their loans.
I thought it was the *perky* Katy Couric, not to be confused with the *sexy* Paula Zahn.
Katy Couric is looking more “saggy” and “sunken-eyed” than “perky” nowadays.
It is unbelievable how fast everything has changed, even the tone on this blog. From few months ago when HBB’ers wrote about things to come and how impossible it was to talk about it wiht those who thought they were riding the big wave to doomed predictions of depression, again something that is outside of perception to those who think fixing the interest rates and getting a goverment bail out is going to do it. If Ben’s blog is as predictive as it has been in the past it is getting scary. What are we going to do?
“If Ben’s blog is as predictive as it has been in the past it is getting scary. What are we going to do?”
Be prepared to grow your own food, and buy guns and lots of ammo.
“‘It says the super SIV is dead in the water. That shows it was a bad idea in the first place and as with (British bank) HSBC they have realized they have to sort their own problems and not seek help from someone else,’ said Alan Webborn at SG Securities in London.”
Or in essence…
It’s every bank for themselves, from here out.
“It’s every bank for themselves, from here out.”
I think that’s an accurate and concise description of the situation. I wish someone would or could list virtually every bank and credit union, in estimated order of its exposure to capsizing.
LOL, The smaller banks under $10 B cap will go first. Approximately 2000 of them will go sayonara.
The question is when will the FDIC step in.
Morningstar and Goldman Sachs placed Citigroup as a buy this afternoon, both listed the reason “As to big to fail.” Sad.
Dirigisme, alas.
Exactly right !!
“While the move has undoubtedly eased tensions into year-end and will allow frazzled nerves some respite over the Christmas and New Year period, bankers and investors will return in January to face largely the same problems.”
Those elephants hidden under the living room rug just simply don’t go away!
These a$$holes think they can solve all their problems by buying a bigger rug.
Or by suffocating the elephants.
It’s not elephants making the lumps under the rug, but stuff the elephants left behind.
The clown from Coldwell Banker was on CNBC several months back and denied any possibility of a downturn. He call all this bubble talk hot air. ZERO Credibility!
“‘I know we weren’t predicting things would get this bad,’’ said Frank Liantonio, ”
YOU Blew It, Now Move ON!
Hey, Frank, you get paid BIG BUCKS to use your higher education and economic models to make accurate predictions. If you had stopped playing golf for a couple of hours a week and read Ben’s Blog starting 2 years ago, you might have had a tiny clue that there was some really good research available to make your predictions a little better. But NO!. You knew you were right and we were completely wrong.
“I know we weren’t predicting things would get this bad,” said Frank Liantonio.
Frank, let’s be frank, just what are you paid to do? Chant, “the sun never sets each morning?”
“‘I’m not going to sit here and tell you it’s going to turn real strong next year,’ said Jim Gillespie, CEO of Coldwell Banker Real Estate LLC, the largest U.S. residential brokerage, according to Franchise Times. ‘It’s not going to turn real strong next year.’”
It is your typical herd mentality. When everyone says housing is great, you say it is great. When every starts saying it is bad, you say it is bad. The problem is when the herd is wrong, you can fall off a cliff.
But lemmings are so cute!
When somebody gives you a bunch of lemmings, make lemming juice.
What they need is lemming aid.
LOL.
How to get screwed in a divorce if you listen to realtorwhores: A friend’s daughter has been going through a bad divorce with lots of “haggling” as to who gets what (the lawyer is the winner of course.) When it started 2 years ago, the house they own was valued at $725,000. They had owned it for 18 years so there was a lot of equity having bought it for $125,000. The husband didn’t want to sell the house and drew up an agreement that he would “buy out” the wife’s share. It seems he consulted a realtorwhore who told him, “Look, Amgen and CountryWide are here. In this area, prices will never go down.” So, he signed off at $725,000. Cut to today. The house has dropped to $575,000. So, the husband goes back to court and asks that the agreement be modified. In other words, changed to reflect today’s prices. I figure he didn’t consult the realtorwhore this time (lol).
Outcome: The divorce judge said, “Sorry. It was an agreement in good faith. The price is $725,000.” Ouch!!
Make that a double-ouch.
Well if the house had gone up in value would he have gone to given the extra to the ex-wife? Nope.
I know of a similar situation (same basics but the numbers are all smaller since it is a more recently purchased DC area townhouse) where the woman demanded the house. She treated him like dirt so I think she got what she deserved. No sympathy here.
I have a friend that went through a divorce and kept the house. He let the wife walk away. He is screwed with a depreciating asset and bleeding money each month.
I have another friend that is going through a divorce. He is going to “buy out” his wife and keep the house. I told him to sell it and rent. He will listen but he will not hear. I got the “it’s different here” speech and “I’m going to wait until spring”. He too will be screwed.
People love committing financial suicide.
Since statistically it is women far more than men who want to buy the house in the first place, it looks like these two were more interested in getting back at, or over on, their dearly beloveds than in cutting a deal that makes sense and getting on with their lives.
Two friends of mine recently split up. She wanted the house, he said OK and they got through the mess within 18 months start to finish. A house is a piece of meat. Personally, I think the decision about it should be noticeably less emotional than about who gets the family dog.
isn’t that “hear but not listen”?
Not in this case. He listens and nods his heads. Then proves that he didn’t hear. Semantics? Maybe. Screwed? For sure.
Wow, I got so lucky in my break-up.
We agreed to sell our 3/2 Chicago condo and split the assets 50/50. Sold in Feb. 2005 after being on the market three days. We had some fights and such before divorcing (duh), but the real estate transaction went very smoothly.
My ex-wife now owns a depreciating condo less than a mile from my place, but too close to I-90/94 for my taste. I am a happy renter with a downpayment in the bank. My girlfriend and I will rent a larger place this spring.
Speaking of condos, housing bubbles and I90/94, how about those crappy condos right alongside the Kennedy with the multiple signs reading “CONDOS FROM $184,000″? I think that’s the price. Those signs have been up at least a year.
I’m assuming that the Kennedy is a busy freeway that no one in his/her right mind would want to live next to.
The Kennedy Expressway is the section of I-90/94 that runs from just west of the Chicago Loop north and west until it gets to O’Hare airport. Saying it’s a busy highway is an understatement.
I assumed they were near Ted Kennedy. I wouldn’t want to live near that son-of-a-bitcch either.
Speaking of condos, housing bubbles and I90/94 …
There are some right near the Diversey exit (close to me) that used to have a sign that said “Free car when you by a condo!” or some such twaddle. Those particular condos are up the Kennedy’s ass. The ex isn’t that close to the highway, lucky for her.
Folks in Ventura County are realizing its not so different here after all.
Looking Down the Chasm of the Mortgage Debacle
http://www.dailykos.com/storyonly/2007/12/12/195658/82/489/419542
“An economy is about people, something the GDP is not so good at measuring anymore. I would perhaps point to you the poverty rate and the foreclosure rate, for instance, to get a more accurate understanding. Items such as these should indicate, and better predict, the direction of our country. I promise you that boarded-up, foreclosed homes and persistent poverty are not signs of an economy growing at a 5% annual rate.”
The choice of which measures to emphasize isn’t an accident. However, this doesn’t conceal the reality that many people are experiencing as evidenced by the broad negative public sentiment on the economy. People know they are “worse off”, no matter what the “official” numbers say. What type of solutions are we likely to get if we won’t even be honest about what’s happening?
The solutions they are searching for aren’t for you and me, it’s for their buddies in the financial and banking sectors. Until the “solution” gets hammered out you can expect more dishonesty from the pols to keep J6P in the dark until it’s too late.
It may be growing 5% for multinational corps that are exporting based on the weak dollar, But you are right, it doesn’t consider the wealth of the people who are losing equity every day in their biggest “investment”. And someone mentioned returning to the days of the seventies, i.e. “stagflation” . I don’t see that happening either because unlike the seventies, jobs are being exported in droves through all the offshoring that we never had before. Wage inflation? Sorry. No doubt we are heading for a depression perhaps worse than the 1930s. There is no way that the FED can push on the strings much longer.
To me, the most interesting part of this is the mortgage rate reset chart, Fig. 1.7: it’s DIFFERENT (again) from either the Credit Suisse chart we were perusing last spring, or the other (I forget whose) that we were looking at in early fall. The peaks of both subprime resets and Option-ARM resets have moved back in time. I suppose this is because such mortgages continued to be originated, and maybe the ones that originated in 2006 took some time to find their way into the public record. (??) I don’t know, I just know that our “best” data has been overly optimistic about the timetable for a bottom. And I do mean OUR best data, not REIC shill kr@P.
In particular, subprime resets, which peaked on the CS chart right around now, and on the other chart in Feb 08, are now showing as peaking after the middle of 08. Wow.
I know a few people who are in financial trouble, but were still able to refi (one last time?) before the bell tolls.
I was one of the most bearish when saying it probably wouldn’t bottom out until 2010-2012, now I think even that’s too optimistic.
This is exactly the problem with all the bailout plans. It does NOT solve the problem, but pushes it out further and further, Japan-style.
With the total amount of debt we have as a country, just making the interest payments is going to suck everything out of our economy. We’ve been debating whether or not the PTB would accomodate a quick return to business or a long, drawn-out recession/depression. Looks like we have our answer.
“Median home prices declined in the U.S. this year, the first annual drop since the Great Depression, according to forecasts from the National Association of Realtors.”
That is an observation, not a forecast. NAR “forecasts” have been consistently wrong.
Perhaps it includes the “forecast” that prices are not going to recover their decline in the next 17 calendar days. (!!!)
Come to think of it, they have been consistently wrong in the same direction ever since 2005. Just remember, “Real estate always goes up, in the long run.”
“The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success.”
The Mighty Fed can’t stop this thing from unraveling. There are way too many Bernies. Stop the charade. Cleanse the system.
The invisible hand is now playing Madam Whiplash with the Central bankers. Crack, who’s next?
I like Snidley Whiplash much better.
“While the move has undoubtedly eased tensions into year-end and will allow frazzled nerves some respite over the Christmas and New Year period, bankers and investors will return in January to face largely the same problems.”
No respite for the weary…
I get the feeling that because xmas is the holiest consumerist holiday, we think we can put problems on the back burner…
January hangovers are the worst.
senate just voted you a 2nd mortgage
wow only 1 rep had the balsz to vote against it
That’s right 93-1. To increase FHA limits to match the F words’.
Holiday grandstanding like only pols can do. Some quote too: “The best gift congress can give to American families is to help keep a roof over their heads” or some such gobblydygook.
“Gift” is the keyword - the Cargo Cult comes to Main Street after a record run off Broadway.
FHA goes sumpprime…
Senate Passes FHA Overhaul
Aimed at Stemming Mortgage Woes
By MICHAEL R. CRITTENDEN
December 14, 2007 1:14 p.m.
WASHINGTON — The Senate passed legislation overhauling the Federal Housing Administration on Friday, even as lawmakers warned that more needs to be done to combat rising foreclosures and a broader housing crisis.
“This is not the only step we need to take to get us through the subprime morass,” Sen. Tom Carper (D., Del.) said during floor debate.
The chamber voted 93-1 in favor of the legislation, which would increase the sizes of loans FHA could insure, make counseling more available to homeowners and lower down payments for borrowers getting an FHA loan.
Supporters hope the agency, which is a division of the Department of Housing and Urban Development, can help stem the rising tide of foreclosures that have roiled world credit markets.
“This legislation is a perfect example of the kind of help that Americans are looking for,” Sen. Charles Schumer (D., N.Y.) said during debate.
http://online.wsj.com/article/SB119765283748029731.html?mod=googlenews_wsj
Does anyone have a link to informal pols on what percent of Americans are looking for this kind of help? (I am wondering if it is higher than the 20 percent or so that like the teaser-freezer…)
The government acts like because (supposedly) 70% of the population ‘owns’ homes - then everyone took out a loan during the past 5 years. Amazing!
First do no harm.
Senate Majority Leader Harry Reid (D.,Nev.) warned lawmakers about the cost of inaction on the issue.
“As bad as the crisis is now, there’s reason to believe we are only in the initial stages,” Mr. Reid said. “It’s no exaggeration to say the national economy is at risk.”
Mr. Reid said. “It’s no exaggeration to say the national economy is at risk.”
A pol can do lotsa damage under the cover of fear.
Both parties are complicit in this mess; never forget that.
Especially on November 4, 2008.
Both parties are complicit in this mess; never forget that.
That’s the most important, and least believed point. That’s true whether we are talking about this particular thing or general purpose fear-mongering.
Both parties are complicit in this mess; never forget that.
Absolutely true. Schmucks. But hooray for Sen. Kyl.
Every single time something bipartisan and almost unanimous happens lately, the country is in trouble.
1) Bankruptcy ‘reform’
2) Illegal alien ‘amnesty’
3) This
The risk to enthusiastic supporters of the FHA bailout measure:
It may come back to haunt pols if it looks in retrospect like they helped sink more low income families into BK by encouraging them to continue a futile struggle to pay off loans they cannot afford on underwater houses.
But I suppose more relief can be sent towards bankrupt low income hh’s when the next govt-created crisis unfolds…
I couldn’t find the details of this bill. Is this the one where you still need 3% equity for FHA to buy the mortgage? If so, it this bill will help almost nobody.
No, 1.5% (and I believe there are rumblings to bring that to zero-down).
F’ing bad day. :*(
A good example of government stupidity. Do everything to drive the price of SHELTER HIGHER.
Raise the amount FHA can insure? They should lower it to the median price of housing in the US…..and keep it there forever.
these are crimes against solvancy
Is $417,000 the future price of a coastal McMansion, then?
No, it’s the price of a starter home.
Just one more foolish move by fools, that will “try” and help the stupid, greedy and unscrupulous. As typical of the D.C. DA’s it will be a failure and do nothing more than gum up the works!
“People try to take advantage of the situation,’ she said, recounting how they’ve lowered their price three times only to have prospective buyers now ask them to come down as much as 20 percent more.”
Yep, It felt really good when you were taking “advantage” of the situation. Tables have now turned… Life’s a bitch and then you get slapped!
Duh….. and she didn’t “try to take advantge of the situation” when selling in a rising price market??
Cow. (And I am not feeling charitable today, may she trip over her untied dancing shoes.)
I just wanted to let you all know that “It’s different here” in the Mile High City. That’s right, I just heard it from an expert trying to sell my wife a house. I asked the RE saleswoman if she had a guarantee to that claim by covering any losses for the next 3 years if I paid asking price today. She looked at me like I was speaking Mandarin.
Cow. (Not feeling very charitable today either, AnnScott.)
Gone Skiing……….. Mucho powder to be had.
DENVER
how many up years have they had since 1985 ?
Denver folks are optimistic to say the least
From 1995 to 2001, I would guess about 5% to 10% home price appreciation per year. Prices never went down, plateaued or nominal gains since then. Yet unemployment went from 2.3% to 6.5% in 8 months from late-01 to mid-02. For every happily employed person I know, there are 4 that are under-employed here. I say this because I am in employment and interview and place a diverse candidate base here. Denver led the nation in foreclosures in 05. We may not get the wrath the likes of FL, CA, AZ, but prices will re-align with incomes, in my opinion. I am realistically optimistic. Denver as always gone boom and bust. When the oil industry abandoned Denver in the early 80’s, RE trended according to wages and employment. Not this time around. Why? Funny money loans, just one mans opinion.
Now I’m gone skiing……….. Sorry for veering off in the Walls Street thread.
Hey, Ben. Our local rag ( the St. George Spectrum) just printed a housing story about our local market that wasn’t positive (their first). Wow!
Hard times ahead
Defaut rate on ARMs to increase across nation
By ALYSON VAN DEUSEN
alyson@thespectrum.com
ST. GEORGE — Some homeowners in St. George with adjustable-rate mortgages should brace for a hard winter and tough new year.
An average of three notices of default are served every day in Washington County, compared to just one notice a day last year, said Todd Gorishek, president of the nonprofit organization Housing and Opportunity through Positive Empowerment.
Oh, never mind……..
Gibson (a mortgage broker) said he remains optimistic about the market, noting that not all people have to sell a home somewhere else to purchase a home in St. George.
“St. George does have a good economy,” he said.
http://www.thespectrum.com/apps/pbcs.dll/article?AID=/20071214/NEWS01/71214002
What’s that economy? Homebuilding, construction, lending, RE, and what else?
And the Feds lowered the Discount rate 3 times,and the Feds gave short term loans on junk , only to have Wall Street and the lending institutions demand more . The “more” the money changers wants is for GSE’s to become the sub-prime lender of last resort . I am seeing what I called a long time ago take place before my very eyes . I’m going to stop saying “,NO BAILOUTS “,because the Bailout Gods are doing the opposite of what I want . To think that the Feds ,the good Senators and the current bag-holders are trying to make this look like a bail-out that won’t cost the taxpayers .
Anybody seen a 3 headed dog that’s gone missing, with a bunch of money?
“Cerberus—named for the three-headed hound at the gates of Hades—has seen its reputation reach mythic heights in recent years.”
Mark to Myth…
http://www.businessweek.com/magazine/content/07_52/b4064028904522.htm?campaign_id=rss_autos
close freind of mine works there and things have never been better for him.
led zep tickets in london last week on the “arm”
“We’re not market-timers,” says Cerberus Managing Director Timothy F. Price. “We buy things other people can’t make work. Because of our operational expertise, we make them work.”
What a crock. These guys. like most PE guys, are arrogant and untested. We will see. Any company that hires loosers like John Snow, described as always the dumbest guy in whatever room he is in, and Bob Nardelli, who ruined Home Depot, deserves whatever they get.
…by the way, how can they run Chrysler better than Mercedes?
I have been reading this blog for over a year now and have to say you all are awesome and very much right on target!
Aw, shucks.
Where’s your locale, housing tracker?
Off topic, but a word of caution.
I’m a bit of a packrat with papers and I’ve been on a serious shredding party for a few weeks. Every single scrap of paper that I had related to my long retired student loans had my social security number on it. Even the payment coupons for payments I never had to make because I paid off the principal early.
And I just found a surprising number of my parents’ old tax returns. With their SS numbers on it.
Please be careful with this stuff. Shredder is getting quite a work out and I make sure to mix up the shreds in the trash bag so no one can resonstruct them. I understand that identity theives used to hire kids high on ecstacy to reconstruct them - especially before the cross cuts became common.
A few tears and stuffing the scraps into the “diaper genie” along with its intended “cargo” is more than enough to deter reconstruction. Went this way after the shredder died a few months ago.
This may veer really off topic…but if the paper decomposes and you mix it with organic material, can you use it as compost or mulch?
Most commerical paper has too much acid.
Is the commercial paper you speak of ABCP by any chance? If it is, nobody would want it anyway.
I think most modern paper has a ton of chemicals in it and probably isn’t the best to use in a compost mix.
Apartment so no place to use mulch. Also, you may be severly underestimating the amount of paper I am talking about. I’m using leaf size trash bags to bring it to the trash bin out back. Yes, that is bags - plural.
Fire is your friend. We shred all no longer used documents and burn whatever is left in shredder afterwards. But we also use full disk encryption and destroy drives that are past the warrantee by opening them, pulling the plates and dissolving them in highly concentrated acid.
“‘I know we weren’t predicting things would get this bad,’’ said Frank Liantonio, executive VP for global capital markets at New York-based Cushman & Wakefield Inc…‘There were some signs there, but I don’t think anyone anticipated the level of dislocation that was actually created.’”
Gee, I anticipated it.
Gee — we have been predicting it would get this bad and worse on this board for almost three years now…
I started shorting Citi in 2002. I made money, then lost money, then made money, then got bored, feeling that they were “too” good at laying off risk. I was mistaken.
Great, a great line to bring to your next job interview, or to place in your sales brochure, “although it is our function to understand potential future dislocations on behalf of our client base, we have been proven to be incapable of performing those duties.”
‘…But funding a bank’s balance sheet is truly not the business of a central bank,’ they said.”
All this Central Bank effort…and little to show for it?
A lot of sexual sweat & no climax…talk about a lot of “wasted effort”
“…but I don’t think anyone anticipated the level of dislocation that was actually created.’”
Hey, Frank buddy…what’s your salary?…have a computer at home?…Know how to use it?…type this into your bowser: http://www.thehousingbubbleblog.com... in about 3 weeks…go back to work, ask anyone at the next executive meeting if anyone knows what “Got Popcorn?” means or what the “Joshua Tree Effect” refers to… you’ll look so damn smart!
You’ll also learn nifty acronyms like FB and GF. Not to mention some really cool 20 lb. trout-whacking techniques.
not to mention PITI, for all the FBs !!
Well ,I think it’s more like how to spin a positive outlook until we can somehow change bagholders in this mess .I’m not looking forward to the bastards that created this mess getting off the hook while my taxes go up and I see reports of the government bailing out the massive foreclosures from the GSE’s.
You and me, both, Wiz.
Let’s get all the HBB’ers together and we can start our own country from scratch. Whaddya say?
HIVtv
flip this house had no carry cost, commission, nadda
all profit !
I can’t believe the stock market is still so high. I guess like homedebtors they don’t want to give it away.
Why isn’t the government determining the real demand that is out there . Kinda seems pretty stupid to go to all the trouble of trying to re-spike the market when it isn’t going to help at the higher prices …I suppose the cash back fraudsters could get a demand going to bail out the current FB’s .
Those pesky day traders must be shorting the market again today.
Time for the FED to lift is leg and let another Fart out.
A nice visual for those of us who like graphs:
Pent Up Housing Demand in Pictures
http://tinyurl.com/2wcnv9
And the author is also a Yun “pent up demand” basher.
“Moody’s Economy.com Inc. says home sales will hit bottom next year, declining 40 percent from their peak.”
Frankly, sales at 60 percent of the peak would be a big surprise to me on the upside if we have a recession. Start with the fact that peak sales are inflated, and assume 2008 will be the worst year ever. It’s amazing to me that anyone is buying.
It’s amazing to me that anyone is buying.
I’m not amazed due to the sheeple effect. There will always be a group of sheeple who do not do the research and believe the NAR when they say “Now is the time to buy” even though the NAR is most often incorrect.
but I don’t think anyone anticipated the level of dislocation that was actually created.’
Ben…do this guy a favor and send him a link to your / our acrhives
crush