The Positive Side Of The Long, Painful Contraction
The San Francisco Chronicle reports from California. “Banks are under pressure from the Obama administration to participate in its Making Home Affordable program to rewrite mortgage terms. But only about 7 percent of the 850,000 homeowners enrolled have received permanent modifications. More commonly, homeowners say they spend months pleading with their lender and end up with suggested new payments that are not sustainable. Steve and Sue Alparone of Pittsburg first contacted their servicer in December 2008 to request a loan modification after reductions in their income and a reset of their adjustable-rate mortgage to $4,400. Steve Alparone had to leave his IT job due to health reasons and ended up with a lower-paying job at Trader Joe’s, while the retailer where Sue Alparone worked went out of business.”
“After several months of fruitlessly asking for lower payments, the couple skipped several payments, then finally got a verbal offer for a new payment of $1,944 this fall. They have made that payment since Oct. 1, but two months ago received notice that they were being given a new loan modification that would raise their payment to $3,500 a month, which they said they can’t afford.”
“Even though they are significantly underwater, the couple want to hang on. ‘We would love to stay in this house,’ said Steve Alparone. ‘We’ve got a lot of sweat equity in it. We’re not looking to make any money on it, just looking to stay.’”
The Marin Independent Journal. “A total of 305 notices of default were recorded in Marin during the October-to-December period, down from 428 in the third quarter of 2009. But compared year to year, default filings in the fourth quarter of 2009 were up 57 percent from the same period in 2008. The number of actual foreclosures jumped from 87 in the fourth quarter of 2008 to 123 in the fourth quarter of 2009.”
“Realtor Greg Browman of Marchant Chapman Realtors of San Anselmo, who specializes in short sales, said he did not see a rebound any time soon. ‘I think we’re not going to see any increase in value,’ he said. ‘Many parts of Novato are at their bottom - there’s nowhere else to go. The first-time homebuyer market is really attractive right now because the prices are so low. I think it’s going to continue like that.’”
“‘I think we’re going to have another couple years of this, but anything can happen,’ Browman said.”
The Mercury News. “Fewer Santa Clara County homeowners received mortgage default notices at the end of last year, but upscale areas are becoming a bigger part of the foreclosure problem. ‘I certainly can attest to the fact that we’re seeing more notices of default in more affluent neighborhoods,’ said Rick Turley, president of Coldwell Banker for the San Francisco Bay Area. But, he said, ‘I don’t necessarily know that we’re out of the woods for the entry level.’”
“Karl Lee, president of the Santa Clara County Association of Realtors, agreed that defaults and foreclosures are trending up in the higher-end neighborhoods. ‘I imagine the increase has to do with the unemployment situation,’ he said. ‘The lower end got hit earlier because, frankly, their reserves were less. In the higher end they were able to put it off a little bit’ by tapping their financial reserves, he said.”
The Press Democrat. “Foreclosures dipped slightly in Sonoma County during the fourth quarter. Analysts, foreclosure counselors and others cautioned that they aren’t seeing a drop in the overall numbers of homeowners in danger of losing their homes. ‘We seem to get new clients constantly and the old ones aren’t going away,’ said Linda Hedstrom, a manager who oversees a homeowner counseling program in Santa Rosa.”
“Even more ominous was a national report released last week by a collection of state attorneys general and banking regulators. ‘Despite efforts of (loan) servicers, homeowners and the government, the foreclosure crisis continues to worsen,’ wrote the State Foreclosure Prevention Working Group, which has tracked the issue for more than two years. ‘These signs point to more foreclosures in 2010 than in 2009.’”
“The attorneys general and banking regulators warned of trouble ahead for those with ‘payment option’ adjustable-rate mortgages, a loan segment estimated at $200 billion. The officials predicted that two-thirds of those mortgages will readjust in the next two years and cause ‘payment shock’ for the homeowners.”
“Madeline Schnapp, director of macroeconomic research for TrimTabs Investment Research of Sausalito, said November estimates suggest there were a record 6.2 million mortgage delinquencies in the United State. She wrote recently that the housing market remains on ‘life support.’ ‘I don’t see things getting substantially better because there’s just not a lot of economic activity generating jobs,’ Schnapp said Wednesday.”
Capital Public Radio. “Sacramento-area homebuilders pulled about 2,300 permits for single-family homes last year, and that is much lower than the previous record low of about 4,000 in 2008. Both are a dramatic drop from the 18,700 permits in 2004, considered the peak of the housing boom. In fact, you would need to add the past three years to even come close to the figure of building permits issued in 2005.”
“The Sacramento region has lost almost 11,000 construction-related jobs during the past year, and about 116,000 statewide.”
The Sacramento Bee. “Call it the positive side of the region’s long, painful contraction of housing values since 2005. Though the housing collapse has shredded the fortunes of thousands of existing homeowners, the sudden return of affordability also may help set the stage for an eventual turnaround. Widespread $400,000 and $500,000 price tags for single-family homes ‘used to be a hurdle,’ said Barbara Hayes, who woos companies and jobs as head of the Sacramento Area Commerce and Trade Organization. ‘Now (they’re) not.’”
“In December, the median price for a house in Placer was $275,500, compared with $525,500 at the market peak in 2005.”
“‘We liked where we were, but it was way beyond our reach to own a home,’ said attorney Anthony Cortez, who left Orange County with his family in 2008 for a house in Lincoln. After a year of renting there, the now-Sacramento attorney closed escrow before Christmas on a distress-sale property in Lincoln Crossing.’
“‘We paid literally less than half what the original owners paid for it,’ said Cortez.”
The Record.net. “Up to 2005, Mabini Fuertis was doing pretty well. He earned enough from his job as a train conductor together with a U.S. Postal Service pension to cover the mortgage, credit card and car payments and still put aside $12,000 a year in savings. The problems began when he lost his job but didn’t change his spending habits. Unable to find another full-time job in the intervening years, he exhausted the savings, piled up more than $30,000 in consumer debt and recently stopped making payments on the $430,000 mortgage on his Weston Ranch home.”
“‘Being bullheaded, I thought I could fight through it, but as you can see, I couldn’t,’ he admitted.”
“And while the Fuertises want to remain in their home and hope to get their mortgage reworked, Grant Fletcher, a certified financial planner in Lodi said they should consider alternatives. ‘Homeownership is the American dream, but when the American dream becomes a nightmare, we have to see if there is a better option.’”
The Modesto Bee. “Foreclosure statistics for 2009 show home losses leveled out in Stanislaus, San Joaquin and Merced counties. Far fewer homes were repossessed by lenders last year than in 2008. But housing counselors say record numbers of homeowners are seeking relief from mortgages they can’t afford. ‘We’ve seen no decrease in our counseling activities,’ said Martha Lucey, president of ClearPoint Credit Counseling Solutions’ Pacific region. ‘We had our highest-call-volume day the Monday after Christmas. We were shocked.’”
“University of California at Merced economics Professor Shawn Kantor also questioned whether 2009’s foreclosure statistics accurately reflect homeowner problems. More than 16 percent of Stanislaus County mortgages are 90 days or more delinquent, double the national average, according to First American CoreLogic.”
“Kantor said lenders may be delaying some foreclosures ‘for economic and political reasons.’ ‘They are managing the flow of foreclosed houses so they don’t completely overwhelm the real estate market and further drive down home prices,’ Kantor explained.”
“Patterson real estate agent Heidi Vento said many homes already are empty, and she doesn’t understand why lenders delay putting those homes on the resale market. Vento said there’s a ’shadow inventory’ of bank-owned homes that first-time buyers can afford and are qualified to buy. ‘There is a huge number of people who want to buy homes,’ said Vento, last year’s president of the Central Valley Association of Realtors. ‘But the banks are controlling what goes on the market and when. We’re really just not sure why they’re holding onto all this inventory.’”
“John Karevoll of MDA DataQuick Information Systems, offered an answer: ‘Banks are just trying to minimize their losses.’”
The Union Tribune. “Home foreclosures in San Diego County surged last month, even as default notices dropped to their lowest level in more than a year, MDA DataQuick reported. To real estate agents hungry for inventory of low-cost foreclosures to sell to bargain hunters, the upsurge in foreclosures promises to refill empty lists of homes for sale, although agents have complained in recent months that banks aren’t moving quickly to list those properties for sale — possibly hoping prices will rise.”
“DataQuick analyst Andrew LePage said San Diego had the state’s highest large-county foreclosure spike in December. ‘It’s a mystery,’ he said of the increase.”
“Jeff Shaffer, director of acquisitions and investments at McKinley Partners, a local investment group, said the modifications might work if the economy picks up. But if that doesn’t happen, distress will return and send values back down. ‘The December numbers are giving people confidence that the housing market is recovering to some point of stability and losses due to foreclosure are starring to subside,’ Shaffer said.”
“But he said a new sign of trouble is that lenders aren’t moving to file formal default notices against delinquent owners — both to carry out the Obama administration’s desire to get loans modified and to minimize the troubled assets on their books. ‘We’ll see how it works; it’s not sustainable for banks,’ Shaffer said.”
The LA Times. “So far, thousands of California borrowers have had their mortgages modified through Obama’s Making Home Affordable program, but only 7.8% of those modifications were permanent through Dec. 31, according to government data. If the majority of borrowers who have received temporary loan modifications are unable to make those changes permanent, another surge of foreclosures could follow.”
“‘Given what we see in terms of the number of distressed properties that are in the pipeline, we do expect that foreclosures will mount as borrowers are not able to make it from a trial modification to a permanent modification,’ Celia Chen, senior director of Moody’s Economy.com, said. ‘This will cause home prices to start falling again.’”
“‘If a borrower is deeply underwater, he doesn’t want to be in the home,’ said Laurie Goodman, senior managing director of Amherst Securities. A loan modification would give the borrower more time, she said, ‘but there is no reason to stay in your home, and you save a lot by just walking away.’”
“Agreeing to settle 29 class-action lawsuits alleging predatory lending, the Ameriquest group of subprime lenders has pledged $22 million to repay aggrieved borrowers and their lawyers — a fraction of its payments in previous suits before it shut down as the mortgage meltdown set in. The agreement potentially affects 712,000 borrowers from what once was the nation’s largest subprime lender, based in Orange County.”
“Because nonbank lenders such as Ameriquest sold their loans, they maintained very little capital and had few assets to recover when they closed up shop, said Benjamin G. Diehl, a deputy attorney general for California who helped craft the states’ agreement with Ameriquest. ‘Unfortunately, there isn’t much left for borrowers,’ Diehl said.”
“The settlement includes no payment from the estate of Ameriquest founder Roland E. Arnall, a billionaire who died in 2008, or from the Wall Street firms that funded subprime lenders and transformed the loans into securities that proved toxic when the housing bubble burst. ‘The abettors on Wall Street . . . got away untouched,’ said Christopher L. Peterson, a University of Utah law school associate dean who has testified to Congress about his research into subprime lending.”
The Acorn. “New regulations passed by Sacramento legislators and federal housing leaders will discourage mortgage fraud and make home buying safer, but the laws might also lead to higher borrowing costs and continued sluggish sales, some industry experts believe. One of the bills, introduced by Sen. Fran Pavley (D-Agoura), makes it illegal for California mortgage brokers and lenders to mislead customers on their loan applications. ‘It’s critically important. The crash of the housing market and impact on the local economy when people lose their homes affects all of us,’ Pavley said.”
“Jeanet Moltke is a Calabasas resident and a Realtor who has been involved in real estate for more than 20 years. She said the new laws should have been established years ago to prevent fraud. But mortage fraud wasn’t the only cause of the real estate crash that began in 2008, Moltke said.”
“‘Brokers weren’t alone, there was the supply and the demand. The bubble burst because home values declined and people had taken all the equity out of it,’ Moltke said.”
The Bakersfield Californian. “Appraiser Kirksey J. Newton Jr., who is fighting to keep his appraiser’s license, on Monday defended his choices in the inexact art of estimating home values, and blasted the media and regulatory authorities for dragging him into the ‘frenzy’ over mortgage fraud allegations against disgraced former real estate agents David Crisp and Carl Cole.”
“Newton insisted that with the exception of some minor errors that did not affect the ultimate valuation, he stood by all but two of the reports prepared by his company, Bakersfield-based San Joaquin Appraisals. The report on the Heaton Street house suggested a valuation of $910,000 in 2006, but did not explain why that figure was 87 percent higher than a February 2004 sale price of $487,500, according to the state’s official accusation. Another report valued the 10,454-square-foot Three Bridges Way property at $785,000 in 2006 based in part on a sale identified as comparable even though the other property was 40 percent larger.”
“‘Knowing what you know now, including this investigation, would you do anything differently?’ defense attorney Ernest Price asked.”
“‘No,’ Newton replied.”
“When California Deputy Attorney General Gillian Friedman asked what Newton did after learning about the alleged misuse of his name, he replied that he said nothing to William Drabick, senior property appraiser and investigator for the state. ‘I wanted Mr. Drabick to do his own investigation,’ he said. ‘It was a frenzy. The media went crazy. It would have been like saying the dog ate my homework.’”
The Fosters Daily Democrat. “Back in 2006, comedian Juston McKinney and his wife were ready to buy their first home. It was at the peak of the housing market and they were living in Los Angeles at the time. They figured they’d start looking around L.A. and then proceed east until they found something they could afford.”
“They checked out Pasadena first. It was beyond their reach. Then they looked into Nevada. Then Arizona. Homes out there were still too pricey. So they continued pressing eastward. How east? They bought a home in New Hampshire.”
“‘We couldn’t afford anything on the coast, though, so we had to retreat west a bit,’ he said.”
The bubble burst because home values declined and people had taken all the equity out of it,’ Moltke said.
NOOOO, really?
The bubble didn’t burst because home values declined. It burst when prices got way too damn high for anyone.
I just hate to use the word ‘decline’ in home prices, when what is occurring is a ‘return to normal’.
It’s OK to buy now, though, as the Obamanomics Team has cooked up a plan to support housing prices (aka collateral values) going forward.
Yes.. and in another development, Congress will repeal the law of gravity in an effort to revitalize the space program.
While most people polled believe the government can and will do both, the true aim and possible outcome of the proposals remain in some doubt among economists on the one hand, and scientists and engineers on the other..
I just don’t get it. $4,400/month for a house in Pittsburg CA? That’s over $50K a year. With taxes being what they are the couple had to pull in a huge amount just to make ends meet.
Pittsburg CA is a tiny suburban ghetto on the delta a huge distance from any jobs, about halfway between SF and Stockton.
Yeah, I had to go there a few years ago to defend my company in a small claims case and it was EXHAUSTING getting there from the Oakland airport.
You didn’t just ride the BART?
Since I came up from LA and wasn’t familiar with anything East of Oakland, I thought a rental car was the better move. I had to go up and come back in the same day!
It looks like the Pittsburg BART station is about 4 miles west of downtown Pittsburg, which presumably is where the courthouse is located. I’m not sure if there even ARE any taxicabs in Pittsburg.
BART is a real useless system for many people. The largest city in the Bay Area - in fact the largest city between LA and Vancouver BC - is San Jose. The BART system makes no connections in San Jose. BART is as useless as a Baltimore-Boston corridor rail system that makes NO STOPS in NY City.
Another way of looking at this is that San Jose is the largest city in the entire US west of the Mississippi and north of Los Angeles.
“The BART system makes no connections in San Jose.”
Pretty dumb. When we lived in the Bay Area (during the height of the tech mania), we avoided San Jose like the plague for that very reason — i.e., you needed to budget two hours extra driving time for the freeway gridlock encountered as you approached San Jose.
Since no one in San Jose works, all they need is a Post Office to deliver their checks.
Each county in the Bay Area was allowed to vote to allow BART into their county. At the time the voters in San Mateo and Santa Clara County (San Jose is in this county), voted no on BART being allowed into their counties.
SFBAG,
Actually Santa Clara County originally wanted BART and voted for it back in the 1960’s. But the NIMBY’s in San Mateo county - lying in the only path between SF and SC counties - voted it down and blocked it. Santa Clara county even voted in a BART tax to pay for it. With no BART they diverted the tax to the bus system.
I was 10 years old when BART was first built in circa 1964. When I left San Jose after living their my whole life - at age 53 - BART was still a promise never to be kept.
It’s a real sore subject to me.
You don’t understand how ’special’ Pittsburgh is, and how many people were moving there to enjoy the ‘lifestyle’, it was an ‘up and coming’ town that was being ‘revitalized’.
Overall, he said, Wells now has more than 15,000 staffers working on “home preservation” efforts.
Wow, the housing crash has created 15,000 new jobs!
I wonder if these are part of the “200K jobs created or preserved” that Obama’s been going on about.
Uh oh. Looks like HAMP, aka Operation Extend and Pretend, is starting to show some stress fractures. Can they hold the evil Shadow Inventory back long enough to cash their massive bonuses?? Tune in next week kids, and drink your Ovaltine!
“Patterson real estate agent Heidi Vento said many homes already are empty, and she doesn’t understand why lenders delay putting those homes on the resale market. Vento said there’s a ’shadow inventory’ of bank-owned homes that first-time buyers can afford and are qualified to buy. ‘There is a huge number of people who want to buy homes,’ said Vento, last year’s president of the Central Valley Association of Realtors. ‘But the banks are controlling what goes on the market and when. We’re really just not sure why they’re holding onto all this inventory.’”
And while those homes are empty, they’re not being repaired. Or maintained. Banks just aren’t into that sort of thing. Oh, did I mention that vandals, squatters, and other up-to-no-goods are also attracted to vacant properties?
Somehow, in the midst of this reality, there are some deluded bankers who think that holding these houses off the market will somehow raise their value.
Why sell and realize the loss when you can hold it on the books forever at whatever value you want since mark-to-market was suspended?
Even better, I bet most banks are considering the REO on their books as appreciating at a 10% clip per year. Why sell it and miss out on that appreciation!
That is the irony, accounting value stays flat or goes up as actual value declines.
Why sell and realize the loss when you can hold it on the books forever at whatever value you want since mark-to-market was suspended?
Ding…..ding…..ding…..
We have a Winner!
A house that sold for 750k a few years back near me but was taken over by the bank 12 months ago is now finally on the market. It is listed for 250k. Apparently while it sat abandoned some entrepreneurs turned it into a meth lab. The lab was discovered after a violent assault occured on the property two months ago.
Slim makes note to add meth lab rats to the category of up-to-no-goods.
I don’t know where you live, but in WA state, you don’t want to buy a house which has been a meth lab. I think it stays on the title forever- almost like a salvage title on a vehicle.
Meth labs use toxic chemicals. They permeate the walls, the floors, the ceiling. It’s like buying a small Superfund site.
“Even though they are significantly underwater, the couple want to hang on. ‘We would love to stay in this house,’ said Steve Alparone. ‘We’ve got a lot of sweat equity in it. We’re not looking to make any money on it, just looking to stay.’”
Welcome to debt slavery. Work 1 FT and 2 PT jobs, never take a vacation and eat raman noodles to pay a mortgage that will never get below the value of the house.
Sounds pretty good for Megabank, Inc, though — especially the news that Uncle Sam is going to backstop the value of collateral. Good time for flippers to go out and buy ten or more houses for buy-and-hold speculation purposes.
Don’t forget weekends spent investing “sweat equity”…
The entire United States of America is now officially “house poor” because of all of these twats that think we should keep house prices propped up. My anger is high this afternoon.
Hey, there. You just insulted twats. It seems to me that quite a few guy-parts were involved as well.
I can feel your pain. I am struggling today.
Got mine back right after lunch. Realized that
my mind had been swept away last night while watching some empty suit mouthing vapid platitudes, the shock has just worn off ..laughing.
There was an older black woman on the subway tonight discussing her plan for committing bank fraud. She was talking to her acquaintance. She was going to go to multiple banks on the same day and try to get lines of credit. She wouldn’t post any collateral and if they asked for any she would yell at them. She figured she would then default on all of them.
She joked that she would make it so Barrack Obama had to declare her too big to fail. She said that and laughed.
Her friend thought her prospects were dubious. She was confident. I just laughed at how f—ing comical the whole thing has become.
NycityBoy,
That is a sad story and it shows what happens when corruption and injustice is condoned at our highest levels of government.
People notice these kind of things.
“…mouthing vapid platitudes,…”
The housing bubble was bad for American prosperity…
which is why we want to reflate it…LONG LIVE THE HOUSING BUBBLE!
We are going to be seeing the cause and effect of moral hazard
based on the course of action the Powers went for ,which was basically a cover-up and condoning corruption at all levels of the financial markets ,and even bailing out the culprits .
The days of your life being based on reward or punishment based on your actions are over, along with the rule of law .
I hate to say it but it was a joke watching the House yell at the Treasury Sec. for income tax evasion and now for not getting a good deal on the AIG bail-outs . I guess the House thinks that if it does a little after the fact yelling this erases all facts that they condoned those acts to begin with . These are the Lawmakers ,can you believe it .
When people see that Justice does not prevail on the culprits and Pillars of Society that are really wolves in sheep clothing ,they will justify their own moral undoing .
I see a lack of faith in the Prophet of Change! Don’t worry - Megabank and friends will find a way to keep housing unaffordable, no matter how badly they have to mangle our economy to do it! D’oh!
San Diego case about a year ago for a friend. She, divorced and no children with probably 60K+(?) per year, owned a small condo in eight unit set in a reasonable hood (Mission Valley) bought slightly before(?) the peak. She was slightly under(?) on market value/mortgage on a unit that probably cost max 350k.(?) and was (probably) alt-A. Investor group bought a package of mortgages including hers at 60% of face value–so they told her–and from whom she did not know. She was approached with a deal that claimed no government involvement. Proposal: They would forgive her principle by 50K, and arrange a 30 year fixed mortgage at marketinterest rate(?) and government insured at her cost. Her payments fell $105 per month. As best she could tell, the investor offered everyone ten to 25% principal writedowns to bring most positive and eliminating most risk since they all became government insured. I would guess they needed to write off some. Nevertheless, it is easy to see that investor was ahead by voluntary action which eliminated foreclosure risk. All second hand information, but I believe reliable.
Who ate the 50K x 8 = $400,000 loss? Oh, we the taxpayer did.
“Even though they are significantly underwater, the couple want to hang on. ‘We would love to stay in this house,’ said Steve Alparone. ‘We’ve got a lot of sweat equity in it. We’re not looking to make any money on it, just looking to stay.’”
The New Housing Deal:
1) We will ensure that housing prices don’t fall any further.
2) We will help middle class families refinance debt they are unlikely to ever be able to repay, by providing them with an ‘affordable’ monthly payment, provided their lenders agree to the terms.
3) We will give new entrants to the housing market $8K incentives plus low mortgage rates and (in many cases) govt guaranteed mortgages, to help them commit to debts they are unlikely to ever be able to repay.
4) All of this may turn out rosy for those who responded to our home ownership incentive programs if future inflation turns out ‘higher than expected.’
5) Potential downside: Today’s real estate price supports are likely to feed into tomorrow’s ‘lower-than-expected’ returns on current real estate investments.
6) It is almost certain to work out well for banks who own toxic mortgage assets, thanks to government-sponsored price support of the underlying.
7) Biggest fly in the ointment: Further market-distorting housing reflation efforts may backfire.
This scheme doesn’t sound like it could have been thought up by an economist. In case I am wrong, I am 100 percent certain it was a saltwater economist, as no freshwater economist would put that much faith in government-sponsored market-distorting intervention.
Are freshwater economists tastier than saltwater economists?
Bear, you are such a meanie!
What does an appraisor really do? They just write down a number that someone wants. There is no formula or calculation. They kept puttting down a higher number because the people that paid him wanted the higher number. It is not a science or even a profession.
Lets get rid of the appraisor and the 6% to the real estate agent. A house is worth what the customer wants to pay for it. If the customer wants a mortgage, then the mortgage company is paying for it. If the mortage company over paid for it, just walk away.
I totally agree with you on the appraisal.It is totally useless.The market value is set by a willing buyer and seller.
The original appraisal requirement arose of the bank’s due diligence requirements, not a desire to protect the buyer, to ensure that the required loan-to-value test is satisfied and there was no fraud of gross stupidity. It’s the only way the bank can confirm the value of the collateral it’s lending on. I for one don’t mind banks performing due dilgence, but agree most appraisers are pretty bad and just try to get at the number necessary to make whoever gave them the referral happy. As for commissions, agents get away with what is tolerated. Don’t be scared to interview many agents when selling your house, and insist on no more than X%. Also, never sign a exclusive buyer’s agent contract.
Appraisers are not bad!
Appraisers are as good as the information they use!
I was an appraiser for 30 years for the state, and I can tell you it is easy to appraise when the market is going up, but it is hell to appraise when the market is going down.
It is kind of like an investment analyst, when the market surges you can not make a bad investment, when the market is going down , you can not make a good investment.
I used to have buyers complaining to me about my appraisals being low, and never had one complain when the appraisal was over the purchase price.
I used to tell them why do you worry about what I say the house is worth, you have to pay for it, and live in it, and make the decision to buy it, I am just telling you what I think it is worth.
But, believe as you wish out there in fantasy land!
All of those appraisals would not have been challenged if the market kept going up.
But, lest you think I supported the stuff. I told realtors 25 years ago, that the prices were outrunning the ability of enough population to afford the higher prices, and they kept assuring me that it can only go up!
In my life I have bought four residences to live in. I still live in the one I bought in 1966, the other three I lost money on all of them when I sold to move to another location. So I know that prices don’t always go up!
JackO
“Kantor said lenders may be delaying some foreclosures ‘for economic and political reasons.’ ‘They are managing the flow of foreclosed houses so they don’t completely overwhelm the real estate market and further drive down home prices,’ Kantor explained.”
Who is the ‘they’ who are ‘managing the flow of foreclosed houses.’ And if ‘they’ are collaberating, doesn’t this constitute a violation of the Sherman Antitrust Act’s provisions against anti-competitive price fixing through withholding supply off the market?
In the long run, such efforts are prone to failure. Case in point: The Hunt brothers tried a similar scheme to corner the silver market circa 1980; how did that work out? I expect a similar fate awaits those speculating on successful housing bubble reflation efforts.
I agree that if this is happening it is certainly an anti-trust violation and that cornering a market seldom works out for the cornerers.
Having said that I still must interject the old axiom, “Don’t fight the Fed.”
You are right. Someone needs to sue the major lenders for price fixing.
“John Karevoll of MDA DataQuick Information Systems, offered an answer: ‘Banks are just trying to minimize their losses.’”
Provided they are acting individually, this is perfectly legal; my understanding is that coordinated action by banks to withhold supply from the market would constitute illegal price fixing under the Sherman Antitrust Act.
Thoughts?
That was my understanding of the Sherman Antitrust Act.
“Patterson real estate agent Heidi Vento said many homes already are empty, and she doesn’t understand why lenders delay putting those homes on the resale market. Vento said there’s a ’shadow inventory’ of bank-owned homes that first-time buyers can afford and are qualified to buy. ‘There is a huge number of people who want to buy homes,’ said Vento, last year’s president of the Central Valley Association of Realtors. ‘But the banks are controlling what goes on the market and when. We’re really just not sure why they’re holding onto all this inventory.’”
Sounds to me like anti-competitive price fixing.
PB
Absolutely. I re-read my printed info. from the DOJ antitrust synopsis & definitions website, that you supplied the link to one day, and it sure looks like collusion, doesn’t it. I read it again yesterday, in the doc’s waiting room.
I wrote the DOJ in favor in of their action against the NAR. We used an online broker to sell our home and got boycotted. In fact, a buyer was told they could use our home for a comp, but because it was out of the “network” (i.e. full commission brokerage) they could not buy it. How’s that for chutzpah. They told us what was going on behind our backs.
Maybe we need to spearhead a campaign for the DOJ to open an investigation against the REO collusion.
Don’t the dumshats at NAR realize their constituents would sell more houses if prices were affordable?
Yeah, but then they would have to work harder. They want ‘easy’ money, remember?
“John Karevoll of MDA DataQuick Information Systems, offered an answer: ‘Banks are just trying to minimize their losses.’”
Actually……no……banks are trying to avoid recognizing their losses……big difference.
They know there are losses and once they officially recognize them via an actual sale of the property, they will have to report serious decreases in net income - at best…..at worst, they would be insolvent (officially).
Rather than accept a nefarious collusion hypothesis, I am more willing to believe:
- the individual banks/lenders know they are in trouble
- they know their competitors are also in similar trouble
- the Feds know all the banks/lenders are in trouble
So there is absolutely no incentive (on anyone’s part) to sell anything……
See…..no collusion necessary…….
I only maintain that collusion is possible; not that it is necessary. And I am not much of a belief-driven guy: I would like to see bank regulators actively involved in figuring out why the inventory is hidden under the rug like an elephant. Instead, it seems as though regulators are turning a blind eye, presumably to help the banks hide their losses (as you yourself suggested).
Where and when does the money flood from the uncorked GSEs come into play?
Jan. 28, 2010, 1:35 p.m. EST
Treasury wants to speed up mortgage modifications
Treasury hopes new documentation requirement will appease critics
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — With expectations for millions of foreclosures on the horizon, the Obama administration is making changes to its $75 billion mortgage-modification program to speed up the conversion of troubled loans into more-affordable permanent loans, the Treasury Department announced Thursday.
The changes come as lawmakers on Capitol Hill and housing advocacy groups pressure the Treasury Department to help more people faster. These groups argue the current program isn’t working fast enough and it is not reaching a new group of troubled homeowners facing foreclosure — the growing numbers of the unemployed.
To speed up the process, the Treasury will require borrowers to provide key documents, such as proof of income including pay stubs and an electronic tax form, before the lender evaluates the borrower’s eligibility for modification program.
During the previous year that the program has been underway, many lenders began the modification process long before obtaining income documents.
As of Dec. 31, lenders have approved the conversion of more than 110,000 troubled mortgages from three-month trial plans into more-affordable permanent loans, the Treasury Department said two weeks ago. Roughly 66,000 borrowers have accepted the offer to convert from trial modifications under the program, known as the Home Affordable Modification Program, or HAMP. Roughly 902,620 homeowners are participating in the three-month trial program, where they have seen loan payments go down by over $500 a month.
“We want this to be about payment relief, not about chasing documents around everywhere,” said Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, in a call with reporters.
…
Wow. Bailing out the unemployed so they can continue to buy homes. Astounding. Yet we renters could be kicked out of our homes at a moments notice but still we have to pay for their bailouts.
“…although agents have complained in recent months that banks aren’t moving quickly to list those properties for sale — possibly hoping prices will rise.”
It sounds like a housing bubble reflation cargo cult has sprung up in the banking sector.
They will eventually tire of the wait. Plus an unintended consequence of reflation efforts could be that they may entice one or more of the banker men to break ranks.
After all, it’s very doubtful that true solidarity has blossomed overnight in the world’s most competitive business.
“…very doubtful that true solidarity has blossomed overnight…”
That’s why I smell collusion.
If even one of them “breaks ranks” — for any reason — and holds a fire sale, the comps will destroy the entire game. Therefore, somebody has to prop up ALL of them. Who’s doing the propping? I don’t know…
..hey wait… gosh n’ golly gee whiz doggone it you betcha, didn’t Fannie and Freddie just receive carte blanche? What a lucky break. Just in the nick of time too.
I smell collusion as well, just not from the banks.
So, how long can they keep it up? When is the tipping point? How many houses can they hide? When does one bank reach the point of no return when they have to unload them?
Edgewater, I doubt that solidarity in the conspiratorial sense of the word has sprung up, but they are all playing in the same economic situation, with the same accounting rules, swimming in the same pool, so to speak, so it’s hardly surprising that they’ve all developed the same strategy in response. It’s like a school of sardines when a tuna arrives on scene, they all dart away en mass - it’s not preplanned, it’s what they’re programmed to do. Banksters are like the sardines reacting to the tuna, some get devoured, but many escape. Course, if it’s humpback whales after them, they can dart all they want, but they’re all doomed.
I would agree with you, if the market were left to work its magic to restoring affordability. But all the intervention from the top seems designed to help cargo cultist bankers rekindle hopes that they will somehow do better by holding on to falling knife inventory until a recovery at some undetermined future point than selling it currently. I guess I am merely adding support to your hunch that the inventory withholding is more about a supply response to price collapse. But there is no way to know whether collusion is also part of the story without conducting some kind of inquiry.
Like a school of fish…I like that analogy. Still, it’s a race against time to see what occurs first: the bankers getting their asset price recovery or a great big freak out.
I’m rooting for the whales and the tunas.
I’m rooting for the whales and the tunas.
I’ll munch on some tuna while the whale does its business.
The first story has the people as unable to afford the payment of 3500$ is around a 500K loan around 5% or perhaps it is a teaser rate at 4% on 600K. Sounds like the kind of bubblenomics we are familiar with. This with one person having to quit an IT job for health reasons and the other laid off from a retailer.
What the hell? You had to leave an IT position to go work at trader joes? What the????
I’m wondering if they have an option arm that is being booked as paid at par and increasing in value, cause the debts getting bigger so its worth more. Right?
The 7-8% number sticks with me because that is, oddly enough, the percentage of the population that makes in excess of 100k. Hence, the people that could (barely) afford the higher prices.
What the hell? You had to leave an IT position to go work at trader joes? What the????
That’s code for he was laid off and couldn’t find another IT job.
Makes me wonder what the health problem was. Anything at Trader Joes must be more physically demanding than IT. Mental health?
I would suspect that the issue was mental health.
Sotto voce: I used to rent from a lady who worked for a NASA subcontractor. She was a computer programmer at the Goddard Space Flight Center. According to her, workweeks of 80-plus hours weren’t uncommon. They took quite a toll on the marriages of many of her coworkers.
After about a decade of this, she decided that enough was enough, and she moved to Tucson. She camped out with an elderly aunt while she cleared a plot of land she owned, then she built her house there.
It seemed to me that, but for living with the aunt (who was a real PITA), the house building and all of the manual labor that was involved was the perfect cure for whatever ailed her mind from the computer programming days.
That’s what I was thinking.
“Anything at Trader Joes must be more physically demanding than IT.”
Ever pull any cable, or do high climbs? Someone has to do it.
I’m just wondering what kind of “health reasons” would force you to leave an IT job–where you can sit in a chair all day, or sometimes even telecommute–and be able to work in a grocery store where you have to stand all day, lift heavy items, and walk around. Sounds fishy.
I worked in IT for 8 years. Sitting in a chair all day working at a desk is the quickest way to experience physical atrophy. Any number of things could’ve befallen the guy: carpal tunnel, morbid obesity, World of Warcraft addiciton, a lethal case The Smugs… who knows…
one or more of the banker men to break ranks
What, and ruin comps for the entire sector? That’s why Fannie and Freddie got carte blanche.
Over the long run, cartels are very unstable. Only notable exception I can think of is OPEC, and even that one has “dissenters” now and then.
That’s why Fannie and Freddie got carte blanche
Exactly……….up next, massive principal reductions, courtesy of the American taxpayer……..
Is this Obama’s “Home Ownership Will Make You Wealthy” program you are talking about?
Does TTT qualify? Maybe he can get a personal bailout on his underwater NY rental home…
Jan. 28, 2010, 1:40 p.m. EST
Highest foreclosure rate last year? Las Vegas
Foreclosures expected to peak in 2010: RealtyTrac
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — The Las Vegas metropolitan area suffered a foreclosure rate that was five times the national average and the highest rate in the country in 2009, according to a report on Thursday by RealtyTrac, an online foreclosure marketplace.
The 20 cities with the highest rates of foreclosure notices were all in California, Florida, Nevada and Arizona — states with markets that got extremely hot during the real-estate boom, according to RealtyTrac’s year-end report.
More than 12% of housing units in the Las Vegas metropolitan area received a foreclosure notice in 2009. Overall, 2.21% of housing units nationwide received a foreclosure filing, according to the data.
But the trouble isn’t over yet, said James J. Saccacio, chief executive of RealtyTrac.
“While it was expected that cities from states with the highest levels of foreclosure activity would top the charts, there is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we’ve seen over the past few years,” Saccacio said in a news release.
“Areas like Provo, Utah, Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S. average in 2009. And markets like Honolulu, Minneapolis and Seattle saw foreclosure activity increase at more than twice the national pace over the past 12 months — although all three of those markets still had 2009 foreclosure rates that were at or below the U.S. average,” he said.
Assuming the unemployment rate peaks in the first quarter of this year, unemployment-related foreclosures likely won’t peak until late this year or early next year, said Rick Sharga, senior vice president for RealtyTrac.
“We’re projecting that 2010 will be statistically the peak [of foreclosure activity] … 2011 will be better, but it won’t feel like a housing recovery until 2013,” he said.
…
Me too. Smells like Eau de Sherman Antitrust Act.
Funny how the MSM never seems to discuss the possibility of collusion, no?
They’re in on it. You need only look at the commercials during the political shows and the news.
..One of the bills, introduced by Sen. Fran Pavley (D-Agoura), makes it illegal for California mortgage brokers and lenders to mislead customers on their loan applications…
“Mr. and Mrs. Phookbyer, I want you to understand that you cannot afford this.”
“We understand.”
“You are borrowing yourselves into oblivion.”
“Yeah.. we know that.”
“You’ll never get out from under this loan. Chances are we will have to foreclose on the house within a year or two.”
“Yes yes for the tenth time, YES! We KNOW all that. Now would you just show us where to sign?”
This proposed law sounds like a dangerous thing. Ultimately, you have to be responsible for a contract you signed. Allowing people to get out of what’s agreed to on paper because they claim to have been “mislead” by a salesperson will undermine the value of a signed contract.
How did we get to this silly idea that it was even acceptable to make a bad loan when Banks/Lenders are under duty to the depositors not to make bad loans . The borrower has to have proper ratios and the loan should be based on verified income at the time of the loan ,not a
notion that their income will go up therefore maybe they can afford the loan in the future ,or increase in real estate values will cover it .
I guess when silly stuff has been around long enough people forget
just simply how they use to do it for all those years when the
secondary markets were stable . The idea that you give credit card
lines of credit without income verified to back it is absurd also .
All the new fangled remedies are silly because its just a matter of going back to the past ,in terms of underwriting anyway .
Wall Street just wants to keep their Casino games alive . I am increasingly becoming more concerned about the games Insurance Companies play in terms of leverage also . Insurance Companies use to be really conservative with their investments/
Since everyone has had their beliefs confirmed about the availability of TBTF insurance (except for a couple of hapless losers), I am expecting more high risk gambling Wall Street activity going forward. Risk is not bad in and of itself, but when it involves throwing away hundreds of billions of dollars with the expectation to be made whole, there is a big problem. And nobody seems very interested in even discussing this these days, much less fixing it.
PB…Risk is bad in terms of lending IMHO . All risk has to be
accounted for in lending . For instance ,if a person is higher risk on credit ,they have to put more money down to offset that risk or pay more perhaps . You can never take away the risk of the person losing their
job or having a health emergency ,but you can weigh the risk of a loan in the now .
Investment is more the area where risk is more allowable . Its clear that Wall Street took Lending and exposed it to unnecessary risk .
This BS after the meltdown in which the Market Makers were saying that they were repricing risk was a fancy way of saying that they didn’t rate it proper to begin with or underwrite it proper .
They will never have a functional secondary market for lending until they correct all the New World faulty lending concepts . The leverage game was one of the biggest violations of the financial markets ,not to mention making bets with no capital to back it .
Lending is a prudent act because not only do you want your principal back but you want your yield on that principal . With investment you are going in knowing that the yield on principal could be higher because of the risk of capital .
Talk about pricing risk . You know you get lower yields in a CD account because it’s insured by FDIC and the lower the risk the lower the yield . These junk loans were marketed as if they were almost as safe as CD’s . For Wall Street to pull in this amount of funds for lending and for the whole lending community to breach their duty to have quality control or prevent fraud combined with faulty product and loan underwriting was a major breach in fiduciary duty to protect the funds of depositors or investors in highly rated MBS’s offered . The money would not of been there for lending without that breach or without what people would call a Ponzi-scheme .
They can’t even stop the bad lending without it putting a wrinkle in their objective to re-inflate the real estate market so they are forcing the taxpayers to take on that risk where the private markets wouldn’t at this juncture .
Once government starts to interfere with all that needed to correct ,they messed up the natural correction . Oh how wonderful it is for the banks /investment firms /insurance companies to think that they have a automatic bail out
option with the government .
Had they solved this crash by standing law at the time ,all the Entities that engaged in these faulty business models would of been sued silly and beg for reform ,after they went BK of course .
Instead we get what we got ,and the corruption is alive and kicking as well as risk not priced right ,but this time the bag-holders aren’t the culprits of Wall Street/Lenders .
The whole way this crisis was handled was a attempt at cover-up and a clear attempt to transfer the loss to new bag-holders . Why couldn’t they of just offered restitution
to the right parties after they got rid of the corrupt players that have the nerve to be demanding and blackmailing and they are still in tack after the bail-outs. These players should of had their personal wealth taken also and with many jail time was in order .
This was not a light weight thing that they did to the financial markets . If you kill people in a financial way ,they don’t die like in a product liability case ,but the damage is
very destructive ,and some people do die as a indirect result .
This proposed law sounds like a dangerous thing. Ultimately, you have to be responsible for a contract you signed. Allowing people to get out of what’s agreed to on paper because they claim to have been “mislead” by a salesperson will undermine the value of a signed contract.
I agree 100% with this. Either we have to assume that adults have the mental capacity to understand and sign their name to legally binding contracts, and hence to be responsible for honoring the terms of those contracts, or it’s time to institute a certification process of some kind that measures basic financial literacy and logic. Failure to become certified = you’re not allowed to sign any contract of any kind, i.e., we treat you as if you were a minor.
Very kind of you to find the silver lining here, Professor Wheaton.
However, your notion that “Strong-arming is US” will somehow listen to your advice and act on it seems rather whimsical.
Obama Can’t Do Much For Housing (Unless He’s Magical)
5:40 pm
January 27, 2010
A foreclosed home is shown, Sept. 16, 2009 in Owosso, Mich. (Paul Sancya / AP Photo)
By Frank James
Many experts have warned that the economy won’t truly recover until housing rebounds once and for all. And for housing to turnaround, foreclosures will have to decline significantly and home sales will have to rise strongly.
While the Obama Administration has tried its hand at turning the housing tide by tackling foreclosues, it has so far mostly failed.
William Wheaton, professor of economics at the MIT Center for Real Estate, doesn’t think it’s for lack of trying. Instead, the housing problem is less about housing and more about jobs.
On All Things Considered Wednesday, host Madeleine Brand had the following exchange with Wheaton:
MADELEINE: Do you think the president is doing enough to help the housing market?
WHEATON: Unfortunately, there’s not a lot that can be done. Many of the foreclosures that we have going on right now are really due to job losses. Unfortunately, the best way to fix that is to fix the economy.
MADELEINE: Can’t the government do something in terms of mitigating the rate of foreclosures? It does have several federal programs aimed at doing that although by many estimations not too successful.
WHEATON: I think that’s the problem. Almost every proposal to fix the problem has a severe drawback. Mortgage lenders really don’t like to fix mortgages because they find that a large fraction of mortgages fix themselves. And they also find that once they fix a mortgage there’s a fairly high probability of redefaulting. So you’re just going to have to really strong arm them if you want to get anything done there.
WHEATON: Another proposal is that the government should simply provide some cash assistance to pay people’s mortgages who are temporarily unemployed. That has the disadvantage of creating the disincentive not to go back to work. So it’s really not easy to fix this.
There is a silver lining, according to Wheaton. Despite what he clearly believes is media hype about homeowners en masse walking away from homes value less than their mortgages, Wheaton doesn’t this is going to happen.
WHEATON: There are several recent research reports suggesting that people have to have a great deal of negative equity — 20, 40, 50 percent — before there’s even a small probability they’re actually going to walk from the house they were trying to build a life in and default.
…
WHEATON: Unfortunately, there’s not a lot that can be done. Many of the foreclosures that we have going on right now are really due to job losses. Unfortunately, the best way to fix that is to fix the economy.
This is pure nonsense! There’s a LOT that can be done!
- Audit all mortgage applications with stated income and make sure the applicant has paid income tax on the stated amount. This will increase our tax revenue in a fair and just way, and lower our deficit
- Stop prolonging forclosures and get house prices to return to what the market will bear w/o government intervention. This will create more affordable housing for honest, hard-working Americans
- Eliminate the $8,000 first-time homebuyers credit. The program is overrun with fraud (at least $1 Billion in fraud so far, according to the WSJ) and we don’t have the money to give away at this time.
The President and Congress can do all of these things right now.
Reuven…..They are not going to punish the liar loan mania borrowers
or even the ones that are committing loan crime now . The simple reason is because Wall Street /Lenders committed the same crimes
and even more serious ones . The Politicians are not going to want it pointed out that they allowed these culprits to have the free rein
to mess up the financial systems of the World and for it to be clear just how incompetent and bought off the Politicians are .
They stated that the major grounds for repealing Glass-Steagall was because Citi Bank wanted to merge with Travelers Insurance? So what, you repeal long standing law because a Corporation wanted something . Those entities have been wanting them to repeal that law from the day they enacted it in the 30’s because it limited the Casino games they could get into . What a bunch of jerks . I went back and read the statements of the opposing
Senators to repealing that act and there was only about 6 of them .
Until some kind of sanity prevails ,we are going to get more of the same on stupid remedies to this big mess .
Sounds like we are in store for reflexivity until the point of societal collapse. Oh goody!
Off topic, but it confirmed the outsourcing problem.
We should be producing engineers and scientists instead of financial crooks.
http://www.edn.com/article/CA6716463.html?nid=3351&rid=8683549
US chip industry expected to be second only to retail in job declines
Only retail department stores will lose more jobs than the US chip industry over the next decade, according to government projections. And American executives might be joining the flight.
By Tam Harbert, Contributing Editor — Electronic Business, 1/26/2010
Even for those who have watched semiconductor manufacturing move offshore over the last 25 years, the numbers are startling.
United States semiconductor and other electronic component makers will lose 146,000 jobs between 2008 and 2018, according to a report published by the US Bureau of Labor Statistics (BLS) in December. The report ranks the chip industry second highest in terms of projected job loss over the next decade, just below retail department stores. (See “Top losers” below.) And that’s on the heels of a loss of 217,000 semiconductor jobs from 1998 to 2008. All told, the BLS figures estimate US semiconductor manufacturing employment will have shrunk from an annual high of 676,000 in 2000 to 287,000 by 2018.
“My reaction when I saw those numbers was, ‘wow,’” said John Ciacchella, a principal and technology lead at Deloitte Consulting LLP who has been involved in the semiconductor industry for more than 20 years. “It’s a pretty big number when you put it in that context.”
Perhaps a U.K. Conservative victory in May will be needed to jump start international reform of the global banking system from a cabal of pirates back into a service industry that actually provides benefits to societies, rather than imposing ongoing costs of systemic theft?
Jan. 28, 2010, 3:51 p.m. EST
Davos bankers quietly push back against regulation
By William L. Watts, MarketWatch
DAVOS, Switzerland (MarketWatch) — Bankers may not dominate Davos like they once did, but they’re quietly pushing back against efforts to crack down on size and scope of their activities.
International bankers will meet with U.K. Chancellor of the Exchequer Alistair Darling behind closed doors at the annual meeting of the World Economic Forum in the Swiss Alps, according to British press reports. See full coverage of the World Economic Forum meeting in Davos.
Darling has made clear he’s unenthusiastic about replicating President Barack Obama’s call last week to limit the size of U.S. banks and to bar them from a range of activities, including trading for their own accounts and operating hedge funds or private-equity funds.
IMF First Deputy Managing Director John Lipsky calls on world leaders at Davos to continue working together on banking regulation, in an interview with Dow Jones Newswires’ Geoffrey Smith.
The opposition Conservatives, however, applauded Obama’s proposals. The Conservatives lead British Prime Minister Gordon Brown’s Labour party in the polls that likely will occur in May.
The British government in December announced a one-time tax on some bank bonuses, while the Obama administration has introduced a levy on big banks. U.K. Prime Minister Gordon Brown has backed calls by Germany and France to impose a tax on financial transactions, a move opposed by Washington.
Bankers got an earful Thursday night from French President Nicolas Sarkozy in his keynote address at the annual meeting. Sarkozy backed Obama’s call to crack down on banks but warned against individual countries going it alone, saying measures must be coordinated by the Group of 20 powerful industrialized and emerging-market nations.
…
Ken-
Good information. Thank you. Even if the numbers are off, it’s certainly a pattern.
Hi all, I want to stay in Miami for a month or maybe a week. Does anyone where should I look for opportunities to sublet/rent…?
Now that bonus season is over, is the January stock market swoon any shock?
* Wall Street Journal
* JANUARY 29, 2010
Stocks Hit Roughest Spell Since Early ‘09
BY TOM LAURICELLA
The rosy view of a global recovery that powered markets in 2009 has dissipated, leading U.S. stocks to their worst month in nearly a year, pushing down commodities prices and scaring investors out of the euro to the relative safety of the U.S. dollar.
…
What happens if Chindia tightens and the Fed plays fast and loose?
* The Wall Street Journal
* ASIA MARKETS
* JANUARY 28, 2010, 11:38 P.M. ET
Asia Falls as Worries Mount
By SHRI NAVARATNAM And LESLIE SHAFFER
SINGAPORE — Most Asian stock markets were trading sharply lower Friday after Wall Street’s losses, with the tech and resource sectors leading declines.
Japan’s Nikkei Stock Average of 225 companies was down 1.5%, South Korea’s Kospi Composite was down 1.6%, Australia’s S&P/ASX 200 fell 1.9%. In Hong Kong, the Hang Seng Index shed 0.6%, while on the mainland, the Shanghai Composite added 0.7%. Dow Jones Industrial Average futures were five points lower in screen trade.
Tech plays were reeling after a forecast cut from Qualcomm, a bigger-than-expected revenue drop from Motorola and apparent disappointment over Apple’s iPad.
In Japan, Advantest, which makes chip testing equipment, dropped 8.5%, after the company surprised the market by saying it expects to post a loss for the fiscal year ending in March. The company reported a net loss of Y5.67 billion for the fiscal third quarter, compared with a loss of Y7.76 billion a year earlier.
Samsung Electronics dropped 1.9% despite swinging to a profit of KRW3.05 trillion in the fourth quarter from a loss of KRW20 billion a year earlier. The company said it expects earnings to improve in the current quarter on stronger chip prices.
“I think analysts expected the results to be a bit higher. But I should say the results came broadly in line with expectations,” with higher than expected handset profits offsetting lower than expected LCD profits, said Song Myung-sub at HI Investment & Securities.
Bucking the market in Korea, Hyundai Motor added 0.9% after reporting fourth-quarter net profit nearly quadrupled from a year earlier, coming in at KRW945.5 billion, while net profit for the full year more than doubled to KRW2.962 trillion.
Resources plays around the region also fell amid rising risk aversion. In Australia, heavyweights BHP Billiton dropped 2.2% and Rio Tinto was down 3.5%. In Hong Kong, Zijin Mining shed 1.1%.
“The tightening coming out of China and the expectation of more tightening coming out of India are making people concerned that what had been a disproportionate source of growth over the past year is starting to be under pressure,” said Bob Browne, chief investment officer at Northern Trust Global Investments.
…
Should be an interesting day on Wall Street tomorrow, for sure! I predict either Uncle Buck or Mr Market will have a really bad Friday, and perhaps some of both.
market pulse
Jan. 29, 2010, 1:10 a.m. EST
India RBI ups banks’ reserve ratio by 0.75 points
By V. Phani Kumar
HONG KONG (MarketWatch) — The Reserve Bank of India Friday raised commercial banks’ cash reserve ratio by a higher-than-expected 0.75 percentage points to 5.75%, signaling intent to roll back its easy monetary policy stance amid inflationary pressures. The RBI left its benchmark lending rate unchanged at 4.75%, as expected, but sharply raised its forecast for inflation as measured by the wholesale price index to 8.5% by the end of March from 6.5%. The central bank also increased its gross domestic product growth projection for the current financial year ending March 31 to 7.5% from 6% earlier. The 30-stock Sensex dropped as much as 2%, extending losses in a knee-jerk reaction after the announcement, before recovering as sharply. It was down 1% at 16,132.23.
…
Why “ought” the U.S. economy be “flying out of recession”? Just because some central banker spreads around some propaganda about his green shoots fantasy makes it so?
Down with the elitists (like Kimberley Strassel, for instance); up with the misnamed populists!!!
* The Wall Street Journal
* OPINION: POTOMAC WATCH
* JANUARY 28, 2010, 7:14 P.M. ET
Bonfire of the Populists
The president’s anti-Wall Street rhetoric is not good for the economy, and may hurt his party politically.
* By KIMBERLEY A. STRASSEL
The problem with fires is that they can blow in any direction. Consider the White House, which is seeing a backdraft from the anti-Wall-Street flame it has been dousing with gasoline.
His agenda on the ropes, President Obama made a calculated decision to pivot to populism. The Massachusetts Senate race highlighted a fed-up public. The White House strategy: Channel that anger away from itself and to easier targets. Its opening shots were a new tax on banks, new restrictions on banking activities, and Mr. Obama roaring, “We want our money back!”
The president fed the fire with his State of the Union address. Americans are angry at “bad behavior on Wall Street.” It is time to “slash the tax breaks for companies that ship our jobs overseas.” Lobbyists are trying to “kill” financial regulation. American “cynicism” is the result of “selfish” bankers, CEOs who “reward” themselves “for failure” and lobbyists who “game the system.” (No mention of Cornhusker Kickbacks or backroom union deals, but never mind.)
For an administration that claims to know its political history, the White House appears to have misread at least one decade. FDR was re-elected in 1936 for many reasons, but among them was his fiery denunciations of “economic royalists,” “economic tyranny,” and “economic slavery.” Business knew it was in the president’s crosshairs and put its capital on strike. The economy didn’t recover until the war.
Team Obama is already witnessing a repeat. The U.S. economy ought to be flying out of recession. Yet bank lending is sluggish. Companies refuse to hire. Business is going elsewhere to raise capital: China last year outstripped the U.S. as a center for initial public offerings. The market gyrates on Washington’s latest political drama.
…
Wall Street led us into this economic disaster and will not lead us out. It wants nothing more than to continue the looting, at least as long as there’s something to loot.
With regard to banking for Obama, going populist could be both good politics and good policy. Of course, sound policy and reregulation to match the rhetoric would be helpful.
Oh, the plutocrats are threatening to go Galt on us?
We should be so lucky. Let’s rebuild the economy without them. It may take a bit longer, but that is not a bad thing if that means the new economy is a lot less bubbly.
The elitists are really riding their high horse now over at the Wall Street Journal. It might be time for me to cancel my dead tree subscription in this right wing reactionary rag.
My question: Why didn’t he mention that this was the worst SCOTUS decision since Dred Scott?
* The Wall Street Journal
* OPINION
* JANUARY 28, 2010, 11:49 P.M. ET
Obama Owes the High Court an Apology
The justices were there as a courtesy to him.
BY RANDY E. BARNETT
In his State of the Union address, the president of the United States called out the Supreme Court by name for sharp condemnation and egged on his congressional supporters to jeer its recent decision:
…
What’s wrong with Dred Scott v. Sanford? At the time it was a reasonable interpretation of the Constitution as it then stood.
It took killing off 1/3 of all the men in the South and the 13th, 14th, and 15th Amds. to overturn Dred Scott.
Economics expert: “The stock market would collapse if the market perceived the Fed’s independence was in jeapordy?”
Professor Bear: “Why is that?”
Economics expert: “Because that is what reams of peer reviewed economic journal articles have concluded.”
Professor Bear: “I guess it must be true then.”
Bloomberg
Bernanke May Have Harder Fight Defending Fed After Confirmation
January 29, 2010, 12:40 AM EST
More From Businessweek
By Scott Lanman
Jan. 29 (Bloomberg) — Ben S. Bernanke, who won Senate approval for a second term as Federal Reserve chairman over a record number of opponents, may now have a tougher fight against threats to the central bank itself.
Lawmakers are considering legislation to remove a shield from congressional audits of monetary policy and strip the Fed of bank-supervision powers, measures that Bernanke opposes.
The debate over Bernanke’s performance has focused lawmaker attention on the powers of the institution, said Vincent Reinhart, a former Fed official. The scrutiny comes as politicians respond to voter anger over government bailouts of Wall Street firms, including the Fed’s role in rescues of American International Group Inc. and Citigroup Inc.
“I can’t imagine that there will not be separate legislation or some piece of legislation that is the Federal Reserve Reform Act of 2010,” said Reinhart, who served as Bernanke’s monetary-affairs director until 2007.
The Senate voted 70-30 yesterday to confirm Bernanke, 56, to a four-year term starting Feb. 1, after White House officials moved to shore up support that wavered last week.
Bernanke received the most opposing votes by a Fed chairman since 1978, when the office first became subject to Senate confirmation. In 1983, Paul Volcker was confirmed for a second term by an 84-16 vote. Before 1978, the Senate voted to confirm members of the Fed’s Board of Governors, and the president picked the chairman from among them.
‘Public Distrust’
“The opposition to Bernanke isn’t about the guy,” said Reinhart, a resident scholar at the American Enterprise Institute in Washington. “It shows the public distrust of the institution.”
U.S. stocks, bonds and the dollar would collapse if investors perceive Congress violating the independence of the policy-setting panel, former Fed Governor Laurence Meyer, now vice chairman of Macroeconomic Advisers LLC, has said.
…
After twenty years, Japan is still struggling to leave the ‘D’ word in sight of the rear view mirror.
Economic Report
Jan. 28, 2010, 9:00 p.m. EST
Japan economic data mixed; deflationary pressure rises
By MarketWatch
TOKYO (MarketWatch) — Japanese economic data Friday painted a mixed picture of a country struggling to keep its nascent recovery on track, with deflationary pressure increasing, employment and spending data showing signs of improvement, and industrial output increasing but falling short of expectations.
For January, Tokyo’s core consumer price index — considered a leading indicator of the nationwide CPI — fell 2.0% from the same month last year, according to data from the Ministry of Internal Affairs and Communications. That was worse than the 1.8% decrease expected by economists surveyed by Nikkei and Dow Jones Newswires.
…
Las Vegas: Most foreclosures of any city in 2009
Las Vegas - call it Foreclosure City
By Les Christie, staff writerJanuary 28, 2010: 5:55 AM ET
NEW YORK (CNNMoney com) — Cities in the so-called Sand States dominated the foreclosure rankings in 2009, with the 20 worst-hit metro areas residing in Nevada, Florida, California and Arizona.
Las Vegas had the largest number of foreclosure filings of any city last year, with 12% of its households receiving at least one during the year, according to RealtyTrac, the online marketer of foreclosed homes. That was more than five times the national average.
Cape Coral, Fla., was a close second with 11.9% of its households; Merced, Calif., was third with 10.1%.
The good news is that all top 20 cities recorded declines in foreclosure filings in the last three months of the year.
The bad news is that the foreclosure plague is spreading beyond these usual trouble spots, according to RealtyTrac’s CEO, James Saccacio. And, nationwide, foreclosures grew 21.2% during the year.
3 million hit with foreclosure notices in 2009
“Areas like Provo, Utah, Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S. average in 2009,” he said. “And markets like Honolulu, Minneapolis and Seattle saw foreclosure activity increase at more than twice the national pace over the past 12 months.”
He added that the new foreclosure wave seems more grounded in traditional foreclosure causes, such as job losses, than those recorded in the Sand States, where they were much more “bubble related.”
In cities such as Las Vegas, Phoenix, Miami and Bakersfield, Calif., soaring home prices of the mid 2000s drove homebuyers to desperate measures, such as taking on hybrid adjustable rate mortgages, also called toxic ARMS. These products only remained affordable as long as home prices grew; once prices stopped rising, borrowers began to default.
New hotspots
Some cites that had escaped the worst of the default demon in prior years saw foreclosure filings — default notices, auction sales and bank repossessions — soar. The Gulfport area of Mississippi recorded a year-over-year spike of 784%. Houma, La., recorded a 379% gain, and Roanoke, Va., filings jumped 352%.
…