January 11, 2008

Treating The Housing Market Like A Used-Car Lot

Some housing bubble news from Wall Street and Washington. MarketWatch, “Bank of America Corp. said Friday it’s purchasing Countrywide Financial Corp. for $4 billion. The stock-swap deal will put an end to the independence of the troubled California lender headed by Angelo Mozilo, and represents an increase from the bank’s August investment of about $2 billion. ‘We believe this is the right decision for our shareholders, customers and employees,’ said Mozilo.”

From Reuters. “Mozilo pushed the once dominant U.S. mortgage lender into a liquidity crisis by relaxing lending standards on risky subprime loans. In 2006, Countrywide originated $461 billion worth of loans. Nearly $41 billion of that activity was in the subprime market.”

“Early in the housing downturn, Mozilo said Countrywide would take advantage of the situation by expanding its market position. In May, Mozilo and many other leaders in the mortgage industry still seemed to be in denial over the depth of the subprime lending crisis. He said that he planned to add 2,000 sales jobs. But that boast fizzled.”

“He was in no mood for soul-searching about what went wrong as industry executives gathered in Manhattan for a Mortgage Bankers Association conference. ‘You’ve got to be careful here about blaming ourselves too much,’ Mozilo told the gathering.”

“The real culprits, he argued, were the Federal Reserve and its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators’ attacks on interest-only and other risky subprime mortgages.”

“Unmentioned by Mozilo were the industry’s loose lending policies and mortgage products such as ‘liar loans,’ which gave borrowers money at higher rates without verifying their income.”

“But last April, in a speech in Beverly Hills, California, Mozilo conceded Countrywide lost its compass and chased risky customers as competition in that market increased. Names like Ameriquest, New Century, NovaStar Financial and Ownit Mortgage Solutions set a new lowered standard, changing the rules of the game, Mozilo said.”

“‘Traditional lenders such as ourselves looked around and said, ‘Well maybe there’s a (new) paradigm here,’ Mozilo said. ‘Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.”

The New York Times. “As the mortgage mess grows, we are learning more and more about just how sloppy things were in the mortgage-issuing business as loans were churned out, carved into securities and sold off.”

“Judges have blocked some foreclosures with rulings that purchasers of mortgages could not prove that they owned them. The buyers of the mortgages complain that it is unfair to ask them to have complied with detailed rules.”

“And now the banks are begging the accounting rule makers to allow them to ignore a rule that has been on the books for almost 15 years. They explain that they never had any idea that they would have to restructure a lot of home mortgages, and thus had no reason to develop systems to deal with the accounting for such restructurings.”

“‘No one anticipated a day when potentially hundreds of thousands of residential mortgage loans would be modified,’ said Alison Utermohlen, an official of the Mortgage Bankers Association who has led the effort to get the accounting rules relaxed.”

“But the plea that the banks never saw it coming does ring true. In this cycle, those who lent the money thought that they had no reason to concern themselves with whether it would be paid back. Instead, they planned to sell the loans, usually to trusts that would then finance the loans by issuing securities. Such trusts have different accounting rules.”

“In any case, the banks seem to have shared the general belief that house prices would always go up, so anyone unable to meet mortgage payments could sell the house. If losses are never going to appear, why prepare to deal with them?”

“Now home prices are falling in many areas. The risks of owning mortgage securities began to become apparent last spring, and the securitization markets virtually shut down by summer.”

From Business Week. “It’s no coincidence that states with the largest shares of adjustable-rate mortgages—Nevada, California, Arizona, Florida, and Colorado—are also among the states with the highest levels of foreclosures.”

“But just because a state has a low exposure to ARMs doesn’t mean it is immune to high foreclosure rates.”

“Take Texas, for example. Home prices in the Lone Star State are low and, as of November, 2007, only about 12% of mortgages were ARMs. But it ranked 14th in the nation for foreclosures.”

“David Zugheri, co-founder of First Houston Mortgage in Houston, blames aggressive lenders who he said would qualify almost anyone during the building boom. Developers were putting up houses farther and farther away from metropolitan areas, where land was less expensive, and filled the homes with subprime buyers, Zugheri said.”

“‘I blame the builders who needed to unload their product and the nonprofessional loan officers,’ Zugheri said. ‘Everybody was putting loans together just to get them sold. We were treating the housing market like a used-car lot.’”

“The problems are more dire in Florida. Lower- and middle-class families who bought houses with no-money-down, adjustable-rate mortgages are seeing their payments triple, says Jane Bolin, an attorney and managing partner of a South Florida property management company.”

“‘Every community that at this time last year had no homes in foreclosure, now [has] three or four,’ Bolin said.”

“Delinquencies have started to pick up for so-called option ARMs, which allow prime borrowers to decide every month on the amount they’ll pay: a 30- or 15-year fixed rate, an interest-only payment, or a lower minimum payment. About 75% of borrowers are opting for the minimum payment, according to Standard & Poor’s.”

“Subprime borrowers not only started with higher rates than prime buyers, they sometimes were approved for loans they couldn’t afford even at the teaser rate once taxes and insurance costs were factored in, said Keith Gumbinger, VP of (a) mortgage-research firm.”

“‘It is certainly not out of the realm of possibility that even without resets some of the borrowers who took out these loans are ill-prescribed for homeownership,’ said Gumbinger. ‘They may have taken them because they’re stretched.’”

National Public Radio. “Walk around parts of Baltimore’s Reservoir Hill and you can see the mortgage credit crisis up close and personal.”

“A year ago, you had to dodge the construction crews that were bringing the neighborhood back to life. But now it’s like a movie set, says city housing chief Paul Graziano: ‘You know, where you walk through and some horrible event occurred and all of a sudden there’s nothing. There’s no life. There’s just nothingness.’”

“Nothing but empty houses and for-sale signs. The people who bought these houses can’t afford to finish or keep them.”

“The leaders of Baltimore are so mad, they’re going to try to hold one of those subprime lenders responsible for the mess. This isn’t about lenders discriminating by denying credit to borrowers because they are black.”

“Mayor Sheila Dixon believes that Wells Fargo has been doing just the opposite in Baltimore – that lenders have been targeting borrowers for credit on unfair terms because they are black.”

“‘You know, years ago we talked about redlining. …Now we’re talking about reverse redlining,’ Dixon says.”

The Plain Dealer. “Cleveland Mayor Frank Jackson took aim at Wall Street on Thursday with a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis here.”

“The one-of-a-kind suit, filed in Cuyahoga County Common Pleas Court, accuses venerable institutions such as Deutsche Bank, Goldman Sachs, Merrill Lynch and Wells Fargo of creating a public nuisance.”

“Jackson contends the companies irresponsibly bought and sold high-interest home loans. The result: widespread defaults that depleted the city’s tax base and left entire neighborhoods in ruins.”

“‘To me, this is no different than organized crime or drugs,’ Jackson said in an interview with Plain Dealer reporters and editors. ‘It has the same effect as drug activity in neighborhoods. It’s a form of organized crime that happens to be legal in many respects.’”

“Cleveland’s suit is even more unique because the city has based its complaints on a state law that relates to public nuisances. The suit also is far more wide-reaching than Baltimore’s in that it targets the investment banking side of the industry, which feeds off the mortgage market.”

“Jackson and city Law Director Robert Triozzi said Cleveland should have been excluded from the frenzy. They pointed to housing prices that remained relatively flat as real estate values jumped elsewhere, as well as a manufacturing downturn and widespread poverty.”

“The suit claims that even though these issues were well documented, investment bankers continued to feed loans to hungry investors at the expense of borrowers buried in interest.”

“‘Ultimately, they’re responsible,’ Triozzi said of the investment banks. ‘They knew the economic conditions in which they were operating here. They decided that didn’t matter.’”

“Judge Corrigan will have to decide ‘how far up the food chain’ to go in determining responsibility, said Cleveland State University Law professor Kathleen Engel, an expert on mortgage-backed securities. She believes the city can make a case against the investment bankers.”

“‘These loans were defective products,’ said Engel, co-author of ‘Turning a Blind Eye: Wall Street Finance of Predatory Lending,’ an article that appeared last year in the Fordham Law Review. ‘They were continuing to finance products that they knew were defective and could have devastating consequences for the city of Cleveland.’”

“Ohio Attorney General Marc Dann also is considering a state lawsuit against investment banks. Dann said he is investigating ’some of the very same people’ identified in the city’s suit.”

“‘There’s clearly been a wrong done, and the source is Wall Street,’ Dann said in a phone interview. ‘I’m glad to have some company on my hunt.’”




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209 Comments »

Comment by Ben Jones
2008-01-11 10:50:13

‘No one anticipated a day when potentially hundreds of thousands of residential mortgage loans would be modified,’ said Alison Utermohlen, an official of the Mortgage Bankers Association’

Actually, this isn’t true. IIRC, Bill Wendel did on this radio show in August 2005.

Comment by txchick57
2008-01-11 10:55:00

“Take Texas, for example. Home prices in the Lone Star State are low and, as of November, 2007, only about 12% of mortgages were ARMs. But it ranked 14th in the nation for foreclosures.”

Jesus, this again? Prices are NOT low in Texas on a relative basis. Texas is as overpriced as any bubble state.

Oh and did you all see the Tiffany sales shortfall and warning? First sign that this is spreading to the formerly “immune” high end?

Comment by crispy&cole
2008-01-11 11:05:47

Tiffany and AMEX…

Comment by Arizona Slim
2008-01-11 11:10:11

…sitting in a tree, K-I-S-S-I-N-G…

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Comment by mgnyc99
2008-01-11 11:44:05

i wasa watching the staurday morning cartoons oops i mean bulls and bears saturday and they were pimping amex @$50 plus ouch if you bit

 
Comment by frcp_23_b_3
2008-01-11 11:44:46

Yet no mention from the media during the sales season. I’m amazed that this information is just now quietly coming out, nearly three weeks after the fact, in this day and age of the internet. Sure we have blogs and sure we all shared anecdotal stories of the sales season, but what’s amazing is that you never would have even known there was a dismal selling season unless you were on the blogs. Even Drudge hardly had much information about the reality of the season and it’s precisely because he mostly links to MSM reports. MSM reports were totally silent on the matter. So unless you are a blogger, you’ll be blissfully ignorant of the reality about you which I suppose suits 99% of Americans just fine. Amazing. And scary.

 
Comment by Devildog
2008-01-11 12:41:17

Yeah, most of the MSM stories actually said sales were great and higher than expected, until this week. If you read the MSM it’s worse than being uninformed, you wind up being misinformed by outright propoganda.

Even the “conservative” talk radio hosts are in complete denial about the state of the economy. Nothing drives me nuts faster than hearing Hannity or Limbaugh go off on any bad economy news like you’re a commie if you don’t have rose colored glasses pertaining to the economy. Hannity is by far the worst, at least Limbaugh’s beef seems to be against cry baby hand wringing.

 
Comment by Matt_in_TX
2008-01-11 18:21:52

I still want the “Bulls and Bears” cartoon hero who said DOW 15,000 by the end of 2007 to stand up and take a tomato.

 
 
Comment by Brandon
2008-01-11 11:18:53

also Target and Beth, Bad, and Beyond- the stomping grounds of suburban moms with their HELOC money.

I do believe Kohls, Gap, Macys, and limited brands missed their estimates.

And the big indicator- Mens Wearhouse is guiding lower. I guess the RE agents and Mortgage brokers are either staying with last years suits or have traded their suits for Starbucks aprons.

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Comment by edgewaterjohn
2008-01-11 11:29:55

Those stores must be ghost towns in 1Q. As it dawns on the retailers new orders have got to start coming down markedly. Then the fun will really start.

As for Men’s Wearhouse - how many of you know older gentlemen who owned like one suit - for several decades?

Too many stores, too much crap.

 
Comment by Arizona Slim
2008-01-11 11:34:56

I do know such a gentleman. He’s my father.

 
Comment by mgnyc99
2008-01-11 11:42:23

lmao

 
Comment by Isabel
2008-01-11 11:50:45

When I was a kid in the 1960’s my father was sill wearing mechanics coveralls issued to him during World War II. I think he was still wearing them when I went to college in the 70’s. 78 was when my parents finally gave in and bought their first colored TV.

 
Comment by jim A
2008-01-11 12:20:11

Heck, my parents bought their first color TV Christmas ‘81. The year after that they splurged on a Betamax.

 
Comment by ET-Chicago
2008-01-11 12:51:34

how many of you know older gentlemen who owned like one suit - for several decades?

I’m the guy that buys their suits & ties at the thrift store after they kick it.

(I’m skinny w/ narrow shoulders, so I fit into the vintage (’40s to ’70s) stuff better than modern day — and I like it better, style-wise.)

One of my favorites, a green wool blazer from the ’40s, still has a tag pinned inside from being dry cleaned in New Orleans during WWII.

 
Comment by ET-Chicago
2008-01-11 12:58:00

Also reminds me of the Johnny Cash classic “Understand Your Man”:

You can give my other suit to the Salvation Army
And everything else I leave behind
I ain’t takin’ nothin’ that’ll slow down my travelin’
While i’m untangling my mind.

I ain’t gonna repeat what i said anymore
While i’m breathing air that ain’t been breath before.
I’ll be as gone as a wild goose in winter
Then you’ll understand your man

Meditate on it!

 
Comment by Blano
2008-01-11 13:08:17

I just picked up a sharp double-breasted suit at Salvation Army for 20 bucks. It looks great.

 
Comment by Isabel
2008-01-11 13:37:40

“Heck, my parents bought their first color TV Christmas ‘81. The year after that they splurged on a Betamax.”

My parents never went for the beta max or the VCR. I finally bought one for my mother when she moved in with us in 1996.

 
Comment by Dani W
2008-01-11 14:11:34

I just got a great pair of calvin klein jeans for $6 at the thrift store. I made over $100,000 last year and I’ll make more this year, but I prefer to buy quality goods cheaply.

 
Comment by Max
2008-01-11 15:41:39

78 was when my parents finally gave in and bought their first colored TV

No need to be all racist and Jim Crow about the TV. Color of a TV set is skin-deep and all TVs are brothers. :)

 
Comment by finance_guy
2008-01-11 15:44:52

So true (re cheapness) … i made even more last year than you Dani :> ;> but drive an 11 year old car, when i don’t use public transport, and save > 25% of my income….

 
Comment by in Colorado
2008-01-11 15:55:50

As for Men’s Wearhouse - how many of you know older gentlemen who owned like one suit - for several decades?

Also, even though we supposed to be a society of office workers, hardly anyone wears a suit to work anymore. When I told my mom that I don’t wear a suit to the office, she was surprised.

 
Comment by travanx
2008-01-11 20:00:01

I don’t see the big deal in how much you make compared to how cheap you are. Whats the point of making a lot if you can’t spend it.

 
Comment by Arwen_U
2008-01-11 21:00:18

TV tuning in the 1970’s — Dad climbed a ladder to a box built on a tree platform in a poplar wood about 1/4 mile away from the house — Someone stood next to the TV to wach and the yelling went up the chain of kids - is it clearer? is it clearer? is it clearer? little more! little more! go back! go back!

The good old days.

 
 
Comment by jetson_boy
2008-01-11 11:38:20

Credit card debt is the next shoe to fall. There’s over a TRILLION dollars in credit card debt, and you better believe that all those over-HELOC’d folks are going to max out as many cards aas they can get away with to keep that house. Oh joy, the fun just never seems to end!

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Comment by Deflationary Jane
2008-01-11 12:12:48

Which is weird because the few people I know who aren’t HELOCed to their eyeballs are shopping for better rates and perks on cards, paying down the old ones and closing old low ceiling accounts.

I’m doing this as well - closing some store cards that just sat open with zero balances that frankly I just don’t use but never got around to making the phonecall. Also getting rid of my old emergency CapOne. They cheesed me off for the last time with their fee tricks. Picked up a nice high ceiling AMEX for emergencies (Costco).

 
Comment by 4sanchor
2008-01-11 12:18:06

Call me an old fashioned 20-something. Only one card, never use it. I can’t fathom how people could try to live off of them.

 
Comment by VaBeyatch in Virginia Beach
2008-01-11 12:34:30

I thought having open credit cards (tradelines) with low utilization was the key to keeping up a good FICO score. It’s my goal to get a bunch of credit cards, with very high limits, and sock drawer them. As someone who hasn’t ever had a need for much credit, I’m suffering now. Insurance rates are now based on FICO scores. Home loans are too. Lots of things rely on the data held in these private databases, which are held by very very badly run companies.

 
Comment by speedingpullet
2008-01-11 12:37:12

Call me an old-fashioned 40-something ;-)

Had one CC that I abused in the early 90’s, spent the next 5 years paying it off.
Cut it up with a pair of scissors when I found out how in debt I was, and never got another one.
Learnt my lesson good and proper.

Now? If the money’s not in the checking account, then I can’t afford to buy it. Thank god for Debit cards.

Yes, I’m a Luddite. But a Luddite with a savings account

 
Comment by oxide
2008-01-11 13:14:57

It’s my goal to get a bunch of credit cards, with very high limits, and sock drawer them.

Don’t get too many credit cards. I read somewhere that if you have too many cards and too much credit limit (even if you owe nothing on it), it actually hurts your FICO. Apparently they think you’re poised to go on a shopping spree. So there’s a balance between not enough available credit, and too much credit.

Check Bankrate.com. They have a couple articles on maximizing your FICO.

 
Comment by jer
2008-01-11 13:21:49

I put eveything on my mileage plus visa — gas, cigarettes, food, ultilities, etc — everything!

I pay in full every month, and for the $50 annual fee reap enough miles for about four trips a year. I’ve been hoarding the miles to fly out to lung cancer specialists when the cigs kick in…

 
Comment by PontiacMI
2008-01-11 14:36:40

I subscribe to the Myfico service with quarterly credit report & score. Last year the reason they gave for not having a higher fico was that “on average, most people have 6 revolving credit accounts”. I took this to heart & opened a fourth credit account. I never carry a balance, and use the Discover card for the cashback rewards. I charge everything I can.

Strangely, I guess they were correct. My score has gone up to 817 on this last update from MyFico.

 
Comment by Paul in Jax
2008-01-11 15:46:14

Jer - negatory on the lung cancer. Unless you’re checking for it every few months (and why would you do that, since it’s a hassle and if you found out you had it you’d have to quit smoking), by the time you detect it you’re more than likely a dead man, no matter what you try. It can be a very quick go - you’ll barely have time to clean out your room and call the casket man and get right with the god of your choice. . .

 
Comment by travanx
2008-01-11 20:05:22

I had a very bad experience with a debit card in college. I bought a computer part, the company overcharged me and no one would take care of it for over 5 months. I was charged over $500 for $200 ram. With a credit card this can be disputed and held off the payment. Goodluck doing that with a debit card.

 
 
Comment by Fuzzy Bear
2008-01-11 14:47:27

AMEX…The consumer is leaving home without the card.

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Comment by Brandon
2008-01-11 11:07:09

I hear you- with the price gains in California, perspective is lost, so a price increase in a Dallas suburb from 90k to 140k is not seen as “expensive”. In reality, though, this is a lot of money based on historical data.

Then you have some areas totally off the rails like the quaint neigborhoods between greenville and the central expressway- a few hundred grand? Of course, the condo craze in uptown and the victory area is way overpriced and set to crash and burn.

Comment by txchick57
2008-01-11 11:11:58

they were a few hundred grand in the 1980s. Now the new McMansions are closer to a million. I can barely stand to drive through there anymore, it is so maddening.

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Comment by no mo So Cal
2008-01-11 12:52:24

and with the property taxes in TX so high prices have always been low and will always be.

 
Comment by Matt_in_TX
2008-01-11 18:25:02

(as long as you inflation adjust ;)

 
 
 
Comment by are they crazy
2008-01-11 11:41:57

Not to intrude on your thread, but where is Leigh? I’m sure she would have something to say about Tiffany’s going down the drain. Bet you’ll be able to get amazing values on bling via ebay in a few more months. If new stuff goes on sale, resale goes down, too.

 
Comment by exeter
2008-01-11 11:51:14

TXchck, I fight the same stupidity of “we never saw a bubble here” in New England. These morons go silent when I use real local examples of shacks selling for 3x over what they were sold for in 1999.

Comment by Northeastener
2008-01-11 13:40:34

Oh, the bubble is definitely here in New England… I’m still shocked at the wishing prices for nice homes in decent communities.

I haven’t found a single property in good condition with 2000sqft for less than $450K. Even with 20% to put down ($90K), it’s still a $360K note. That would require at least $120K/yr in income, not to mention over $2000/mo in cash flow just to the mortgage…

Incomes are decent here in Mass, but I’m quite sure not every family around these parts makes that much money… last I checked, median family income was in the low $70’s for many of the communites I’m looking in. Go to a wealthy community like Newton or Duxbury, where the median income approaches $120K and the same house is closer to $700K

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Comment by hd74man
2008-01-11 13:50:17

RE: Incomes are decent here.

Why don’t you move to Boston proper, so you can pay the pensions of these scumbags.

http://www.boston.com/news/local/articles/2008/01/11/fire_dept_disability_backlog_costs_city

 
 
 
Comment by bicoastal
2008-01-11 12:54:12

Re: Tiffany, I could have predicted this when I unwrapped one of my Christmas presents. My husband recycled an old Tiffany & Co. box and filled it with robin’s-egg-blue L.L. Bean long silk underwear!

Comment by txchick57
2008-01-11 13:40:34

lol. I am trolling Ebay daily for bling. Prices are sticky ;)

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Comment by jer
2008-01-11 21:20:20

I’m trolling too, for classic guitars. Same thing, deluded sellers not meeting bids for 40 year old Gibsons, but prices not coming down.

 
 
 
 
Comment by crispy&cole
2008-01-11 10:56:18

By no one he means, no one from the MBA, Wall Street, NAR or anyone with an interest in it not happening. With the Net and Blogs like this one it will be very difficult for these guys to run and hide from their lies!

Look at the Mozzilo quotes rubbed in his face by the media. Do you think this would have happened with bloggers pestering the media?

Comment by Ben Jones
2008-01-11 10:58:58

IMO, the media see where this thing is going, and are on the bandwagon. I am more hopeful than ever that some justice and reform might come out of all this.

Comment by txchick57
2008-01-11 11:10:11

You know all the established biz writers are shopping book ideas as we speak . . .

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Comment by crispy&cole
2008-01-11 11:10:46

Unfortunately, guys like Chuck Prince, Franklin Raines, Mozzilo, Bruce Karatz, et al will all walk away with billions in total and nothing will be done to them. Meanwhile, millions of sheeple will be forcelosed upon…Where is the justice in that?

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Comment by are they crazy
2008-01-11 11:44:05

Where has the tan man disappeared to - barely seen him recently?

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Comment by DAVID
2008-01-11 12:19:14

As we speak he is boarding his space ship and headed back to the plane debton located in galaxy sub-prime. Anybody that orange must be an alien.

 
Comment by Starve_the _agents
2008-01-11 13:20:44

Maybe the this particular Drac went back to Fyrine IV. I can see him splitting open to reveal a creature of Zammis likeness, but with Tangelo’s mug…

 
Comment by Jimmy Jazz
2008-01-11 14:19:53

As we speak he is boarding his space ship and headed back to the plane debton located in galaxy sub-prime. Anybody that orange must be an alien.

“Lectroids from Planet 10 by way of the Eighth Dimension!”

hehe

 
Comment by nova
2008-01-11 17:23:55

Txchick,

Skip ebay and go to the auction houses. Some major deals for cash people starting to happen. Estate sales from high end old money. Some even let you view and bid online.

 
 
Comment by Fuzzy Bear
2008-01-11 14:52:34

Ben:

Check out the post on the sptimes.com, money, (un) real estate regarding the responses to the prices falling to 1998 levels. A real estate broker has also turned the tide and now agree’s with our statements.

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Comment by Fuzzy Bear
2008-01-11 15:10:38

Ben:

Here is a response to my comments on the sptimes.com website by a St. Petersburg broker. It seems even the realtors are beginning to change their views:

I concur with Fuzzy Bear on the majority of his assesments. I own a real estate brokerage in Pinellas and have done my homework on the real estate market here and around the country. We are definitely NOT done dropping in prices here. I don’t promote the typical agent propaganda that NOW is a great time to buy. It is not a buyers market. It is a transitional market. I call it a “Buyer beware” market. I actually Do care about people and their financial well being, many times to my own hurt. I work now mostly in property management (aka rentals) and I help “realistic” sellers to sell. I actually sell every listing I take because I refuse to take overpriced listings. I fully educate my sellers and their properties do sell. Agents would do well to start doing busines this way and stop “flattering” sellers about their property value just to get their sign in the yard. If we do this, the sellers would get the point and this market correction would be over with much faster. I call on all Agents to do this and stop the slow painful drop. We need to hit bottom fast and get it over with. Get educated about what actually supports real estate values. It is NOT specualtors. They have now lost their shirts and they are virtually gone. The real estate flipping fad is over. It is NOT subrpime, option arm loans or interest only loans. They have been proven very bad for lenders and borrowers and are virtually gone. The market for those loans on wall street is now zero. The main and lasting support for real estate prices is local median incomes. Rents are a much more acurate display of what locals can afford. One main reason is because people don’t specualate on renting as an investment nor do people get “creative” loans and borrow money for rent. Real estate prices in this area WILL revert back to the same relationship it had to rents before this bubble started. Though rents have gone up some because of all the higher prices, they have already dropped considerably because they are directly related to what people can actually afford on what they earn. This will happen in real estate and we are not there yet. Incomes have not increased nearly enough nor have home prices dropped enough to bring things back in line. I have many tenants that see this clearly, can afford to buy, make six fugures, and still wait for prices to come back in line with reality. I am in full agreement with them. Taxes will then drop, though it will take some time, and the economy in Florida will eventually get better. I daily listen to the financial and emotional pain of home owners here who are just ready to walk away from their homes and leave Florida for good. This was not like this BEFORE this investor speculation bubble. This is just too sad and it really needs to end soon.

Posted by: Donc | January 11, 2008 at 10:38 AM

Great post. To be sure, if the Tax situation does not get resolved across the board - meaning for all homeowners and landlords - the cost of homes will need to fall far enough to compensate for the monthly cashflow impact of escalating RE taxes. The seller is the only participant in the RE transcation with the opportunity to negotiate affordability. In other words, escalating taxes (and insurance) will continue to drive homeprices down. I stand by my assertion that taxes and insurance will not go down (in a meaningful way) regardless of market conditions without reform.

Posted by: Real | January 11, 2008 at 11:33 AM

Demand for rentals is way down in some areas because of higher unemployment. On my way to work this a.m. in Spring Hill, I counted 14 “for rent” signs in front of duplex units on one 2 block street!

Posted by: | January 11, 2008 at 11:36 AM

We are definitely NOT done dropping in prices here. I don’t promote the typical agent propaganda that NOW is a great time to buy.

DonC: It is a pleasent surprise to have a professional like yourself that is open and honest to the public about the housing market!!

Professionals, like yourself and the way you run your business will be successful, while the short term thinking people in real estate, etc. that think they can deceive the public will fail. Keep up the good honest work, it will bring value and success to your business.

Posted by: Fuzzy Bear | January 11, 2008 at 01:00 PM

Yes, Real, falling property values are no guarantee of property tax cuts if you have accrued savings through Save Our Homes. Think of this scenario: Your home’s market value is 200K but you pay taxes only on 100K of that value through SOH. If your home’s market value falls to 150K, you’re still getting a break. So the government could theoretically raise your taxes the following year as it closes the gap between the 100K taxable value and the 150K market value. If you bought a house in the past 1 1/2 years and are taxed to nearly 100 percent of your home’s market value, you COULD see a tax cut, but in many cases you’ll have to lobby your tax appraiser to get him to act.

Posted by: James Thorner | January 11, 2008 at 02:47 PM

but in many cases you’ll have to lobby your tax appraiser to get him to act.

Initially that may need to be done to get your tax bill reduced. The SOH could make matters worse for the homeowner over time. Not a good situation for us in Florida.

Posted by: Fuzzy Bear | January 11, 2008 at 05:05 PM

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About This Blog
(Un)Real Estate offers a peek at the housing market usually reserved for insiders. While it focuses on the Tampa Bay area, it won’t neglect dipping into the rest of Florida and beyond. Its goal? Simple: To help you keep a roof over your head without losing your shirt.

Times business reporter James Thorner has covered the Tampa Bay area housing market since 1999 and writes a weekly column on the topic in the St. Petersburg Times. Having recently bought and sold a house here, Thorner has shown his insights are more than theory. He’s got the burn marks to prove it.

E-mail James Thorner: jthorner@sptimes.com.

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Comment by txchick57
2008-01-11 11:13:14

I dunno. Wouldn’t you take a little heckling in exchange for $115M and a private plane?

Comment by Incredulous
2008-01-11 13:43:02

Try 83 million.

http://tinyurl.com/3cxscc

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Comment by Incredulous
2008-01-11 14:01:23

“Congressman Frank, a Democrat from Massachusetts, said today a takeover could be “a positive development.” He urged the company to work with borrowers to alleviate their difficulties and took aim at Mozilo.

“`I am calling on Angelo Mozilo, who will be profiting from this transaction personally, to donate a substantial portion of the $150 million he has collected over the last several years to non-profits and other institutions that are helping us deal with the problem he helped to create,’ Frank said in a statement.”

Same link above.

 
 
 
Comment by ghostwriter
2008-01-11 13:05:30

If I had accounts at bank of am I would be pulling them. This cannot end up well for them. What the h*ll are they thinking.

Comment by JohnF
2008-01-11 13:19:07

I am a 27-year customer of BofA and I am thinking of doing the same thing….they have NO idea what they are getting into….

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Comment by Isabel
2008-01-11 13:44:10

BOA probably thinks they are too big to fail. They have the contract for all the government Purchase cards/ Travel cards. I have one in my wallet with the security sticker still on it, since my job no longer requires me to travel anywhere.

 
Comment by Suzy K
2008-01-11 13:52:11

I hear ya. We’re 25 yr customers of BofA but by months end that relationship will be over. It’s more than just the Countywide debacle though……

 
Comment by polly
2008-01-11 14:26:26

My government credit card is with Citi.

 
Comment by Isabel
2008-01-11 14:55:35

Really? Who do you work for? Maybe it is just DOD that owes their soul to B of A.

 
Comment by in Colorado
2008-01-11 16:13:01

I hear ya. We’re 25 yr customers of BofA but by months end that relationship will be over. It’s more than just the Countywide debacle though……

BofA sucked 25 years ago. They had lousy customer service back then.

 
 
Comment by judy blue eyes
2008-01-11 14:46:06

I’ve been thinking the same thing. A BofA customer since 1983 (ulp! Am I that old already?) Maybe it’s time to collect my pennies and git while the gittin’s good. But where to? Aren’t all the banks in pretty much the same ugly sitch?

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Comment by Matt_in_TX
2008-01-11 18:28:24

I’ve been a bank of a customer for 20 years to. No, I was a Sea-First customer, then a Nations Bank Customer, then a BoA customer.

Oh well, at least they used to have nice cookies in the Southlake, TX branch…

 
Comment by travanx
2008-01-11 20:14:09

HSBC is really good, and very nice if you travel overseas. no charges for ATMs. All when I was in London, Paris, and Sydney at current exchange rates. How can you beat that?

 
 
 
 
Comment by Michael Fink
2008-01-11 11:03:19

I am so sick of the “no one could haves” or “it was an unforeseeable outcome” crap.

People DID see it, and there is NO way to dispute that fact. Even if you remove the entire Internet, books were published on the subject (Shiller’s book being the most popular), and there was endless commentary on it on every single news channel and paper in the country.

And, if you look back into the history of this blog, there were 100’s of us 3-4 years ago predicting exactly this outcome. Failure of the banks/lenders, massive price depreciation, credit instruments exploding. All of it, documented in time by the power of the computer..

So, please, for the love of everything holy (speaking to the media here, not you Ben) STOP telling me that no one anticipated these consequences from the psychotic lending that went on during this bubble. Anyone with a basic knowledge of math could have figured this out; it’s not like we are doing partial integrations here; all we need are percentages and some historic data.

Comment by Al
2008-01-11 11:38:49

I’m sure there was some awareness of these blogs and the books, but after all what could have a bunch of amateur conspiracy theorists - doomsday predictors know? The truth.

 
 
 
Comment by jjinla
2008-01-11 10:58:15

“Mayor Sheila Dixon believes that Wells Fargo has been doing just the opposite in Baltimore – that lenders have been targeting borrowers for credit on unfair terms because they are black.”

Explain to me how Wells could have satisfied her? Deny blacks with poor credit, get called a racist. Approve them, and get called a predatory lender.

She’s just using the race card like the Latinos that now supposedly don’t know what they signed. Unless whites get left holding the entire bag, they won’t be satisfied.

Comment by Arizona Slim
2008-01-11 11:11:24

I once had the race card played on me by a neighbor who took umbrage at my request for his family to quiet their barking dog.

Comment by Al
2008-01-11 11:40:29

What race was the dog?

Comment by Deflationary Jane
2008-01-11 12:18:13

Har! **roflma**

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Comment by jjinla
2008-01-11 11:42:52

Just call animal control. Either they, or the dog, will have to go.

Comment by Arizona Slim
2008-01-11 12:16:26

JJ, I called Animal Control more times than I care to count. I also went to mediation with this clown, and the race card was his last-ditch attempt to gain some cred with the mediators. He used it after I refuted every one of his lies about his family’s uncontrolled barking dog.

It didn’t work. One of the mediators said she saw no evidence of discrimination on my part.

He did try to use the race card again in January 2007. I called him on a cold, cold night when the pug was left outside in misery. It was pleading (in doggy language) to be let back in the house. Well, he wasn’t home, said no one else was, and, too bad, nothing could be done about the barkathon that was emanating from his property and making mine unlivable.

I told him I was going to report him to Animal Control for animal neglect. Well, he said he would report me for discrimination. That didn’t stop me. I went ahead and reported him for neglect. And I have yet to hear from the Discrimination Police.

In recent months, the dog has bee quieted down. I think this is due to the neighbors who moved in behind me. I don’t know them, but they are awfully quiet. Methinks that they had a word with the pug owners. Probably in Spanish.

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Comment by jjinla
2008-01-11 12:46:37

Maybe it is different in CA. Way back when I called animal control on a house in back of us where the guy worked nights and left the dog out every night.

Within weeks he, and the dog, were gone.

If they had dog-free communities, I would be the first to move in. I love animals, but in cramped towns and cities, they are nothing but a nuisance to your neighbors. Owners don’t realize that their dogs bark because it’s usually when they aren’t around.

 
Comment by AdamCO
2008-01-11 13:45:15

Everyone here in the mountains has a giant dog. I generally don’t mind them, but I hate it when they urinate on the pristine white snow in front of my house. Aggravates the hell out of me.

 
Comment by jjinla
2008-01-11 14:00:29

Yeah, I always kind of thought it was rude to let your dog go to the bathroom on your neighbors lawn. What if they have young kids that play on that??

But then again, in LA people bring their dogs to the mall, to cafes…everywhere. I came within six inches of stepping in dog poop on day in the middle of Nordstom’s men’s department one time. Unbelievable!

 
Comment by Matt_in_TX
2008-01-11 18:37:40

Our new neighbor lets her 2 barking dogs run free through the neighborhood “to get used to it.” They routinely violate 3 or 4 local animal control ordinances (not sure if they have more than the legal 3 dogs - it sounds like they own 10.)

Why is is so hard to leash dogs or build a fence?

Some people can imagine the worst that can happen if a neighbors out-of-control dog charges onto your property. My wife doesn’t have to imagine, she has the marks and the memories. She and another kid were attacked by a dog in their own front yard as a child. A rabid dog. She did the full course of treatment, and still has trouble scheduling doctor appointments that might end up with needles.

Leash it or lose it.

 
Comment by Arwen_U
2008-01-11 21:21:39

I remember being a little incensed at a radio advertisement for a 55+ community here in NoVA. They were using the ad space to talk about how much fun it would be to have your wonderful dog there with you, and they had a dog bark on the radio to prove it. Then they talked about how there wouldn’t be any kids there to mess up the seniors’ lives.

I prefer kids to dogs. They usually go to bed after dark and don’t bark at you or poop in your yard (most of the time).

The 55+ communities here are losing equity like there’s no tomorrow. I think they overbuilt for the demand, and they were riddled with speculators, too.

 
 
 
 
Comment by ghostwriter
2008-01-11 13:09:35

The thing is, bad credit is a reason to deny a loan I don’t care if you’re blue, red or green. If your credit is bad you can be denied a loan and race has no part of it.

 
 
Comment by edgewaterjohn
2008-01-11 10:58:42

‘Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.

Maybe I can leave a five dollar bill on the sidewalk for fifteen minutes too?

Comment by takingbets
2008-01-11 11:36:24

was that your 5 bucks my mom found on the sidewalk last month?

 
Comment by SDGreg
2008-01-11 12:14:52

And maybe you can have unprotected sex with crack whores and not get HIV…

 
Comment by ghostwriter
2008-01-11 13:11:59

‘Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.

I think that tanning booth fried his brain.

 
Comment by oxide
2008-01-11 13:50:58

Mozilo’s lament is an exact repeat of what some mortgage brokers were saying: “If we didn’t give Mr. FICO 550 a mortgage, he could go around the corner and get his subprime slime somewhere else, so we had to enter the subprime arena.”

In other words: if Countrywide didn’t get fat on fees for selling slime up the foodchain, then somebody else would.

 
 
Comment by willyboy
2008-01-11 10:59:33

I think the “public nuisance” theory is quite the stretch. What you have here is “damnum absque injuria” and probably a frivilous law suit.

Comment by Not_In_Montana
2008-01-11 11:10:11

They must not have been able to find better causes of action. Not good.

 
Comment by ghostwriter
2008-01-11 13:14:16

I think the “public nuisance” theory is quite the stretch. What you have here is “damnum absque injuria” and probably a frivilous law suit.

Maybe the public nuisance part is the abandoned rotting houses with overgrown lawns, broken windows, drug dealing & rats.

 
 
Comment by hd74man
2008-01-11 11:04:18

RE: Cleveland Mayor Frank Jackson took aim at Wall Street on Thursday with a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis here.”

LMAO…Everything’s contained!

 
Comment by AnnScott
2008-01-11 11:07:45

The quoted section from the NYT article “Banks Plead They Can’t Follow Rules” leaves out an interesting sentence:

“But the banks argue that would take too much effort, given the volume of loans likely to be restructured. “This would be extremely time-consuming and would likely involve additional staff dedicated to this purpose,” Ms. Utermohlen said in a letter to the Financial Accounting Standards Board this week.”

And therein lies the REAL matter which is making these banks whine that they can not or do not want to comply with a rule that has been around for over 15 years.

They will have to PAY people to do the work and even hire more people.

Cuts into the profits, cuts into shareholder dividends and cuts into CEO salaries and bonuses.

Aww…..too bad. That is what happens when a business tries to take shortcuts, operate with below minimum staffing and otherwise dance on the edge to maximize profit without planning for the other likely events - and takes a LOT of shortcuts in handling transactions.

They CAN follow the rules - they just don’t want to spend the money to do it.

Comment by WT Economist
2008-01-11 11:49:34

“And therein lies the REAL matter which is making these banks whine that they can not or do not want to comply with a rule that has been around for over 15 years. They will have to PAY people to do the work and even hire more people.”

And that’s just about the only industry likely to pull us our of recession. Investors lose big on the loans, and on their investments in financial companies. Lots of little people get $15 per hour high level clerical jobs, or field jobs managing REOs.

Bring it on.

 
Comment by guess who's
2008-01-11 11:50:09

Do these people have to give back their bonuses as a result of this mess?

 
 
Comment by michael
2008-01-11 11:14:12

OT - i just checked zillow on a few homes for sale in ashburn, va (a dc suburb with mcmansions galore).

one word…PWND!!!!!!

Comment by flatffplan
2008-01-11 11:17:29

I’m in 22151 and saw no change lately
off 15% from peak

Comment by michael
2008-01-11 11:47:33

i saw one home bought for 1.237 in 06. bank owned now listed at 850k. that’s about 31% off from peak.

it’s been awhile since i have looked at ashburn. 15% was even a surprise.

wife and i would like to live in vienna 22180. long way to go there.

Comment by bink
2008-01-11 12:50:50

I grew up in Vienna. You’re not missing anything.

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Comment by Ostriches
2008-01-11 14:37:35

Check out Harriet’s blog at Northern Virginia Bubble Fallout- she has some pretty good stats.

 
 
 
 
Comment by watcher
2008-01-11 11:39:06

ZOMG!

 
Comment by JamesRaven
2008-01-11 12:27:26

Very strange. I’ve been following the house we used to rent in 92104 on Zillow, and in three weeks it went from 383K to 507K. WTF?

Comment by ghostwriter
2008-01-11 13:18:09

Very strange. I’ve been following the house we used to rent in 92104 on Zillow, and in three weeks it went from 383K to 507K. WTF?

The bank probably OK’d a short sale. The town I’ve been watching has 3 or 4 big price reductions on a lot of the houses then the bank Ok’s a short sale and the price jumps up to where it was 3 reductions ago. Anyone else noticing this?

 
 
 
Comment by txchick57
2008-01-11 11:16:25
Comment by ex-nnvmtgbrkr
2008-01-11 12:03:02

You might remember the comment I made a few weeks ago about we’ve only seen the tip of the iceberg when it comes to the tsunami exposed fraud coming our way.

Comment by txchick57
2008-01-11 12:25:20

right, this stuff is circa 2003. Imagine 2005

 
Comment by ghostwriter
2008-01-11 13:20:34

We don’t have jails for all the mortgage fraudsters.

 
 
Comment by are they crazy
2008-01-11 12:24:18

Old co-worker is spouse of one of these characters. I remember being envious of her wedding in Italy. She’s really a nice woman and good person and apparently did not know what was going on - he was already rich when she met him and actually was uncomfortable with his wealth. Worked before she met him and continued after - still does.

 
Comment by ugh
2008-01-11 16:21:12

rut roh
RBC , my neck of the woods.

 
 
Comment by Lip
2008-01-11 11:16:34

Anybody Heard any WaMu Rumors?
Just had a cup of coffee with a friend at *bks. Of course, our conversation went into the HBB arena and he said that

“WaMu is making it so hard for their top brokers to write a mortgage, the best are beginning to look to other companies”

Problem is, where would this guy go?

Oh yeah, the barista, she worked at a mortgage company in 2007.

Comment by jim A
2008-01-11 12:29:49

“What, you want me to attach W2s and bank statements to the file? What kind of insane workload are you putting on me?”

 
 
Comment by takingbets
2008-01-11 11:20:12

“The real culprits, he argued, were the Federal Reserve and its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators’ attacks on interest-only and other risky subprime mortgages.”

o how he was wanting the party to continue!

Comment by oxide
2008-01-11 13:44:29

he’s half right. It WAS the fault of the Federal Reserve, but for its series of interest rate CUTS.

Crooked speculators and the rest would never have happened without those low interest rates greasing the wheels of securitization.

 
 
Comment by zeropointzero
2008-01-11 11:21:15

Mozillo sounds like an arsonist who is blaming the dry forest conditions, firefighters, and even the Bic lighter company for the damage his fire has caused.

“You’ve got to be careful here about blaming ourselves too much” - yeah, THAT’s what you’ve gotta be careful about, Angie baby. Sheeeesh.

Comment by targetdrone
2008-01-11 12:45:19

He didnt look too good on CNBC today. Gaining weight. Eating lots of comfort food ? Drinking ?

 
 
Comment by mrktMaven FL
2008-01-11 11:25:07

I’m speechless.

 
Comment by North GA Dave
2008-01-11 11:25:49

‘You’ve got to be careful here about blaming ourselves too much,’ Mozilo told the gathering.”

…last April, in a speech …. Mozilo conceded Countrywide lost its compass and chased risky customers as competition in that market increased. Names like Ameriquest, New Century, NovaStar Financial and Ownit Mortgage Solutions set a new lowered standard, changing the rules of the game, Mozilo said.”

But Mommy, EVERYONE stays out until 12, why can’t I?

Comment by climber
2008-01-11 13:18:47

Funny, I never noticed the rules of the game changing. The rules have always been never lend money to people who can’t pay it back, always require a down payment and always be sure of the value of the collateral.

Just because some players chose to be stupid is no excuse for being stupid yourself.

Comment by Faster Pussycat, Sell Sell
2008-01-11 14:35:23

You have quite clearly never worked for one of these big banks.

Talking truth to power is a career-ending move.

 
 
 
Comment by shadow7
2008-01-11 11:26:40

This was so simple to see. Allan Greenspan should be brought up to answer his role, how is it that a banking guru didn’t see anything wrong and this man was paid and entrusted to tell us if a bank is failing or doing unsafe practices, the whole country is smoke and mirrors?

 
Comment by NB Bear
2008-01-11 11:28:04

Let the buffoon’s comments from 11 months ago speak for themselves:

Cramer: Countrywide Still Looks Like a Buy

By Jim Cramer
RealMoney.com Columnist
2/6/2007 3:19 PM EST

The conundrum of Countrywide (CFC - Cramer’s Take - Stockpickr - Rating) going up even as another subprime dealer, Mortgage Lenders Network, goes under, may be answered by a simple tenet: The weak hands are going under, leaving the biggest and best to triumph.

When I pulled up with Angelo Mozilo, the man who built Countrywide — the man who is Countrywide, some would say — we joked about how strong Countrywide’s business is because it has always “modeled” the bad loans better than anyone. One of the mistakes made by the analyst community is believing that any loans that go under could be death to a lender. In truth, the good ones model what will happen under a lot of scenarios, and it is pretty clear that Countrywide has the best models. Always has.

When the company’s stock got bid up on takeover rumors, despite insider selling, I expected it to come right back down.

It didn’t because what’s really happening is the long-awaited shakeout. There have been too many crummy players in this business. You are seeing the small ones go under — and some larger private ones, too. What you aren’t seeing is the pullback in the major brokerages’ business that is emblematic of a recognition that the margins got too bad in the subprimers that they bought to get the flow for mortgage back. You heard this if you listened closely on all the big brokers’ conference calls.

If the brokers are pulling back and the smaller independents are going belly up, that leaves Countrywide to reap the benefits of the inevitable expansion in margin that comes from the end of the price wars for subprime.

That’s why it is going up. That’s why it will continue to go up. That’s why Countrywide is still a buy, despite the problems in housing and the headlines about how bad this business is.

Comment by txchick57
2008-01-11 11:44:43

You probably don’t remember this, but another clown on his site named Joe Capone (yes, very ironic ;)) said that you should buy CFC at 37 because 75% of their option ARMS with ‘08 resets had already refinanced. I remember giving So Cal Mtg Broker here on the blog some grief about this. He (SC) was absolutely right about it and this Capone idiot hopefully is in his rightful position flying pizzas back in NY somewhere.

 
Comment by Hoz
2008-01-11 11:50:08

“(Western) Financials…can go a lot lower if the US economy really rolls over, most particularly as crazy regulatory rules have prevented bankers from provisioning. Western financials are still well above distress valuations, as reflected in their market capitalisation relative to their deposit base. Japanese banks continue to look better valued on this score. Greed & Fear continues to take the view that there remains plenty of potential for nasty surprises to emerge from the whole scary area of imploding structured finance.”
Greed and Fear

 
 
Comment by Helicopter Commander Bernanke
2008-01-11 11:31:14

“‘Traditional lenders such as ourselves looked around and said, ‘Well maybe there’s a (new) paradigm here,’ Mozilo said. ‘Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,’ Mozilo said.”

As someone said on Russ Winter’s blog a week or so ago, the USSR at the height of its lie-telling glory did not approach the Orwellianism prevalent here in the US today.

Comment by Frank Hague
2008-01-11 12:28:04

His lack of shame and complete abdication of responsiblity is truly amazing. That quote looks like something out of the Onion.

 
Comment by Professor Bear
2008-01-11 12:57:50

Pearl of wisdom recently gleaned from Russ Winter’s blog:

“In a world of universal deceit, telling the truth is a revolutionary act.”

- George Orwell -

 
 
Comment by ouden mallon
2008-01-11 11:37:04

With regard to legal action being taken against these real estate people, can you imagine what kind of award a jury would give if any of these matters came to trial? And if punitive damages were available…

Comment by Professor Bear
2008-01-11 11:39:19

‘…what kind of award a jury would give…’

What kind of award can you fund off a bankrupt company?

Comment by txchick57
2008-01-11 11:47:09

plenty. Just ask Fred Barron and the asbestos plaintiffs.

 
Comment by zeropointzero
2008-01-11 11:57:40

I would guess a jury award gets seniority over other debt.

Bankruptcy does not mean zero assets.

Comment by txchick57
2008-01-11 12:04:16

if it’s an 11, they usually set up a trust to pay those claims.

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Comment by gorobei
2008-01-11 12:38:44

PB,

Sorry if you felt my critique of your foreclosures vs time regression was overly negative. To address your points, I suggest wikipedia for the basic references:

1. Coefficient of determination. See notes on interpreting R^2. At least three of these apply to your regression.
2. Linear regression - This explains R^2 in terms of the underlying regression. Note the first caveat on regressions against time: “However, it suffers from a lack of scientific validity in cases where other potential changes can affect the data.”

Recently, a paper was published showing CEO compensation vs firm capitalization had an R^2 of >.9. The paper used historical data on firms (i.e. a timeseries) and then did a simple LR fit.

We econo-geeks trashed it because the reported R^2 was too high, and that pointed us to where the errors were:

1. The “trivial” case. Yes, CEO comp goes up over time, and so does market cap. The math doesn’t lie, so there is a trivial truth here that both numbers increase over time.

2. The “meaningless” case. Because both processes are non-stationary (here, the mean increases over time,) you see very high overall correlation, and hence a very high R^2. Given a standard interpretation of R^2( .95 means we can explain 95% of the variability,) does knowing a firm’s capitalization let us predict its CEO’s comp anywhere near the 5% level? The answer is obviously no, and the take-home point is that R^2 gets very high as soon as you start regressing things that aren’t statistically the same (see measure theory, but intuitively: low mean in 2006, higher mean in 2007, gives you a great R^2.)

I hope that clarifies things a bit.

Comment by Professor Bear
2008-01-11 13:38:01

I was merely trying to estimate the recent rate of NOD increase, not make grandiose claims that foreclosures will increase forevermore at an exponential rate.

That said, I believe you (and any other econogeeks you conferred with) are confused on the notion of what’s nonstationary and what is not. Foreclosure data is inherently mean-reverting. For an example, see this data set:

http://www.foreclosureforum.com/stats.html

Fred Hooper’s NOD data for my quick and dirty regression only appears to be nonstationary because it covers too short of a time period (one during which foreclosures only went up).

P.S. If you have any good recipes for modeling the San Diego foreclosure data series, feel free to share…

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Comment by Professor Bear
2008-01-11 13:45:37

“…does knowing a firm’s capitalization let us predict its CEO’s comp anywhere near the 5% level?”

Apples and oranges comparison. The growth rate in NODs after several years off a low base initially looks like an exponential process with regular doubling times — a feature captured by my R^2 = 99 percent. Since trees don’t grow to the sky and foreclosure rates eventually top out (when the real estate market really hits a bottom — approximately 1996 in the last cycle according to the San Diego foreclosure data), the number of foreclosures plateaus then begins decreasing again. Time is obviously not the causal factor which “explains” or “predicts” this variation; rather it merely serves to measure the rate of adjustment.

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Comment by Professor Bear
2008-01-11 13:53:02

Gorobei — Do you always flame people who don’t detrend — even when they are regressing to measure the trend rate???

From The Economist’s Voice:

“gorobei says…

Here’s a good rule of thumb: anytime you see an R^2 above .9, the authors didn’t de-trend the data.

I could give you regressions with R^2s in the .9s by comparing CEO comp to global warming, number of blue whales, population of the US, the year, etc.

Posted by: gorobei | September 04, 2007 at 06:52 PM”

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Comment by gorobei
2008-01-11 14:57:48

PB,

Good research, and I don’t think we are really that far apart on this issue.

Yes, I usually flame people who don’t detrend. I’ve spent decades on Wall St listening to pitches in which regressions proving X went up subtly morph into “we buy lots of X and get rich.”

At my last job, I was airdropped into the mortgage conduit pricing biz. After 3 months of 100 hour weeks, I reported that the entire mathematical framework was invalid (and yes, I started reading HBB seriously around that time.) Two years later, I have a better job, and that entire MC group was fired.

Math is fun :)

 
Comment by Professor Bear
2008-01-11 21:01:41

Gorobei — Thanks for the comments. If I came across as irate, is is only for lack of sleep. I enjoy the feedback.

I still think the foreclosure data most likely follows a stationary (mean reverting?) process, but the cycle is about a decade or so in duration. Check out the Case-Shiller Brookings study (circa 2004 or so) for some long-term graphs of the housing cycle in California. The foreclosure cycle follows in close synchronization with a lag.

 
 
 
 
 
Comment by Professor Bear
2008-01-11 11:37:47

“The real culprits, he argued, were the Federal Reserve and its series of interest rate hikes, crooked real estate speculators, falling housing prices and regulators’ attacks on interest-only and other risky subprime mortgages.”

“Unmentioned by Mozilo were the industry’s loose lending policies and mortgage products such as ‘liar loans,’ which gave borrowers money at higher rates without verifying their income.”

I wonder whether decision makers at the Fed have any regrets at this point about trying to rescue ‘too-big-to-fail’ CFC last August? Some companies deserve to fail, and extending blanket too-big-to-fail insurance drastically increases the number of such companies over time.

Comment by watcher
2008-01-11 11:40:49

The cities blame the banks, the banks blame the government, the government blames the lenders, the borrowers blame everyone. It’s a finger pointing circle jerk.

Comment by Professor Bear
2008-01-11 12:11:05

Nobody blames themselves.

 
 
 
Comment by txchick57
2008-01-11 11:40:49

It’s Different Here!

Dallas-Fort Worth quarterly home starts fall nearly 50%

12:10 PM CST on Friday, January 11, 2008
By STEVE BROWN / The Dallas Morning News
stevebrown@dallasnews.com

Dallas-Fort Worth homebuilders slashed construction by almost 50 percent in the fourth quarter as the housing sector slowdown deepened.

D-FW HOME STARTS AND SALES

Annual totals for new single-family homes:
STARTS
2004 43,845
2005 47,914
2006 48,128
2007 30,606
SALES
2004 41,570
2005 43,920
2006 46,189
2007 38,149
SOURCE: Residential Strategies Inc.
New-home sales during the period also fell by almost 30 percent, according to a report released Friday by Dallas housing analyst Residential Strategies.

“This is the lowest amount of under-construction inventory in over 10 years,” Residential Strategies’ Ted Wilson said in a statement.

 
Comment by exeter
2008-01-11 11:41:20

“‘Traditional lenders such as ourselves looked around and said, ‘Well maybe there’s a (new) paradigm here,’ Mozilo said.”

Traditional? The only thing traditional about Kuntrywide is that it is a typical business with a typical business goal; Separating people from their money.

 
Comment by Professor Bear
2008-01-11 11:41:32

“‘You know, years ago we talked about redlining. …Now we’re talking about reverse redlining,’ Dixon says.”

Lenders apparently find it difficult to locate the sweet spot between covert racial discrimination in lending and throwing money at any applicant who can breath.

 
Comment by Professor Bear
2008-01-11 11:44:05

Hopeful revision:

“The one-of-a-kind precedent-setting suit, filed in Cuyahoga County Common Pleas Court, accuses venerable institutions such as Deutsche Bank, Goldman Sachs, Merrill Lynch and Wells Fargo of creating a public nuisance.”

 
Comment by q pointe
2008-01-11 11:44:46

The New York Law Journal reports that key NY law firms are downsizing their mortgage securitization departments:

“Cadwalader, Wickersham & Taft, a leading law firm in the area of mortgage-backed securities, announced yesterday it was laying off 35 lawyers in the face of slumping credit markets.”

“A number of law firms active in the area have already announced cutbacks. Clifford Chance terminated a six-lawyer group in November. Thacher Proffitt & Wood and McKee Nelson both have offered buyouts to large numbers of associates working in the area.”

http://tinyurl.com/ypmfpb

Comment by WT Economist
2008-01-11 12:09:05

Why not just transfer the lawyers to fraud litigation against the securitizations they participated in? Or do they need different lawyers for that?

Comment by txchick57
2008-01-11 12:27:04

yeah, they need litigators. They can hire experts on securitization. Bet they’re beefing up the insolvency groups though.

 
Comment by octal77
2008-01-11 14:28:33


Why not just transfer the lawyers to fraud litigation against the securitizations they participated in?

Does that mean they could sue themselves?
(insert smiley face here)

 
Comment by Thomas
2008-01-11 15:01:45

Yes. Most transactional specialists have been doing transactional work since they got out of law school, and couldn’t litigate a case to save their lives. Likewise, you would definitely not want to use me as a tax lawyer, unless you’re feeling really, really generous towards the government.

Comment by Joshua Tree
2008-01-12 02:26:32

Yes, compartmentalizing is a big part of the mega law firm business plan. Try to make each new “associate” (whatever that means) feel special, because they are in a “specialized” area.

Under no circumstances give them any opportunity to learn or experience any law outside of their “specialty”.

Business upside - you have drones for life earning you dollars. When their specific area falters economically, just sack the lot of them.

Makes sense…..

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Comment by Aqius
2008-01-11 11:47:33

interesting article txchick

reminds me of the ending to ‘ Goodfellas’, when ray liotta’s world comes unravelled. seems its always the same result; corruption, theft, temporarily living large, then later the downfall. these so-called smart con men never plan for what happens later in their schemes, they never have a good exit plan and are always exposed by some envious, jealous, or resentful person.

i can think of only a handful of successful crooks that were able to enjoy their gains without getting caught. DB Cooper comes to mind right away, as the recent FBI cold case re-opening has made news. Dont know if ‘ol DB survived the parachute jump, but at least he isnt serving federal time. the movie shawshank redemption comes to mind also as a good ending. but those are far & few between.

so in summary, i have to laugh & say that living the high life from crime for a few short years is not worth spending the rest of yer life in jail, or on the run. thats just me.

Comment by michael
2008-01-11 11:57:48

wasn’t the guy in shawshank innoncent of the crimes?

Comment by Aqius
2008-01-11 12:01:11

yes, he was innocent of the original crime … but then when he skimmed money from the warden he made a successful escape to the beach later … and pointed morgan freeman to his location.

poetic justice.

Comment by svcodemonkey
2008-01-11 18:48:10

The irony he did say is “when I was out there, I was an honest person. Now, I learned all these crooks/schemes in prison instead.”

Definitely one of the best movies for those did not see it yet but it was kind of “slow” at the beginning. The movie did make you think…

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Comment by Wino Bear
2008-01-11 19:52:50

“The funny thing is - on the outside, I was an honest man, straight as an arrow. I had to come to prison to be a crook.”

 
 
 
 
 
Comment by calex
2008-01-11 11:51:19

Merril 15 bil writedown
Citi 50 bil writedown
What is the countrywide writedown 100 bil ??
Did BofA just buy a 100 bil writedown.

Comment by sweeny texas
2008-01-11 12:16:05

You wouldn’t figure BofA would be THAT stupid.

We definitely don’t know the whole story.

John Mooney: Are you disappointed?
Charlie: Disappointed? Why should I be disappointed? I got rose bushes didn’t I? I got a used car, didn’t I? This other guy, what’d you call him?
John Mooney: The beneficiary.
Charlie: Yeah him, he got $3,000,000 but he didn’t get the rose bushes. I got the rose bushes. I definitely got the rose bushes. I DEFINITELY got the rose bushes!

 
Comment by Professor Bear
2008-01-11 12:17:31

“What is the countrywide writedown”

Writedown = $461 bn * X%, where X = a random variable on the support [0,100].

If X = 5, writedown = $23.05 bn.
If X = 10, writedown = $46.1 bn.
If X = 15, writedown = $69.15 bn.
If X = 20, writedown = $92.2 bn.
etc.

 
 
Comment by anon
2008-01-11 11:52:02

In May, Mozilo and many other leaders in the mortgage industry still seemed to be in denial over the depth of the subprime lending crisis.

No, he was obviously dumping shares: http://biz.yahoo.com/t/18/6026.html

 
Comment by SFC
2008-01-11 11:59:34

Speaking of legal action - could someone (or the mortgage holder) who overpaid for a house because cash-back fraud drove up comps in a given neighborhood sue the seller and buyer of that fraudulent house? I don’t see why not. Think about it - some guy gives $100K cash back to a buyer of his condo, then 10 identical condos are purchased for $100K more than they were really worth. That guy and the buyer should be sued for $1 million (100K x 10).

 
Comment by shadow7
2008-01-11 12:00:08

The ball of wax has melted, the city of Phoenix which has always been a nice clean town with maintain streets announced that is all ending, the credit crunch has gotten them, many services are being cancelled and layoffs are in the works, some local companies are calling for workers to be laid off and moving more jobs overseas, couple that with Arnold saying that Calif is broke again and a red light will go off everytime they overspend for services along with Country Wide workers in Ventura and LA counties going bye bye a recession sounds good, because a depression might be just around the corner?

Comment by Darrell in PHX
2008-01-11 13:00:57

But, PHX city budget shortfalls are only 30% worse than were projected in November.

2007 sales tax receipts were expected to be up 7%, actually up .9%…. WELL under rate of inflation.

At the rate the budget shortfall is growig, they won’t be able to make tax cuts fast enough to keep up.

On a positive note, as sales tax receipts rise at a rate much lower than inflation, the metro area has basically doubled the retail space in major malls over the last year and a half.

If housing wasn’t killing the economy, overbuilding in commerical and retail would have!

 
 
Comment by ec3
2008-01-11 12:05:33

Angelo took the teaser loan from BofA. Now CFC’s been repo’d.

Comment by bob
2008-01-11 13:41:47

ha ha - teaser rate on the HELOC. Thats funny - send it into CNBC

 
 
Comment by rms
2008-01-11 12:07:05

“In 2006, Countrywide originated $461 billion worth of loans. Nearly $41 billion of that activity was in the subprime market.”

Anyone buying in 2006 paid too much; subprime is just the tip of the iceberg!

Comment by shadow7
2008-01-11 12:11:59

Amen, the ship has hit the iceberg and it is sinking very fast!

Comment by Sean_Fron_NVA
2008-01-11 12:29:24

We all know the ship is sinking but how much is under water, and now with the breaking news of CFC how fast will it take before it is totally submegered. We all know the depth of the ocean so hittng bottem is still a long time off.

 
 
 
Comment by waiting_in_la
2008-01-11 12:18:47

This blog has been WAY ahead of the curve.

Absolutely astounding.

The same people who thought I was nuts 2 years ago because of my opinions are now regularly asking me for advice.

Thanks to Ben and the HBB!

Comment by rms
2008-01-11 12:55:32

“The same people who thought I was nuts 2 years ago because of my opinions are now regularly asking me for advice.”

That’s better than being ostracized!

 
Comment by Lip
2008-01-11 14:18:30

But do they believe you when you tell them how long it’s going to take to recover?

 
Comment by Paul in Jax
2008-01-11 15:59:28

Start shocking them with more and more radical and outrageous predictions. I now say things like, “You’ll be paying people take your house off your hands, mark my words!”, or “There’ll be blood on the streets - and I’m talking next week!” and they say, “Well, you’ve been right so far!”

 
 
Comment by Brian in Seattle
2008-01-11 12:20:56

Washington Mutual, the U.S. savings and loan slammed by slumping mortgage markets, has held “very preliminary” merger talks with JPMorgan Chase, CNBC has learned.
No deal is imminent but the talks were held fairly recently.

ADVERTISEMENT

JP Morgan also may be interested in two other regional banks, Suntrust Banks (NYSE:STI - News) and PNC Financial Services (NYSE:PNC - News), and is likely to acquire one of the three sometime this year.

News of the talks comes as Bank of America (NYSE:BAC - News) announced it will acquire another troubled mortgage lender, Countrywide Financial (NYSE:CFC - News), in a $4 billion transaction.

Comment by Brian in Seattle
2008-01-11 12:26:48

Oops, I put the link for the article in my name..click there for the info..

 
Comment by waiting_in_la
2008-01-11 12:33:14

Any info if JPC is interested in FMD?

I bought fmd low, thinking that student loan abs’s would eventually be regarded as safer than mbs’s.

Comment by climber
2008-01-11 13:00:29

There’s no asset backing student loans. There is nothing to foreclose on to recoup principal. Fort Collins almost elected a US congress rep who skipped out on her student loans. There’s not even any stigma to it anymore.

Comment by Professor Bear
2008-01-11 13:26:19

“There’s no asset backing student loans.”

Future wages may be garnered to force repayment.

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Comment by Ostriches
2008-01-11 14:57:07

What happens if I pay off the student loans on a credit card or with those checks and then declare bankruptcy?

 
Comment by travanx
2008-01-11 20:36:18

sounds like a good way to pay back a student loan to me.

 
Comment by Professor Bear
2008-01-11 21:04:56

“What happens if I pay off the student loans on a credit card or with those checks and then declare bankruptcy?”

Not sure if this is legal, but it sounds like a great way to stick some banksters with a bill and save U.S. tax dollars.

 
 
 
 
 
Comment by FB wants a do over
2008-01-11 12:38:43

Need a bailout? Someone forgot to tell Hillary there’s no money in the till.

http://tinyurl.com/3bqo9q

Comment by Professor Bear
2008-01-11 13:23:49

Campaign promises often represent the promise of future unfunded mandates. She will decide who (implicitly) gets stuck with the tab for the implied wealth transfer when and if she gets elected.

 
Comment by Not_In_Montana
2008-01-11 14:01:47

Oh, barf, they’re ALL wrong. “stop the housing crisis”? These people spend so much time hustling to get elected they have NO idea what they’re talking about. Except you know who..

 
 
Comment by WT Economist
2008-01-11 12:51:25

Gambling revenues were down in Atlantic City for the first time ever.

http://www.nytimes.com/2008/01/11/business/11casino.html?_r=1&oref=slogin&ref=nyregion&pagewanted=print

Comment by FutureVulture
2008-01-11 13:42:16

Wow, first decline since 1978, and it’s -5.7%. The story in Vegas has always been that gambling is recession-proof — maybe not.

I can’t believe how fast this is all falling apart. Reminiscent of 1930.

Comment by FutureVulture
2008-01-11 13:44:10

“since 1978″ meaning that’s when gambling began there

 
Comment by Matt_in_TX
2008-01-11 19:24:26

…but is it Trump-proof?

 
 
 
Comment by no mo So Cal
2008-01-11 12:55:19

In the Santa Fe news paper this week they reported, city prices down 7% in 2007, up 24% in the county. I guess the City Different is different in the County. Beautiful country!

Comment by no mo So Cal
 
 
Comment by mgnyc99
2008-01-11 13:25:03

has the ppt taken the day off? dow down near 300

Comment by Professor Bear
2008-01-11 13:38:37

I think they may be out of the country by now…

 
 
Comment by Happy Renter in Vancouver
2008-01-11 13:35:40

This comment is directed at people who think “their” housing market is “overpriced’. Let’s talk comparables - if you think a typical 3 bedroom bungalow in the state of Texas is ‘overpriced” (depending on location, of course), and it averages $200,000.00 to $500,000.00 U.S. a pop, how this for sticker shock…..Here, where I live in Beautiful (so they tell me) Vancouver, (but really moldy and wet), an average price of a three bedroom bungalow will cost 750,000.00 to 1,000,000.00 Canadian dollars. Our currency is on par with that of the United States. How’s that for sticker shock, folks? Depending upon location, of course, the majority of these houses are crappy tear downs. The ‘experts” tell me it is all about land value. CRAP!!! It is all based on ruthless speculators. Now then, tell me what is wrong with this picture? My wife and I are educated professionals who previously owned two houses, both in Toronto and Ottawa, (huge urban markets) and we still own a vacation property in Ontario. I choose to rent here because I cannot afford to buy a house in Vancouver. This is not California, where at least the geographical location and climate can justify the high cost of housing . IT RAIN”S HERE FOR CRAP”S SAKE!!!! AND IT AIN”T ALL GRAND HERE ABOUT LIFESTYLE EITHER!!! It is not Manhattan, after all. So think about this folks. I am living here because I had to come for a job transfer, which, hopefully, will be short lived. Please, seriously consider what you think your concept of over priced versus affordable real estate really is. Many people are just plain spoiled and don’t value what they have. Greed will always get you in the end. Talk about humble pie.

Comment by fortworthsnotdoc
2008-01-11 14:23:52

Housing at least in areas of Fort Worth I’m looking at is under a $100/sq.ft. Reasonable or unreasonable-it’s something I can afford and I do appreciate that fact.

Comment by Bloz
2008-01-11 20:40:40

Housing in Fort Wayne is $80/sq.ft. ;-)

 
 
Comment by polly
2008-01-11 14:58:15

Mr. Happy Renter,

The fact that one place has lower prices than another place, does not prevent the first place from being over priced. House prices in a given area are too high when the houses in that area cannot create a stream of income in the form of rent that justifies the price. Alternatively, you can compare the price of houses to the median incomes of the people in the area.

A house can be overpriced at $50,000 if it would rent for only $200-$400 per month or if the only people in the area who would want to buy it have yearly incomes below $15,000.

Comment by Happy Renter in Vancouver
2008-01-11 15:45:34

Note to Polly - Eighty percent of Vancouver’s citizens rent - they simply cannot afford to buy. Who buys? It is estimated that the majority of buyers in this market are foreign investors, international speculators and those that are willing to buy into the false notion that Vancouver truly is the place to be and lastly, those that continually wish to believe that current pricing is still undervalued. The home I rent is worth about 1.25 million Canadian and my monthly rent is $1,950.00. I live in a great “location, location, location ” neighbourhood. Rents here are a comparable bargain in proportion to the actual current market value of a home. That’s why so many people rent. It makes financial sense. Anyone I know who has purchased a home here has a “mortgage-helper” unit(s) in the basement to rent out. People here are getting mortgages until the age of eighty. HERE, RENTS ARE NOT GEARED OR PROPORTIONAL TO THE VALUE OF THE HOME. Even if the purchaser takes a loss on his rental, a little cash (or income stream) is better than no cash. And lastly, homes pricing here is not geared to median incomes of the people in the area. Like I said, people are mortgaged to the ying yang. The community here is a genuine mixed bag with lower and higher incomes co-existing on the same street.

Comment by Paul in Jax
2008-01-11 16:03:55

HERE, RENTS ARE NOT GEARED OR PROPORTIONAL TO THE VALUE OF THE HOME.

Why should they? Houses (”homes”) are investments; rents are paid in order to have a place to live. No relationship I can see. In fact, why would you even rent out a house, and chance soiling the flip?

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Comment by Happy Renter in Vancouver
2008-01-11 21:18:09

To Paul in Jax - Yes, I agree that homes are an investment. And part of a DIVERSIFIED financial portfolio. Never lay your eggs in one basket, right? My point is that HERE in Vancouver, in order to buy a house and render it “affordable” (and obtain the correct mortgage,) one has no choice but to rent out a part of the house to a tenant, while the owner lives in the other part of the house. Hardly the desirable life. Gone are the days of owning the single family home. The new bitter realty is that buying a house in Vancouver means having the requisite tenant come with it, as “the new affordability” makes a direct mocking refute to the original dream of buying a house . Soiling or flipping or whatever.

 
Comment by Paul in Jax
2008-01-12 08:41:11

HRV: Are you telling me that along with the stomach-turning political correctness you Canadians have also outlawed satire?

 
 
Comment by cayo_ron
2008-01-11 16:24:16

Such was the case more or less when I rented in Corona Del Mar, a CA beach community. Rents have been way out of wack with Prices long before any bubble. I rented a place that would have easily sold for $1.3 Million for $2,100 a month. I think our landlord originally picked it up for $700,000 or so.

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Comment by Rental Watch
2008-01-11 15:20:25

The home I rent I estimate to be worth 430x what I pay on a monthly basis (as evidenced by sales/listings on the same street). I think that beats Vancouver…

 
Comment by sea salt
2008-01-11 16:35:55

Happy,

You must live in a cheap part of Vancouver. Where I rent, the lowest priced homes are over 1 million. I share your frustration with Vancouver prices. I’m happy for all the americans on this blog who have been on the right side of the trade as house prices have fallen in their areas. At the same time, I’m thinking as I read this blog “you people have NO IDEA… NO IDEA how bad the overvaluation is up here in Vancouver” (to paraphrase the famous Cramer rant).

Comment by travanx
2008-01-11 20:42:01

no until you come to Southern California you have no idea how stupid people are. Not out in the boonies areas, but in the actual cities with jobs and houses located in them. Those boonies places are way overpriced for the 2 hour commutes, imagine what happens in the real cities.

 
 
 
Comment by Blacque Jacques Shellacque
2008-01-11 14:55:07

“Traditional lenders such as ourselves looked around and said, ‘Well maybe there’s a (new) paradigm here,” Mozilo said. “Maybe we’ve just been wrong. Maybe you can originate these loans safely without verifications, without documentation,” Mozilo said.

News flash: You can’t.

 
Comment by cougar91
2008-01-11 17:38:08

With all the housing bears on the HBB, I wonder if anyone here is shorting CME Case-Schiller housing index forward contracts? I started looking into this recently as I currently short RYL and Homebuilder ETF but I figure this is worth a look if one wants to short real estate for the multi-year downturn we all are anticipating. Anyone?

Comment by travanx
2008-01-11 20:43:12

SRS has been very interesting the past week or so. Finally got back into it today.

Comment by cougar91
2008-01-12 07:46:26

I been tracking that too, but stocks are forward looking so much of real estate stocks have taken a beating already. Case/Schiller index, on the other hand, in a way represents some wishful seller’s prices and some knife-catching buyers, so I believe it is more lagging so may represent a better short.

 
 
 
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