We Went Too Far And Too Wide
Some housing bubble news from Wall Street and Washington. Dow Jones, “When it released its preliminary second-quarter operating results early Monday, Hovnanian Enterprises Inc., one of the nation’s biggest builders, detailed more pain to come. The much-watched cancellation rate improved slightly - to 29% of gross contracts, from 32%. Hovnanian’s home deliveries fell 21% year over year, and officials estimated the company would take between $225 million to $275 million of land-related pretax charges, a jump from the first quarter’s $94 million.”
“Stung by falling land and house values, the nation’s top builders have racked up more than $21.5 billion in charges in the last two years. UBS, meanwhile, noted the impairments are much higher than Hovnanian’s $100 million forecast.”
“‘Given the continued weakness in the broader housing market, which we believe will only be exacerbated by rising foreclosures and the limited availability of non-conforming loans, we believe Hovnanian will need to discount prices further to maintain the necessary sales pace to reduce its leverage,’ wrote David Goldberg.”
The Des Moines Register. “Jamie Myers seemed the envy of Iowa’s home-building industry just a year and a half ago. Coming off his company’s best year ever in sales, Myers, president of Regency Homes, was staging elaborate public events for potential home buyers at projects like Michael’s Landing, a development that spans 340 acres in a fast-growing region of West Des Moines.”
“The site was still mostly bare ground; yet the live music, free catered food, Hummer rides and helicopter whirling overhead suggested a prosperous, promising future.”
“On Thursday, Myers sat in the mostly empty headquarters of the family business he took over, wondering if his luck had run out.”
“Myers, in an interview last week with the Des Moines Sunday Register, blamed a caustic chain of events — ‘a perfect storm’ — for the company’s decline. Industry veterans such as Bill Kimberley said Regency and a couple of other Iowa builders have fallen victim to an insatiable appetite for growth.”
“‘All it takes is one little slowdown, one little hiccup, and all of a sudden there’s not enough cash flow to pay all that interest on all of these assets and pieces of land that they’ve accumulated,’ said Kimberley, owner of Kimberley Development, an Ankeny-based builder of high-end homes.”
“‘It’s like a craps table. You got all these winnings and profits out there, but you just keep gambling it. You never pull any money off the table. And then all it takes is … to roll that seven one time and all the money is gone,’ he said.”
“The company’s business plan, Myers said, targeted spending in fast-growing suburbs where homes were in demand. When the market was good, Myers counted on his company to be helped by what he called velocity - the swiftness in which it could build and sell, build and sell. That speed created a cash flow that let it add more land and more projects.”
“Like most large builders, Regency bought swaths of land, taking control of its projects from the ground up. And then came the sharp downturn in home buying and the economy that builders and lenders didn’t fully anticipate.”
“In 2005, the company built 1,062 homes. ‘In 2004 and 2005 we were moving through product faster than we could build,’ Myers said.”
“But by 2007, that number fell to 640. The company infrastructure, meanwhile, had been ramped up to handle 1,000 or more homes.”
“Myers…didn’t see it, but Regency was not alone. ‘That’s why you see the largest builders in the country today being affected by this,’ he said. ‘The ones who build the largest communities are the ones who got hit the hardest, because we all depend on velocity. We deliver to the many, not just to one.’”
The Associated Press. “Shares of Countrywide Financial Corp. tumbled Monday as two analysts said Bank of America Corp.’s planned acquisition for the mortgage lender could be renegotiated to a lower price.”
“Friedman, Billings, Ramsey & Co. analyst Paul Miller in a research note said if Bank of America is to complete the deal, it will likely have to reduce the value of Countrywide’s mortgage investments between $20 billion and $30 billion.”
From Reuters. “The mortgage unit of finance company GMAC LLC on Monday said it needs to raise $600 million by the end of June to pay its debts and avoid ‘negative liquidity’ even if a $14 billion bond exchange offer is successful.”
“‘There is a significant risk that we will not be able to meet our debt service obligations, be unable to meet certain financial covenants in our credit facilities, and be in a negative liquidity position in June,’ ResCap said in the U.S. Securities and Exchange Commission filing.”
The New York Times. “The Federal Bureau of Investigation and the criminal division of the Internal Revenue Service have formed a task force to examine mortgages that were made with little or no proof of the earnings or assets of borrowers, a government official who had been briefed on the matter said Sunday.”
“The task force, which was established in January, stepped up its investigation in recent weeks as the financial industry disclosed billions of dollars in additional write-downs from bad mortgage investments. The latest inquiry is broader and deeper than a separate F.B.I. investigation of mortgage lenders that is also under way.”
“These days, Jeffrey M. Peek, the CEO of the CIT Group, is trying to erase lots of things from the past: namely, an ill-timed expansion by CIT into subprime-mortgage lending and the costly acquisition of a student loan firm — twin moves carried out near the top of frothy markets that quickly collapsed, leaving CIT on the financial precipice.”
“Despite the obvious strains under which CIT now labors — a plummeting stock price, mounting losses, funding woes and a loss of faith among some analysts — Mr. Peek says he wouldn’t have done anything differently.”
“‘If I was going to look back, maybe I would have gotten out of mortgages a couple of quarters earlier, but we were making good money,’ he says, matter-of-factly.”
“Changes in automated mortgage underwriting procedures at Fannie Mae will be announced soon, as it addresses rising risks in an ailing housing market, a senior executive at the United States’ largest home funding company said on Monday.”
“‘We are making significant changes to that and we will be rolling them out shortly,’ said Tom Lund, executive VP at Fannie Mae, of the software lenders use to automate the early stages of the lending process.”
“Lund also expects the housing market to face a prolonged period of working through problems spawned by several years of looser lending that drove record home sales but that led to a massive supply of unsold homes and record foreclosures.”
“‘I do think that 2008 and 2009 will be difficult years for this industry; we have a lot of overhang,’ he said. In the last few years ‘we went too far and too wide, and we are changing that … we need to realign with the risks that we are taking in the marketplace.’”
The Business Edge from Canada. “Despite the recent drop in home sales, Canada’s housing market should remain buoyant during the rest of this year, but developers face more difficulty securing loans for projects, analysts say.”
“Maureen Enser, national executive director for the Urban Development Institute, says Ontario-based banks, which have felt more of an impact from the sub-prime meltdown because they have fairly close ties to the U.S., are restricting developers’ access to capital and likely to demand higher pre-sales, which refer to units sold before construction begins.”
“Don Campbell, who heads the Calgary-based Real Estate Investment Network (REIN), says many cities have overbuilt their residential inventories. REIN represents 3,120 investors with $4.2 billion worth of residential holdings across Canada. The group sells research to investors, banks, developers and other industry insiders, but does not sell properties.”
“‘Right now, there’s a lot of fear in the market,’ says Campbell, adding sophisticated investors with a long-term view are continuing to buy properties as prices dip. But speculators - especially Toronto condo owners - are starting to panic, fearing that condo values may be headed for a big downturn.”
“‘Investors have been hoping for a buyer’s market again,’ says Campbell. ‘And now that it’s here, people are quite fearful of it.’”
“Benjamin Tal, a senior economist with Toronto-based CIBC World Markets, says prices in some pockets of Western Canada could actually fall. ‘The sub-prime story is part of the overall economic story,’ he says, adding the U.S. recession will hit Ontario and Quebec hardest.”
“But the sub-prime crisis will probably limit Canadian developers’ access to capital. ‘(Developers) feel the pain because their (interest-rate) spreads are much higher now,’ says Tal. ‘Therefore, it’s more expensive (to build) and banks are much more cautious now.’”
The Mercury from Australia. “The state is in the grip of a home mortgage crisis, with as many as five Tasmanian families and homeowners on the one day faced with the dreadful prospect of losing their home.”
“The number of house possession orders being sought in the Supreme Court by the major banks and financial institutions has jumped in the past year as increasing numbers of Tasmanians have problems paying their mortgages.”
“In February this year, 13 homes in Hobart and four in Launceston were seized after their owners could no longer keep up with debt repayments. In March, another 16 possession orders were granted in the Supreme Court.”
“The mortgage crisis is a direct result of the average price of a house in Tasmania having risen to nearly $300,000. While the size of the average home loan in Tasmania is $177,700, many mortgages taken out in the past three years have been much larger.”
“Mortgage repayments due on variable loans have also jumped considerably in the past two years.”
“Housing pressure is also being felt in well-heeled suburbs such as Sandy Bay and Battery Point. Vicki Flood, of Warrane, is one Hobart homeowner who has run into mortgage problems and is being forced to sell her home.”
“On April 15, the Supreme Court granted a possession order to Mystate Financial to seize Ms Flood’s home because she had defaulted on two loan repayments of $852 a month in November and December last year. Mystate is still owed $115,138 on a $130,000 mortgage Ms Flood borrowed in September 2004 and is legally entitled to have the entire debt repaid.”
“But the lender has agreed to give Ms Flood until June 20 to sell her house on the open market – she hopes to get about $239,000 – before it forcibly repossesses her home. ‘What happens then if there is no sale? I just want to know where I stand,’ Ms Flood asked Associated Justice Stephen Holt in the Supreme Court.”
“‘Well, the scene ends up like you see on the television shows – the sheriff or police come in and change the locks,’ Justice Holt explained.”
Thanks for the Canadian content Ben. Everyone here makes sure to reassure the masses that 10% appreciation each and every year at a minimum is guaranteed, and that house prices never drop (even as they are dropping!)
I’m beginning to think that the information accesable via the internet does not help the sheople make smart choices, because the internet also spreads the REIC propaganda.
Ben is doing a good job of keeping us abreast of international trends. I’ve noticed not one country had the rampant mortgage fraud that happened in the US, though virtually all Western countries (and “emerging” economies) partook of the Wall St. style
innovationstomfoolery that drove this worldwide bubble.“The mortgage crisis is a direct result of the average price of a house in Tasmania having risen to nearly $300,000. While the size of the average home loan in Tasmania is $177,700, many mortgages taken out in the past three years have been much larger.”
Good grief, there is no way that incomes in Tasmania could support AUS $300K houses! Beautiful place, but definitely off the grid when it comes to Australian job growth. I was actually thinking of moving there if the US economy collapsed.
“On Thursday, Myers sat in the mostly empty headquarters of the family business he took over, wondering if his luck had run out.”
Gloom Dispair and agony on me….
Deep Dark Depression excessive Misery…
If it weren’t for bad luck, I’d have no luck at all…
Gloom despair and agony on me…
Eat it Myers you greedy pig.
These fbs, builders and lenders should all just apologize to everyone, back off the victim speeches and quietly commit hara kiri with the falling knives in the basement of their McMansions
“‘All it takes is one little slowdown, one little hiccup, and all of a sudden there’s not enough cash flow to pay all that interest on all of these assets and pieces of land that they’ve accumulated,’ said Kimberley, owner of Kimberley Development, an Ankeny-based builder of high-end homes.”
Since when do you pay interest on assets. I thought you only paid interest on debts!
Oh, that is right. No one actually pays cash for anything. Each and every purchase is made with a loan that can only be paid back if the asset goes up in value.
We’re ALL, even the businesses, just gambling with other peoples’ money. Who are all these other people that are giving all these loans that can’t be paid back. Are they just printing the money out of thin air???????
Please, no need to answer.
I liked Buffet’s comments this morning on CNBC. The $600 stimulus check will help, but $6000 would help more… BUT there are ramifications, like inflation, that will result.
I used to always hear that a business really had to keep growing to make money. Is that true? Seem to me it would be satisfying enough to just go along at the sam pace every year, but then I’m no business whize either.
I have some experience in this one, and I go along with the “grow or die” crowd, sad to say. You can milk a declining business for cash flow for a few years, especially one that has low inventory turn. But a truly prosperous business needs expanding revenue.
I think it depends a lot on the line of business.
Let’s say I open a widget factory. I take out a loan for $1 million and spend $500K on a building and machinery. I spend $200K on materials, $200K on employees needed to make, market and sell the goods and $100K on principal and interest on my $1 million loan. At the end of the first year, let’s say I have sold $600K worth of goods.
Did I make a profit?
When I buy the building and machinery, it isn’t a cost. It is a transfer from one asset class (cash) to another (property, plant and equipment). This is called capitalizing the costs. I then have to depreciate the capitalized costs. Say 20 years for the building and machinery = $25K per year x 20 years = $500K.
Oh, but some of that labor I paid for is also capital expense. My employees designed my widgets, they created brand recognition with marketing, they created sale relationship with customers, etc. That stuss doesn’t get “used up” in the year the money was spent so I can capitalize some of it. So let’s say I book $50K of the $200K in employee expenses as intangible assets.
Oh, and I didn’t use every scrap of supplies I purchased to make the widgets. Some of the materials are left… say $50K of the $200K. That is raw materials. And I didn’t sell every widget I made… say another $25K in completed inventory waiting to be sold.
And even though I have “sold” all the goods, I haven’t gotten paid by every customer yet, so let’s say I have $100K in accounts receivable (money I am owed).
So, at the end of year one I have $475K in property plant and equipment, $500K in cash, $100K in accounts receivable, $50K in intangibles, $25K in inventory and $50K in raw materials. $1.2 million in assets. Call it $925K in loan (liabilities). I have “made” $275K.
Oh, but some of those widgets in inventory may never sell. Some of the raw materials will never be used. Some of the accounts receivable will never be collectable. Some of the machinery may need replaced long before the 20 years is up.
Some of this stuff will have to be written down in value.
To make the same profit the next year, I need to either use up the old supplies and inventory so I don’t have to write down its value OR stockpile enough more to make profit to cover any write offs.
A red flag for any company is when the inventory or accounts receivable keep rising at a steady rate… It means the company is producing goods that it can’t actually sell or get paid for, just so it can show the profit that comes from turning raw goods into finished inventory.
I hate to break it to you, but you can cut and paste those widgets off other websites onto your own…no need for all that
“Myers…didn’t see it, but Regency was not alone. ‘That’s why you see the largest builders in the country today being affected by this,’ he said. ‘The ones who build the largest communities are the ones who got hit the hardest, because we all depend on velocity. We deliver to the many, not just to one.’”
This last line is the most important. In the hubris of the moment, nothing mattered but the vision. If they had built for the some and saved from the few, they might still be building for the ones.
In an ideal world where costs stayed stable, that would be fine. But in today’s environment? If you’re not growing you’re doomed.
My answer is somewhat like Steve’s. Since the Fed’s rate cuts do not seem to limit my ability to go on charging 9%, I could be perfectly satisfied to keep the volume of my outstanding loans constant…except that the constant income thus generated is worth less and less as the dollar declines in value.
Businesses need to constantly grow because of the competition. When you sit comfortably and make 100 widgets every year, there are other people who are thinking how to make 300 widgets. If you don’t figure out how to make 300 widgets, the competition will make sure you’re not in business.
This rule has nothing to do with inflation, it has always been the case, throughout history.
And thus, crises of overproduction are born.
“Despite the obvious strains under which CIT now labors — a plummeting stock price, mounting losses, funding woes and a loss of faith among some analysts — Mr. Peek says he wouldn’t have done anything differently.”
Then perhaps you should resign and let someone slightly less stupid try the overpaid job you have.
As my father likes to say, “Why’s he being paid so much for being stupid?”
It takes a Potemkin Village…
No, this one is better: Another Potemkin Village has lost its idiot…
“‘All it takes is one little slowdown, one little hiccup, and all of a sudden there’s not enough cash flow to pay all that interest on all of these assets and pieces of land that they’ve accumulated,’ said Kimberley, owner of Kimberley Development, an Ankeny-based builder of high-end homes.”
“‘It’s like a craps table. You got all these winnings and profits out there, but you just keep gambling it. You never pull any money off the table. And then all it takes is … to roll that seven one time and all the money is gone,’ he said.”
_____________________________________________________________
So the homebuilders were just glorified gamblers, preying on other glorified gamblers to buy their finished product?
You…. ‘could’ say that but I’ve cold called about a million of these guys and they’re all the same. Mucho Macho, grab life by the horns types that won’t listen to anybody. Period. You’d take one glance at the lead card and you could pretty much tell how the conversation was going to go.
There IS… no “Plan B”. They have no liquidity, no savings so I guess we can rule out that dumb IRA account thing? They will succeed as a builder or fail fantastically bringing down everyone around them, including employees that don’t even realize they were basically “self” employed and should have told him to stick it years ago. Let’s see, trophy wife, new pick-up and if the guy at the front of the line is giving the airline employee a bad enough of a time you can hear throughout the concourse… builder.
No, they were genius businessmen earning truckloads of money, because they were so smart.
Now, they are genius businessmen who are victims of bad luck and policy.
Jimmy,
Right. I mean doesn’t any “genius” business plan include being eaten alive if there’s the slightest down tick in growth? We certainly wouldn’t invest in a public company where the CEO hadn’t made adequate provisions to implode on command would we!
Two years ago, I had a builder tell me point blank: “I’m a really smart guy. I would make a lot of money doing anything.”
Funny, now he’s installing decks and putting in new bathroom fixtures to survive as some of the homes he built a year ago still sit unsold.
“I’m a really smart guy. I would make a lot of money doing anything.”
The number of mediocre people I meet who just got lucky, yet still believe this, is absolutely stunning. The one’s living off of trust funds are especially amusing.
Bull Market Jenius = no jenius at all
I can feel good about myself mainly because I know I would probably NOT make a decent amount of money in any way other than lending money to trailer park residents. My competitive edge comes entirely from niche knowledge, confidence, and an existing portfolio that would cushion me against any one bad decision. If mobile homes in RV parks suddenly lose their market, I will be toasted. However, the source of the demand is down-sizing boomers, that’s a positive factor.
Sam Zell just won the case in California, making trailer park rent controls unconstitutional. The rent jumped from $700/mo to about $2000/mo.
You probably know, though.
Nope, didn’t know that, I don’t do business in Calif. Quite interesting anyway.
“Myers, in an interview last week with the Des Moines Sunday Register, blamed a caustic chain of events — ‘a perfect storm’ — for the company’s decline. Industry veterans such as Bill Kimberley said Regency and a couple of other Iowa builders have fallen victim to an insatiable appetite for growth.”
Wha..? ‘Fallen victim?’ But I thought these nasty greedy wretches were the very same eager, hungry, whippers-on FOR the ‘insatiable appetite for growth’? Why, it’s like one of them ‘ironic justice’ thingies, almost.
Does, could this, maybe does this mean that the ugly monster they created has now turned on them! We see this often in classic literature, and I always enjoy it, even if it is predictable. Like, their ungodly creation woke up, started shouting, yanked off the grubby straps, climbed off the slab and chased them around the laboratory, and caught them by the door and bit their hands off!
Ahhh. (*satisfied sigh*) I never get tired of that sort of ending. In fact, tell me more.
Yeah but give the guy negative points for dredging up “the perfect storm” for about the millionth time too many.
I always thought it was stupid in the movie when no one bothered to put on a life vest. Know I realize that they were just trying to be realistic.
Life Vests are worthless - water is so cold you’re dead in less that 20 minutes - got to have the cold weather flotation suits.
. When the market was good, Myers counted on his company to be helped by what he called velocity - the swiftness in which it could build and sell, build and sell. That speed created a cash flow that let it add more land and more projects.”
Velocity is cool…until you are getting KILLED by your OWN housing BOMBS
High Velocity + Tiny Little Puddle = Hydroplaning out of control into a brick wall, ending in a fiery explosion for everyone who drove sensibly to toast marshmallows over.
‘In fact, tell me more.’
And make it nice and gruesome.
Here’s a good story line: the builders are out standing by the highway off-ramp and they are holding up cardboard signs, forlornly. They have clustered together for comfort, in a suddenly hostile world. The signs are poorly spelled and include words like ‘Boo-hoo and ‘amortized’ and ‘please, oh, please’.
Tears trickle down the weathered cheek of the former Master Builder president, but the other builders look away and pretend not to see it, out of respect for Todd. (In my experience, an inordinate number of master builder and developer types are named ‘Todd’, is why I picked that name. Also, ‘Brandon’ is popular for some odd reason.) Anyhow, back to the story: Todd surreptitiously wipes away his shameful girly tears, as the wind flutters the frayed cuff of what once was his power-suit, a sorry reminder of the time when the county was holding stakeholders meetings about their Buildable Lands Inventory, and there was this one snotty rude high-strung blonde chick who kept complaining about things like water and stuff, those were the good old days… but…but what is this? My god, man! Out of the despoiled undergrowth hops a legion of frogs! Their demeanor is frightening! They have been displaced by some asshat who paved over their wetland! They are parched, but they move with ominous conviction! Then it’s like some secret frog signal is uttered. They cease moving and crouch, fearsome in their little green silence. There are so many of them…the raggedy builders stare back at them. There is mutual recognition…hatred glitters in their eyes; pretty frog eyes and evil ugly beady builders’ eyes…and then the frogs pounce!
I’m going to leave it there, in case some of you have delicate stomachs. I wouldn’t want to horrify you. I myself don’t have a delicate stomach, and man, I can’t wait for this story to come true. It ends with the builders all being eaten. I tell you this so that you won’t stay up at night wondering.
Good thing, too, because I don’t want to be looked at imploringly by some vagabond type when I pull off the highway. It annoys me.
Well Done Olympiagal!
The only thing I would add is that even though the builders were completely devoured all the frogs died anyway as there was nothing there of substance. Just empty calorie I.O.U’s!
Well, I’ll be. I admire your narrative abilities, DinOR. Seriously, your points are telling and quite elegant, but the frogs, man! We can’t have the frogs suffer, nohow, not even for dramatic cohesion.
Here. How about they ALMOST starve, it’s very poignant, the frogs wasting away in the bushes, nothing to do but fiddle around with the pale white chewed on and dried out bones of former builders, but then…see..wait…what can it be? What is this approaching noise? This one chick pulls up with a rattling trailer attached to her little car, and there’s a small wading pool in the back of it, strapped down and filled up with hose water. The frogs all get in, pulling up the littler or more dried–out frogs up over the edge of the wading pool, until everyone is safe and wet and crouched down at the bottom of the plastic pool, and then they all drive, very carefully and sedately and obeying the speed-limit for once, back to her place in the forest, where there’s ponds, and a hose and lots of flies for all!
Yeah! And everyone lives happily every after in the forest in the trees. Except not the builders, they’re a bunch of shriveling pale bone-bits out by the I-5 off-ramp. But I’m okay with that, yes, I can definitely live with that. The good guys win. The bad guys get to be bones. Can you live with that ending, DinOR? You can? Okay, then. We’re all set.
I expected them to be saved by the Baby Frog Jesus, but your ending is OK, too.
Makes Memo:
Do not annoy Olympiagal as she might be in posession of a broomstick, magic wand or some other sharp pointy object :
test =:)
I was hoping all along the builders would be turned into frogs.
A million peepers in our vernal pools last night….
Not to worry the raggedy builders will be saved by the Feckless Federal Reserve pouncing from the undergrowth with flashlights a blaze and gigs in hand. They all eat well on tender froggy legs. The frogs that escape to the asphalt are flattened by semis and left as detritus on the lanes of life.
Mix the egg, corn meal, salt and pepper together to form a batter. Dip the frog legs into the batter, then fry in the oil in a large heavy skillet for 25 minutes, turning so they brown evenly on all sides. Eat
Oh, you, with your disrespect of frogs and your lackadaisical moral attitude. I bet you never even ate a frog–me neither, I dassn’t, but cooking experience tells me that 25 minutes would be far too much for that tender flesh.
Anyhow, you are wrong, Mr. Grumpster McPessimist.
Truly, though–I remember, and you must remember, when all we all heard from every headline and every round red Soccer-Mom mouth was that horrid mildless brazen howl of the REtard trumpets, ‘Home prices only go up! Equity to infinity! I’m going to make a million bucks flipping houses! Blah, blah’, isn’t that so? And how long ago was that? Not that long ago, and look how bad it’s already hurting the builders and developers! Oh, isnt’ it funny? I say there’s a whole world of delicious hurt a’coming to the real-estate whores, and I am enjoying every single speck of it. I can’t wait to see the FED ‘pouncing’ and pawing ever more industriously, scrabbling along, because that just makes the show ever more funny.
And that should cheer you right up, Hoz! huh? Yeah!
I have dined quite a few times on frog legs. Phil Schmidt’s in Whiting Indiana was a short skip from the Exchange and we would go to lunch and dine on their frog legs. Not nearly as good as when gigging and getting ‘em fresh which is a lot of fun in the roadside ditches at night.
Oly young lass, I have no faith in the justice system of the US, it is the best money can buy. “Mr. Grumpster McPessimist” my grandchildren call me grumpy. Are you one of my grandchildren? I haven’t been to Utah in 40 years! I didn’t do it. It was the Utah water, dulls the senses.
I wish Orson Welles were alive. He could direct a new version of The Magnificant Ambersons. Hubris & Greed run amok, and REtards getting their comeuppance.
Hey, O’gal,
You wouldn’t happen to be a writer, woodya? My spidey sense was tingling.
Not gonna happen, these frogs are different…they can CUSS!!!
I read that story by Fred Twain (Mark’s younger brother and just as near sighted)! “The Cussing Frogs of Des Moines.” They all got sent to church on Sunday for the buffet. I’d cuss.
The celebrated jumping fraud of real estate county
“Oh let me tase your tears, Scott…..the tears of unfathomable sadness!!!!! Yummmy Yuuuuummmmmmm……”
“taste”……..dammit
I like it better the first time, adds a sort of schadenfruede element…
“Don’t taste me Bro!”
/obligatory
It wasn’t like Des Moines was the first place to get hit with this “perfect storm”, it was one of the last. He could have seen the storm coming and changed course, but didn’t.
Hubris, pure and simple.
When will we have our first opera based on the home builder saga?
Götterdämmerung?
“one little hiccup”
“like a craps table”
“perfect storm”
STOP!!! Just please for the love of God make it stop.
Yeah, you were at the “5-yard line” and just about ready for that much deserved early ( and opulent ) retirement when… BAM! Somb!tch, I was “blind-sided”. Arghh. Just, just go away.
Looks like the hiccup turned into a long loud burp, he crapped snake eyes, and was drowned by the perfect storm.
“The Federal Bureau of Investigation and the criminal division of the Internal Revenue Service have formed a task force to examine mortgages that were made with little or no proof of the earnings or assets of borrowers, a government official who had been briefed on the matter said Sunday.”
This is bullish for the Upstate New York real estate market. Upstate was facing a slowdown in prison occupancy as a result of the decline in street crime in recent years.
It should be relatively easy to have an IRS computer program that compares income to loan documents and spits out lists of fraud or audit candidates.
But they don’t want to lock up 2 million people. They want high profile companies and people (but not TOOO high) that they can make an example of.
“but not TOOO high”
Always true. Sucks.
Oh no one’s gone to jail yet, why start now? This was the fraud no one was afraid to commit because it was v-i-c-t-i-m-l-e-s-s. In fact, no harm, no foul.
They’ll absolutely have these clowns by the short ones b/c they either have to admit to fraud OR… pay the taxes due on their fictitious income? Either way, bubble-bloggers win! Finally…
But they WON’T go after all these liars. They can’t lock them all up, and they have no money to pay the taxes anyway.
I don’t have the link, but I’m pretty sure there was a WSJ article about some mortgage originator dude in Alaska going to jail last week.
What about CASEY SERIN? Lest the younger generation try ever to get away with what that twit did.
http://online.wsj.com/article/SB120945775409852363.html
They’ve busted a couple of mortgage fraud rings in Alaska in the past 6 months. Not bad for a small state, population-wise…
“it should be easy to have a computer program compare income to loan documents”
…yes, but where do they GET the loan documents? Aren’t those just on file with county recorders all over the country? Many of them not electronic? etc etc
…or, if you’re talking about loan APPLICATIONS, who the hell has those? I don’t even require a written application. Or, maybe you’re talking about only applications for loans eventually sold to FNMA etc.
“The Federal Reserve said the proportion of U.S. banks making it tougher for companies and consumers to borrow approached a record in the past three months as the credit crunch deepened. A net 70 percent of banks increased loan rates over their cost of funds for commercial and industrial borrowing, according to the central bank’s quarterly survey of senior loan officers released today in Washington. That compares with 45 percent in the January survey, the Fed said.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a45nIbT1eKLo&refer=home
Given where credit conditions started, it will take many more quarters like that to get back to average.
http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200805/
I like the optimism on seeing the cancellation rate improve from 32% to 29%. I can just imagine the positive spins and jubilation when y-o-y declines are only 5% or 7%. They’ll be dancing in the streets and packing ‘em in the flip-yourself-rich seminars.
Also, recall that was 29% cancellation on 21% lower volume. So, the number of *successfully completed* transactions is still headed one way: down.
Basing this on 100 hypothetical transactions that walked in their door, last year they had 32 out of 100 contracts cancel, resulting in 68 executed transaction. This year they had 79 hypothetical transactions, of which 29 percent canceled. So of those 79, 23 walked out the door leaving them with a grand total of 57 contracts executed, roughly a 16% drop YoY in actual executed contracts. So sales still way down. CELEBRATE! Idiots. When pending contracts drop to zero, they’ll have a zero percent cancellation rate! Their stock prices will ROCKET TO THE MOON!
“Benjamin Tal, a senior economist with Toronto-based CIBC World Markets, says prices in some pockets of Western Canada could actually fall.
Calgary and Edmonton, the second and third biggest cities in Western Canada, are both down over 10% already, jackass.
And Vancouver and the rest of BC will be joining them soon. You can count on it.
When I picture Canada in my mind, I have that stereotypical image of vast swaths of trees and more trees; just thousands of square miles (or kilometers, eh?) of buildable land. How could the prices NOT go down?
‘When the market was good, Myers counted on his company to be helped by what he called velocity - the swiftness …..’
- I had a friend who had ‘Velocity’ he said that Kaopectate cleared it right up.
I have a good friend who heads up a mid-sized commercial builder in socal.
I was talking to him yesterday and he still think things are going great guns on the commercial side of things. I told him I thought commercial was a lagging indicator because the investment dollars have been flowwing away from residential and into commercial.
Is my thinking correct or is there something else at work here?
I’ve heard that commercial tends to lag behind residential by about 18 months.
The commercial explosion is already happening.
It started accelerating in January. It will take down the banks.
http://markit.com/information/products/category/indices/cmbx.html
In this index going up is bad news. The index has doubled since October and gone up 500% since July, 2007. (477.5 - 2109.38 high over 2400). A lot of blood letting to come.
Looks to me like the spread came back down after the Fed bailed out all the people Bear owed money to. Am I missing something?
A 20% correction is just overshoot, it is still indicating a 50%+ chance of failure.
“We went too far and too wide.”
Chief: “Me fukem squaw, me fukem brave, me fukem anything that moves.”
Pioneer Gal: “Oh, dear!”
Chief: “No deer! Too high, too fast!”
What’s the Chief’s name? Tonto Horowitz? LOL
Talking to a nice couple down the street, paragons of the Great White Way. model citizens. They’re moaning bigtime cause the bank qualified them for a construction loan a couple of months ago as soon as they sold their house - they now have a buyer. The bank is now refusing the loan. They have excellent credit and construction experience (built the first house) plus a good down. They own the lot outright for the second house. They’re a bit upset and can’t understand it. Same bank that loaned on the first house. Nothing has changed with their situation financially.
speaking of idiots, from this morning LA Times:
Los Angeles Mayor Antonio Villaraigosa and the city’s top financial experts were stunned last fall when a steep drop in tax revenue punched a hole in the city budget — forcing them to propose an array of fee hikes and cuts in public services.
Hey Olympiagal, look for Jack Nicholson in Henderson the Rain King coming to a theater near you soon. If they follow the book at all, it should have a MAgnificent frog scene you will love!! Explosive! a real Blockbuster!!
Ok…someone ask me the other day to post the list for Broward County Delinquent property tax list…holy cow..the lists are huge! Already found some names I know..especially of the “big shots”…how embarassing…Here is the link…
http://www.dailybusinessreview.com/calendar/BRWD_TAX.html
Thanks Anne. Will review and gloat!
Peek Stupidity
“Despite the obvious strains under which CIT now labors — a plummeting stock price, mounting losses, funding woes and a loss of faith among some analysts — Mr. Peek says he wouldn’t have done anything differently.”