The Housing Bubble

Good Morning!

Espresso time!

Get Over It, America IS Real Capitalism

http://www.businessinsider.com/yes-but-real-capitalism-hasnt-been-tried-2009-5

Good morning everyone. OT: Here’s something to start your day with, a video I made on Utah wildflowers.

http://www.youtube.com/watch?v=hquFSaBvXcE&feature=channel_page

Does anyone know anything about the Greenville NC area?

I am considering relocating. Looking at real estate listings, there seems to be a flood of foreclosures selling in the sub $50,000 range. While I believe there are more declines to come, it seems to me, that at some point there is little additional risk.

If I buy a house for say $25,000 (cash) that I am happy living in, how bad can it get? Worst case, I figure I can live there for a couple years and let it go for taxes if I need to, and be none the worse off had I rented.

I have no further ties to my current location. I have a personal reason (ok, not a real good one) for moving to the area. Am I missing something?

BWAHAHAHAHAHA! Yessir, that’s some real credit card reform. If you gave Congress an enema, it would disappear.

http://www.freep.com/article/20090517/COL04/905170439/1081/A+query+for+Sen.+Stabenow++What+ever+became+of+usury

Do you think it is possible that the great pyramids were actually built on the sole premise of economic stimulus by the government? I just came to the realization that this could possibly be true. Think about it: The final phase of a credit cycle including everyone being employed in a government make-work project funded with monopoly money. Then: collapse…

Think about all of the new shiny govt offices and bank buildings, fire and police stations, schools, bridges, etc. Modern pyramids???

Hint to MSM publishers who are having a hard time finding readers: Check out your online competition, who have scooped you again and again on the real housing bust story:

Housing Market Rebound by 2010? Not Likely
by: The Inflection Point May 17, 2009
…
The hope for stabilization in the housing market within the next year, as some market forecasters predict, looks to be a view held by those wearing rose colored glasses. From 2004 to 2007, there was $750 billion option ARMs originated, according to Insider Mortgage Finance. Comparatively, there were roughly $1.9 trillion mortgages originated for each subprime and jumbo category. Goldman predicts that more than half of all outstanding option ARMs will eventually default. With over $375 billion worth of option ARMs headed for delinquency within the next few years, it appears we are just entering the second wave of foreclosures in the housing market.
…
Over the past few months the Obama administration rolled out its plan to help struggling homeowners. The plan has provisions for both primary and secondary mortgages. For primary mortgages, the plan calls for interest rate modification and principal deferment. It goes even further for secondary mortgages, calling for interest rate modification and possibly even loan forgiveness. These programs may keep struggling homeowners afloat in the near term, but as Mark Zandi, chief economist at Moody’s Economy.com, noted “…in many ways, we are kicking the can down the road.” By lowering rates or deferring payments, we may be creating a legion of “zombie homeowners” that are anchored down by high levels of negative equity in their homes. The plan, while lessening the immediate economic impact by preventing some of the millions of foreclosures expected to take place over the next few years, fails to address the real issue at hand, which is the negative equity many borrower’s have in their homes.

The second wave of foreclosures, starting this year, is estimated to reach 3.5 million, according to a recent Credit Suisse report. These foreclosures will only contribute to the current vicious cycle as the foreclosed homes hit an already oversupplied market at fire sale prices, thus continuing to decrease home value. Borrowers struggling to keep up with their payments will have to deal with increasing unemployment, falling home prices and government policies that may do little more than delay the pain. The next wave will certainly touch all mortgage types and borrower classes but it will be the final remnants of the lending craze, the option ARMs, which lead the surge.

This article was written by Andrew Florio, analyst at JBH Capital.

SFGate

More high-end properties sitting on the market
James Temple, Chronicle Staff Writer

Sunday, May 17, 2009

After 14 months on the market and about a $1.2 million price cut, a large, newly built home in the Oakland hills is on the verge of selling, assuming the bank allows it to trade for less than what’s due on the loan.

The approximately $950,000 “short sale” is a prominent example of something brokers don’t like to talk about, at least not brokers who represent owners: High-end properties are increasingly coming under the sort of pressure once reserved for moderate homes. In fact, as slowing price declines fuel hope that the real estate bottom is near, other signs suggest the worst is on its way for the region’s upscale market. (Cont’d)

Crap. Many of these folks selected the pick-a-payment. This will end well.

Leigh

Hello, all. It’s been a while changed jobs, still in the foreclosure / bankruptcy business. Report from the trenches: bidders are showing up at foreclosure sales again. Sometimes they’re even buying houses. Of course these are at prices which the lenders now automatically shave down by 25% or more before submitting a bid, so it would appear to be bottom-feeding, but at least there is some action again. Expectation: the spring upswing (actually the “upswing” merely created an illusion of stabilization rather than a continuing decline) is petering out. The Neg-am loan wave is coming in the fall and it cannot be stopped. In combination with credit card defaults and the President’s demand for credit card legislation, credit-based spending will continue to contract, with dire consequences for businesses based on discretionary spending. Strip malls, even in Northern Virginia, which is usually relatively immune due to monstrous federal spending in the region, are beginning to show really noticeable vacancies, so pressure in the commercial area continues to increase.

Lenders are completely overwhelmed by loan mod applications. The word is they are getting 15 to 20 thousand a day. They absolutely cannot figure out how to handle that kind of volume, and nobody seems sure how they will pay for the write-downs.

Unbelievable as it may seem, despite soaring US unemployment, the lenders are trying to outsource loan mods as - get this - a cost saving measure. They might be willing to write off hundreds of thousands of dollars of an existing loan, but they want a third-worlder to run the numbers and make those decisions for $5.00 a day.

I know what you’re thinking, Punk

Has the credit crunch affected 6 zip codes or only 5?

In all the excitement I’ve lost track myself.

So I moused over listings in Bel-Air, Beverly Hills and Brentwood.

Days on the market for many $1,000,000+ props are measured in hundreds. There’s multiple price reductions from 13m to 8m.

What I really love is the little calculator that shows your monthly payments. Try $50,000.00 / month for some of these alligators. And forget about getting fire insurance up in the Santa Monica Mountains. My SIL just had her Topanga Policy cancelled as fallout from our on-going drought.

The mrs. and I hosted a pool party yesterday. A lot of talk about the economy and especially real estate. But not much negaitve to say. It just struck me during the discussions how unaffected my circle of friends appears to be from “THE WORST ECONOMIC CRISIS SINCE THE GREAT DEPRESSION!!!”

Two couples took the real estate plunge. One of them also came to the party straight from the Lexus dealership in a brand spanking new shiny SUV. They foresaw the bubble bursting and sold their suburban house in 2006. They’ve been renting a condo in the city since. The other couple were 1st time buyers, also having rented condos/townhouses in the city for as long as I can remember. Both basically said they’re tired of renting, prices have fallen so much, it’s time to buy, the $8K tax credit was a nice sweetner. Plus they both wanted a yard. Another couple is in the final stages of completing a custom built vacation cabin (which I am very excited about since I know I will spend lots of time up there too). And finally, one of the guests said his boss made a $1.5M cash offer, on a house is listed at $2M and is waiting to hear back.

We had 20 or so guests. Nobody there is unemployed. Although one of my wife’s friends’ husbands said he was re-orged into some new territory and might lose up to $75K income this year. He probably made $250K last year, so it’s not like he’ll be starving. But that was about the extent of bad news. One couple was getting ready to go on a 2 week European vacation with their kids, another is going on a Caribbean cruise.

Maybe I live in a secluded bubble from the rest of the world. But I just am not experiencing - at least at the personal level - this recession/depression. People are buying cars, buying houses, going on vacations, living their lives. And before someone chimes in with “yeah it’s all borrowed money on the MasterCard”, it’s not. I’ve known these friends for years, decades in some cases. They’re smart with money and are not debt whores. If they’re spending, it’s money they have to spend.

Anyway, just some observations I thought I’d share.

A brokerage head with an interest in convincing people that prices are high and stable claims that the market clearing price for NYC residential is a mere 30% off the peak.

http://ny.therealdeal.com/articles/corcoran-ceo-says-30-percent-cuts-make-sales-ivanka-trump-corcoran-pamela-liebman-jonathan-miller-dottie-herman

There may be a few flight capital and greenhorn buyers at the price, although why the capital would be fleeing here I don’t know.

“I am sure everyone sitting up here has received a plethora of 50-percent-off offers by sort of ‘predatory buyers’ who thought that every seller was distressed,” she said, but added that such offers were on the decline.

A more realistic view.

“We are well over half way in terms of what we have seen in terms of price decline. But I don’t think we are saying right now we are at the bottom.”

I’d say we are slighly more than half way down if 30% down is the current price. And by the way, why didn’t anyone talk about “predatory sellers” a few years ago?

“Glen Crest, a former condominium complex in New Port Richey, experienced so many delinquencies and foreclosures that the remaining owners could not pay the maintenance. Pretty soon they all fell into foreclosure as well, and now the place is deserted.”

http://www.tampabay.com/news/localgovernment/article1001646.ece

I got to thinking this morning…

Banks are having a real problem with REOs. They kick out the foreclosed ones and the house then sits and rots for ages.

In the past there have been numerous “rent to own” schemes. Why not an “own to rent” scheme? The bank would take back the title and offer a lease to the FB, say a 2 year lease based upon a variable rent. The variable rent could be based on a fixed percentage of estimated value of the property. There are various “rules” discussed here how rents should track house values - pick one of them.

This would mean the FB would lose title to the house (which is fair) but get to stay in “their” house (which would preserve the property for the bank). The bank would get the title (which is fair) but not have to worry about an empty house rotting away or having to sell in a depressed market.

“Why Economists Failed To Predict the Financial Crisis” - From the Wharton Business School newsletter

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2234

In this month’s e-mail missive, my friendly neighborhood Realtor is once again assuring me that there’s never been a better time to buy, thanks in part to the vaunted $8,000 tax credit:

“Over the past few weeks we at @properties have already seen an increase in market activity. We want to encourage all of our first-time buyers to take advantage of this unprecedented opportunity before it is too late.

With the right amount of planning and my extensive knowledge of the real estate market I believe that this is an ideal opportunity for first-time home buyers.”

This appears earlier in the e-mail, but it’s noteworthy ’cause it seems like circa-2005 faux money deja vu all over again:

“Looking to spend your refund another way? You can also put the credit to use as a semester’s tuition at the University of Illinois, take that long awaited vacation with your family, or even as an added bonus to your retirement fund. However you choose to apply your $8,000 credit we cannot urge you enough to take advantage of this incredible opportunity.”

I now make a point to go to Hermosa Beach Pier every other evening for a beer. Haven’t done that for several years.

So I park in the 12 hour free parking area and walk through a neighborhood of beach houses on the way to the bars. The street I take has several for sale signs, all Shorewood Realty. I’m thinking I will see more signs like that in the next three years and prices will continue to fall. It’s the 90254 zip code.

Parallel noted between housing and oil markets: In both cases, speculators are driving up prices while an inventory glut builds up hidden away from plain view in the shadows. I expect this shadow inventory to eventually come on line in a massive tsunami wave that drowns the current speculator binge. And I can hardly stand to wait for the Schadenfreudic pleasure that will bring me.

I am also quite hopeful that the shadow inventory of houses and oil might some day get linked to Megabank, Inc’s hoard of TARP money. Wouldn’t it be just beautiful if bank rescue funds were funneled into keeping oil and housing prices at rapaciously high levels, instead of helping to ease the credit crunch, as intended?

Dean Calbreath
46% spike in gas price just doesn’t make sense
2:00 a.m. May 17, 2009
Photo of Dean Calbreath

In many areas of the economy, there looms the specter of deflation, with consumer prices falling over the past 12 months by their greatest percentage since 1955.

But you might not notice that fall in prices next time you fill up your tank with gasoline. Instead of deflating, gasoline is inflating. The big question is why.

Last week, gasoline prices rose above $2.50 per gallon in San Diego County for the first time since early November. Prices are now above the $2.25 mark nationwide.

That’s a 46 percent jump in just five months, up from a recent low of $1.71 last December. By July 4, analysts say, gasoline could surge above $2.50 nationwide and as high as $2.75 in San Diego County. Some analysts say it would not be surprising to see the price at some local gasoline stations creeping back toward the $3 mark.

“The major oil companies are betting prices will go up, and go up quite high,” said Charles Langley, fuel analyst at San Diego’s Utility Consumers’Action Network.

Langley noted that gasoline prices always rise in springtime, after refineries shift from their cheaply produced “winter blend” of gasoline to a more refined “summer blend.” But the change in blends typically results in a price rise of 10 percent to 15 percent, not the 46 percent hike that we’re currently experiencing.

So why are gas prices rising when other goods are dipping? Will the price rise dissipate after the July 4 holiday? Or is the run-up a new threat to an economy that is struggling to dig itself out of recession?

If oil prices were ruled simply by supply and demand, we should not be seeing this kind of price rise.

Thanks to the Great Recession, worldwide demand for oil has plummeted. Workers who have been laid off aren’t buying gas to commute to the office every day. Tourists are taking shorter trips. Businesses are putting fewer trucks on the road. In California, demand is down more than 10 percent. The International Energy Association predicts that global oil demand will average 2 million barrels per day less this year than last.

Because of the declining demand, the world’s supply of oil has risen to a 19-year high. As much as 150 million barrels of oil is floating in tankers on the ocean, being kept on hold until the oil companies decide it’s profitable to bring them in. Last year’s chants of “drill, baby, drill” seem more meaningless than ever, given that there’s more oil now being pumped than oil companies are willing to put on the market.

This conjunction of abundant supply and low demand should translate into cheap prices. But that isn’t the case right now.

“The fact that oil is over $50 per barrel, much less close to $60, doesn’t make sense in a pure supply and demand market,” said Judy Dugan, who tracks oil prices at Consumer Watchdog, a public interest group in Santa Monica.

I thought empty neighborhoods were mainly a Sunbelt phenomena, but I now stand corrected. Heckuva job HUD, Fannie, Freddie and FHA!

Empty neighborhoods fill Rust Belt
By DAN SEWELL and FRANK BASS
The Associated Press

Sunday, May 17, 2009

CINCINNATI — Meet the forgotten housing crisis.

While most attention has focused on the wave of foreclosures sweeping mostly middle-class, suburban Sunbelt neighborhoods from California to Florida, the nation’s emptiest neighborhoods have remained concentrated in the same place for nearly a generation: the mostly minority, poor, urban neighborhoods of the American Rust Belt.

An analysis by The Associated Press, based on data collected by the U.S. Postal Service and the Housing and Urban Development Department, shows the emptiest neighborhoods are clustered in places hit hard during the recession of the 1980s - cities such as Flint, Mich.; Columbus, Ohio; Buffalo, N.Y.; and Indianapolis.

“I’d move in a heartbeat if I had somewhere to go right now,” said Cindy Olejniczak of Buffalo, raking trash from the lawn of a boarded-up house to keep it from blowing in her yard. Roughly every third home in her neighborhood is vacant. Not even pizzerias will deliver to the area now.

“It’s almost like you wish they would just level the whole neighborhood,” she said, “and start rebuilding again from scratch.”
—————————————————————————————————————
Top 25 Vacant Neighborhoods

A list of the 25 neighborhoods with the highest percentage of vacant homes, according to an Associated Press analysis of federal data. The AP analysis included only census tracts with more than 1,000 housing units and less than 5 percent vacation homes, according to the 2000 census.

County State Tract Homes Empty Pct

Franklin Ohio 82.3 1711 1158 67.7

Hamilton Ohio 9 1212 773 63.8

Hamilton Ohio 16 1154 587 50.9

Berkeley S.C. 207.03 2030 874 43.1

Wayne N.C. 5 1812 779 43.0

El Paso Colo. 38 1363 579 42.5

Yuba Calif. 409.02 2058 866 42.1

Cook Ill. 5401 3215 1344 41.8

Montgomery Ohio 8.02 1739 705 40.5

Marion Ind. 3550 1268 511 40.3

Wayne Mich. 5004 1134 442 39.0

Baltimore city Md. 802 1184 455 38.4

Linn Iowa 22 1135 434 38.2

Jefferson Ala. 51.01 1349 504 37.4

Genesee Mich. 15 1199 440 36.7

Fulton Ga. 23 1388 503 36.2

St Louis city Mo. 1267 1187 413 34.8

Wayne Mich. 5332 1136 395 34.8

Delaware Ind. 2 1118 385 34.4

Marion Ind. 3526 2046 702 34.3

Wayne Mich. 5079 1607 551 34.3

Wayne Mich. 5538 1138 388 34.1

Montgomery Ala. 2 1006 342 34.0

St Louis city Mo. 1241 2553 867 34.0

Jefferson Ala. 30.02 1570 532 33.9

Wayne Mich. 5333 1199 406 33.9

Source: Housing and Urban Development Department, U.S. Postal Service.

“Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you.”
~Pericles (430BC)

Ain’t that the truth! I hate politics and the a-holes in that business, but you can’t get away from it.

It’s easier to play games with gas prices in California, since all gas sold there has to be special “regurgitated” gas. Most states have a lot more flexibility in the formulation of gas offered for sale.

Bill Bonner works fulltime at analyzing economic events. “If you think this is just a pause in an otherwise-healthy economy…then, you might believe that things will pick up. That’s what’s happened after every recession since 1948. The average one lasted only about 10 months…with about a 2% decline in GDP. By those yardsticks, this one ought to be over.

“But if you believe that this is something more than a typical Post-WWII recession, then…watch out. The Great Depression lasted for nearly 4 years…taking 27% out of the GDP. And then, when it looked as though it was over, along came another downward whack in 1937 that lasted another 13 months.

During a Recession, Being Rich Loses Its Luster
By 24/7 Wall St. Friday, May. 08, 2009

A sold sign is posted in front of a home at a new housing development May 4, 2009 in South San Francisco, California.
Justin Sullivan / Getty

Being rich during a recession can almost be as bad as being poor. The only difference is that the rich have more to lose. RealtyTrak, a research firm that follows mortgage trends, recently reported that the foreclosure rate on homes valued at more than $729,750, also known as the jumbo-mortgage limit, rose 127% in the first ten weeks of this year compared to the same period a year ago. Bloomberg, reports that “about $500 billion of prime-jumbo mortgages are bundled into bonds, according to Memphis, Tennessee-based FTN Financial.” The default rate on those bonds may rise as high as 10%, leaving banks with yet another set of substantial write-offs.

So the Fed is now not only the lender of last resort, but also the real estate investor of last resort? Good thing they are a private organization that does not expend any U.S. tax dollars on their programs, as otherwise this move to snap up so many MBS would be subject to harsh political scrutiny.

FED FOCUS-Landlord of last resort ponders eventual open house
Thu May 14, 2009 8:05pm
By Pedro Nicolaci da Costa

NEW YORK, May 14 (Reuters) - If Federal Reserve officials think U.S. homeowners are having a tough time selling into a depressed market, just wait until they try to offload the mother of all jumbo mortgages: a $366 billion portfolio of real estate bonds that continues to grow.

In this light, an eventual exit strategy from the Federal Reserve’s multi-trillion dollar emergency measures might be viewed as the central banking equivalent of flipping houses, but on an epic scale.

It is not an enviable task. The U.S. central bank must weigh the necessity of removing reserves from the economy, because of potential inflation, against the reality that selling mortgage-backed securities could further dent that battered market, possibly pushing up mortgage rates.

A large chunk of the Fed’s rescue efforts is a commitment to purchase as much as $1.25 trillion of mortgage securities issued by mortgage giants Fannie Mae and Freddie Mac.

Outstanding Fed credit, commonly referred to as the central bank’s balance sheet, was historically composed mostly of highly-liquid U.S. Treasury bonds. Before the crisis started in the summer of 2007, 92 percent of its holdings of about $855 billion were made up of government debt, according to official central bank data.

As of May 7, 2009, the Fed’s overall balance sheet has expanded to over $2 trillion, of which only about a quarter is Treasuries, with mortgage debt representing a growing slice of the Fed’s asset base, according to the Fed’s weekly H.4.1 report. (here)

“It’s going to be a massive undertaking, especially given the size that we are likely to see before all is said and done,” said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC.

A friend of a friend has over 200 job apps out and has had no bites, this all in the last month in W. Colorado, he’s visited a number of resort and oil patch towns. I didn’t know there were that many businesses around that area.

He’s a burned-out fry cook.

You may laugh, but burned-out fry cooks have always been very accurate economic indicators. They can always get jobs. They get no benefits and ask for none. They’re the easiest kind of employee to find, and they are very employable (but only as fry cooks, mostly). Since they come and go like the weather, there are always openings. And he works in the kinds of restaurants that aren’t expensive.

When fry cooks can’t get jobs…

Some questions regarding recent unconventional moves by the Fed to prop up the U.S. housing market:

1) Given that the Fed is snapping up MBS at fire sale prices, is it possible they are purchasing the underlying as well (houses), in order to prop up the value of their own real estate investment portfolio?

2) Is it even legal for the Fed to buy real estate?

3) Will they eventually have to open up an REO department?

Forbes dot com
Commentary
Fed Up
Ron Paul, 05.15.09, 07:10 PM EDT
Audit the Federal Reserve.

The Federal Reserve’s recent and unprecedented actions in the realm of monetary policy have provoked a backlash among the American people. Trillions of dollars worth of loans and guarantees have been provided to Wall Street firms, while Main Street Americans suffocate under harsh taxation, the prospect of higher debt levels and increasing inflation. These events have awakened many Americans to problems with the Fed’s loose monetary policy, the bubbles it has created in the past and the potential hyperinflation it might cause in the future.

One of the fallacies of modern economics is the idea that a central bank is required in order to keep inflation low and promote economic growth. In reality, it is the central bank’s monetary policy that causes inflation and depresses economic growth. Inflation is an increase in the supply of money, which in our day and age is directly caused or initiated by central banks. All other things being equal, inflation results in a rise in prices. A so-called “mild” rate of inflation of 3% per year leads to a 56% rise in prices over a 15-year period. Even a “low” rate of inflation of 2% per year leads to a 35% rise over that same period. How is that conducive to long-term growth?

What have we done to the earth?
What have we done to our fair sister?
Ravaged and plundered and ripped her and bit her,
Stuck her with knives in the side of the dawn.
And tied her with fences and dragged her down.
- Jim Morrison

Me, I’m always for Clean air, clean water, clean earth, natural declining (without coercion) population (maybe to one billion inhabitants of earth), and Capitalism.

I want a home to own. I’m thinking mobile home.

Good Idea Zombie, but what are you going to do re lot rent, and potential meth head neighbors? NOT knocking all people in trailer parks, just curious. Where can you buy land with sewer, water, for a reasonable price? My curious on this.

You are correct. I hate noises so i’ll just rent. But as long as income taxes are going up and savings goes to big gov I have no chance anyway. California is going to blow up!

I went on Craigslist the other day because, for some reason, nobody in my area lists houses for rent anywhere else. Seriously, the local rental sites are apartments only, which leads me to believe that the houses being rented out are all owned by wanna-be landlords.

I found out something astonishing (or maybe not so much, given that it’s Craigslist.) Our PITI is actually well below the rents there. The lowest rent I saw for a 3/2 house was $1295/month, and 4/2s were running $1400 and up.

What does this prove? I dunno, maybe that the local Craigslist listers are deluded.

In other news, we still don’t have the keys.* The bank’s got our money, now they’re dragging their feet. We may have to take them to small claims court– we already probably have to scrap the “paint before moving” plan, and if they delay much more, Evil Rob will not be able to help move (because he can’t take any time off in June.)

Not sure what to chalk that up to. It’s probably just the bank’s normal lack of consideration.

*We have considered breaking into our own property, but that’s a sub-optimal solution.

Anyone else excited for tomorrow! w00t-w00t! I’m hooked.

Go away! Tradin’!

I am so confused. If the gubmint can summarily allocate $700 bn in TARP funds to Megabank, Inc, why is it so problematic to help out 500+ banks with a piddly $24 bn in additional bailout monies? Like so many other stories out of the financial press these days, this one is incoherently related to others that are currently in circulation.

Financial Times
Smaller US banks need additional $24bn
By Saskia Scholtes, Julie MacIntosh and Francesco Guerrera in New York
Published: May 17 2009 22:57 | Last updated: May 17 2009 22:57

Small and medium-sized US banks must raise some $24bn to meet the capital standards set by the government in its stress tests of large institutions, research for the Financial Times shows.

News of the potential capital shortfall could increase pressure on many of the 7,900 US banks that form the backbone of the US financial system.
EDITOR’S CHOICE
Fund cites BofA chief over Countrywide sale - May-17
Temasek sells entire stake in BofA - May-15

As many as 500 more banks could close, according to investment bank Sandler O’Neill, which carried out the research.

Since this month’s release of the tests for the 19 largest banks, regulators and investors have increased their focus on the next tier of lenders, amid concerns some of them might struggle to survive if the economy worsens.

The government’s stress-case would result in capital shortfalls for 38 per cent of the 200 banks below the 19 largest financial institutions, leading to a deficit of around $16.2bn in common equity, according to Sandler O’Neill.

Applying similar criteria to the remaining 7,700 banks in the US would result in a further $7.8bn capital deficit.

The banks have to repay a combined $27bn in aid from the Troubled Asset Relief Programme (Tarp) but they could do that from internal resources rather than raising more funds.

I have a question that has been been popping up lately in our house…. Due to the President and Congress blowing out our debt and the Fed printing trillions of dollars it is only a matter of time until we see significant inflation. What impact does everyone think this will have on housing? Interest rates will HAVE to go up, but will prices then correspondingly come down even further or will they go up due to inflation? My husband and I are concerned about this issue and was wondering what others thought… I personally don’t see how we can have rising house prices due to unemployment/falling wages/banks not loaning/etc…….

Now a solution to get inflation going again, make traffic worse, cause homes prices to be unaffordable to many and generally just get the ponzi game going again. On the flip side this probably will create jobs.

” Our friends in Washington continue to reward witless members of the financial sector. Meanwhile, those of us who don’t fly bonus class think about importing guillotines from France.

Thankfully, we may not need to place the order.

All we have to do is to get Washington to listen to the best idea I’ve heard to end the decline of housing prices and thereby restore our confidence in the most important assets most Americans ever own. The idea comes from economist A. Gary Shilling and real-estate developer Richard S. Lefrak.

Their suggestion: Don’t think about artificially low mortgage interest rates and other stopgaps. Instead, eliminate the oversupply of houses. Too many were built during our speculative bubble. And, by the way, don’t spend a dime of taxpayer money doing it.

How can this be done? Simple: Open our borders to immigrants who can buy homes in the U.S. Let a million immigrants a year do this for two years and the entire oversupply of homes and condos would be absorbed. Supply would no longer dwarf demand. Prices would stabilize. The most important assets of the vast majority of Americans would, once again, be a source of pride and security.”

http://www.zillow.com/homedetails/14111-El-Dolora-Way-Poway-CA-92064/16828538_zpid/

serious dope smoking going on in N San Diego County

Can ABS work without the scam elements?

Financial Times
Disclosure move aims to revive ABS market
By Ralph Atkins in Frankfurt and David Oakley in London
Published: May 17 2009 20:48 | Last updated: May 17 2009 20:48

The European Central Bank is pushing for an increase in the amount of information that has to be disclosed about asset-backed securities as part of efforts to revive a market that has collapsed since the start of the credit crisis in August 2007.

The ECB wants more details on these securities to be passed to ratings agencies, including data on the individual loans that back them. These are mainly mortgages, but also include credit card, corporate and car loans.

It hopes this will rejuvenate the European market by boosting confidence in the ratings, which in turn should encourage investors to buy the securities because a lack of transparency has been deterring them.

There have only been 11 asset-backed deals in Europe this year, worth €5bn ($7bn), including one by Porsche. In the first seven months of 2007, there were 241 deals in Europe, worth €199bn, according to Dealogic, the data provider.

A revival in the securitisation markets would help the broader economy as it would provide banks with more money to lend.

However, analysts say the ECB should also push for full public disclosure of the loans that back these securities – as in the US – and not just to the ratings agencies. The US market has been hit too, but has seen more signs of recovery. This year there have been 130 deals, worth $80.6bn.

How is it possible to discern what the real economyd is doing when the Fed is executing so many extraordinary market-distorting interventions?

Wall Street Journal

* MAY 17, 2009, 4:45 P.M. ET

Orszag: Economy’s Freefall ‘Seems to Have Stopped’

By AUGUST COLE

The White House’s top budget official, Peter Orszag, said on Sunday that the decline of the U.S. economy appears to have slowed but that the country wasn’t yet in the clear.

“The freefall in the economy seems to have stopped,” Mr. Orszag said during an interview on CNN’s “State of the Union.” “The analogy is there are some glimmers of sun shining through the trees, but we’re not out of the woods yet.”

Budget Director Peter Orszag, left, with President Barack Obama earlier this month.

Mr. Orszag, director of the White House Office of Management and Budget, said the administration would update its budget assumptions in the coming months, as planned. He urged patience when it came to seeing results from the government’s $787 billion economic-stimulus plan, noting that only $100 billion has been allocated since the legislation was enacted three months ago.

“It takes time to get money out the door wisely,” he said.

Won’t more new home construction add to a record glut of vacant homes in the U.S.? Not that there is anything wrong with that…

Wall Street Journal
Home Starts, Leading Index Probably Rose: U.S. Economy Preview
By Bob Willis

May 17 (Bloomberg) — Builders probably broke ground on more houses in April and a measure of the U.S. economic outlook rose for the first time in almost a year, adding to signs the recession was abating, economists said before reports this week.

Housing starts increased 2 percent to an annual rate of 520,000 last month, according to the median forecast of economists surveyed by Bloomberg News before a Commerce Department report on May 19. The index of leading economic indicators probably climbed 0.8 percent, figures from the Conference Board may show.

An easing in the housing slump, now in its fourth year, is an essential element of most forecasts for an economic recovery later this year. Rising stock prices and improving consumer confidence are among the components of the leading index that are stoking speculation the economy will begin to grow again in the next six months.

“Starts reached their trough earlier this year and are going to be on a very slow path to recovery through the rest of the year,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “It does look like the recession is coming to an end.”

The leading indicators index, a measure of the economy’s likely path over the next three to six months, is due from the New York-based private research group on May 21.

Commerce’s housing report may also show building permits, a sign of future construction and another component of the leading index, rose 2.7 percent to a 530,000 rate in April from the prior month’s record low.

Oh, a storm is threatning
My very life today
If I dont get some shelter
Oh yeah, Im gonna fade away

R. Stones

British housing bubble displays evidence of successful punchbowl respiking operations. Given the Fed’s massive montetary stimulus, can U.S. housing prices have long to wait before they start going up as well?

U.K. Home Sellers Raised Asking Prices in May, Rightmove Says
By Jennifer Ryan

May 18 (Bloomberg) — U.K. home sellers raised asking prices in May by the most in more than a year as buyers’ access to mortgages improved and the number of properties for sale dwindled, Rightmove Plc said.

The average cost of a home climbed 2.4 percent from April to 227,441 pounds ($347,000), the operator of the biggest U.K. residential property Web site said today. That was the largest increase since February 2008. The 61,000 total of new listings this month is the lowest May reading since 2003.

“A drastic lack of supply is putting upward pressure on prices,” Miles Shipside, commercial director of Rightmove, said in an interview with Bloomberg Television. “There is increased demand among buyers and slightly more mortgage money becoming available.”

I have been lurking since 2004? early 2005 on this site, and Ben will eventually get credit for his singular work in showing how the world really works. Still have the first blogspot site bookmarked. Something really big is happening, and I do not think that it will end with things as we found them.

Has anyone noticed that a movie about the Illuminati is beating out a movie at the Box Office based upon the ideas of the Illuminati? Dan Brown’s Angels and Demons is about the link between reason and faith- Illuminati/Masonry vs Pope. A good read, whatever your opinions.

Star Trek is based upon the show created by Gene Roddenberry-a strong mason with a vision of the future as one world, all getting along for the sake of science and the good of life. Roddenberry is so revered by Freemasonry that he has one of only 3 permanent exhibits at the Scottish Rite Temple in downtown DC. (Others are J Edgar Hoover and Albert Pike-kinda odd)

Dan Brown’s next book is about Washington DC.
Barack Obama is (reported to be) a 32nd Degree Mason.

Things are not what they seem. If anybody is big into understanding what is really happening without sounding like a conspiracy freak, I would be interested in seeing how this links to the financial chicanery of the last several years. I am too deep to comment much, so would love to hear if someone is paying attention to what is going on.
I want to thank all of you pro and amateur economists for keeping this blog a fascinating guidepost. The prescient comments made over the years have amazed me in their accuracy. I hope that all of you made-or didn’t lose- money from this historic debacle that will forever change our country and the world.

Sorry if this has already been discussed. (Didn’t see it above. Perhaps it was in a previous Journal)

http://finance.yahoo.com/real-estate/article/107041/House-Price-Drops-Leave-More-Underwater

House-Price Drops Leave More Underwater

by Ruth Simon and James R. Hagerty
Monday, May 18, 2009

I thought this quote was interesting:

Mr. Humphries of Zillow calls his methodology conservative and said Zillow’s use of pricing for individual homes provides a better measure of home valuations than Mr. Zandi’s approach, which relies on market-level estimates of home values. He adds that Zillow doesn’t include foreclosures in its pricing models.