‘No Secret’ Prices Are ‘Out Of The Realm Of Affordability’
Some housing bubble news from Wall Street to Washington. “Golden West Financial Corp., one of the last major savings and loans in California, agreed Sunday to be acquired by North Carolina-based Wachovia Corp., the nation’s fourth-largest bank, for $25.5 billion in cash and stock.”
“‘The mortgage business is weakening across the country. I think the California housing market is due for a crash, prices could drop at least 20% and housing starts fall by 30%. And their mortgage portfolio is characterized by these untraditional loans, these payment-option ARMs, and interest-only mortgages,’ Richard X. Bove, an analyst for Punk, Ziegel & Co. said. The risk to Wachovia comes if the housing market suffers a crash. That may be why the Sandlers chose to sell their thrift now, he said.”
“Golden West is a heavy borrower from the San Francisco Home Loan Bank. Bove said that bank was likely to curtail lending because of proposals that would restrict the federal housing-finance system. ‘So the deal could be problematic, and we’ll just have to wait and see if in fact the housing market in California does blow up before we know if Wachovia is overpaying,’ he said.”
From Paul Muolo, “This past week was one of the ugliest in recent memory for the industry. Ameriquest Mortgage, once the nation’s largest subprime lender, laid off 3,800 workers, and closed its traditional retail network; all of it. Washington Mutual shut its traditional correspondent division, and late this past week Merit Financial of Washington State was on the verge of going bust. Meanwhile, sources tell us that two publicly traded mortgage REITs are on the auction block.”
“Lennar Corp. has cancelled a contract to buy a full city block in Oakland for between 500 and 850 units of housing, raising questions over whether the city’s downtown development boom is losing steam.”
“Real estate players widely acknowledge that the Bay Area condominium market is cooling. ‘It’s no secret the market has slowed and there seem to be fewer buyers,’ said Adam Lubow with a Pleasanton firm that helps developers set prices and otherwise market their properties. ‘A lot of product has gotten priced out of the realm of affordability.’”
From Bloomberg. “Federal Reserve Chairman Ben S. Bernanke is trying to do something the central bank has never accomplished: engineer a perfect three-point landing for the high-flying U.S. economy.”
“‘If he pulls it off, it will be a first for the Fed,’ says David Jones, a former New York Fed economist, author of four books on the central bank.”
“There’s reason for skepticism. Even under Chairman Alan Greenspan, who came the closest to avoiding the mistake of over- tightening, the Fed almost brought the economy to a standstill in 1995. The bank’s rate increases helped set the stage for the 1994-95 Mexican currency crisis, followed by a slowdown in U.S. growth to 0.7 percent in the second quarter of 1995.”
“‘Right now, I’m not as concerned about the Fed overshooting on interest rates,’ says Susan Phillips, a former Fed governor. ‘The key risk is inflation.’ John Ryding, chief economist at Bear Stearns, says the declining dollar and rising prices for gold and other commodities underscore that the Fed is running the risk of having too easy a policy. ‘The Fed is still providing too much high-powered liquidity to the economy,’ Ryding said.”
“‘The committee has gotten very nervous about overshooting,’ says Laurence Meyer, a former Fed governor. ‘They want a slowdown in housing, but they worry that it may get out of control.’”
just checked forclosure.com and they are showing 21,141 properties in san diego in some tpe of forclosure tax liens etc.can this be true.
That is an incredible figure — hope it is true, but I doubt it, as it implies the inventory of homes for sale could double in the span of a few days (or maybe that it is effectively twice as high as the MLS suggests)…
Although watching this bubble burst is like watching a pool being drained in slow motion, it appears that this week is unique in that the media appears to REALLY be jumping on board. Not to let a day pass without a housing bubble headline on the top of CNN-Money, today they restored “Buffett: Real estate slowdown ahead” as one of the two headline stories from their homepage.
dude. stfu please.
Tourette’s alert!
Cowering in the face of truth is unbecoming.
Nobody here cares about your politics. Catch a hint.
Nobody has mentioned any politics. Your paranoia seems to be getting the best of you. (or I am)
You old sack of undigested Metamucil, you’re so old, the key on Benjamin Franklin’s kite unlocks your apartment!
Stop pretending.
Hey Cunni, we’re getting tired of your tongue lashing already.
Then take a nap.
Please, give it a rest. See a psychiatrist and grow up if you can not do it on your own!
No doubt!
Just a hint…do what I tell my two 4 year-olds when something similar happens: IGNORE EACH OTHER.
I suggest an uneasy truce. Focus on the housing bubble.
Sunset, we’ve got to get these political hacks off the board. They pop up everyplace and try to drag everybody off-topic. The topic could be “deep dish pizza” and he’d be here raving about partisan politics.
lmao
Every once in a while, two people in a forum will engage in a childish spat that no one else is entertained by, no one else cares about, and after a while no one else reads. From now on, if I see either of your names at the top of a post, I’ll just skip it.
you mean “parmisan politics”
Deep dish is for godless commies… Thin crust in a brick oven with fresh-made mozzarella is the One True Pizza..
I think they’re hillarious and add color to this blog.
Interesting how some blog personalities clash, ain’t it?
Interesting Catch-22 for the Fed. Raise rates and other interest rates go up. Stop raising rates and other interest rates go up because the market perceives the Fed isn’t controling inflation with rate hikes.
The fed is paralyzed. They are between the proverbial rock and hard spot. (of course, they put themselves there).
Raise rates: risk a housing collapse and secondary recession/depression. (Wall street is already starting to mumble about this, laying the blame in advance) If housing collapses and we go into recession/depression, it could pull down some big banks/hedge funds/Institutional investors/etc… causing deflation and no way out as raising rates won’t be enough to re-exapnd money supply (the so called “pushing on a string phenomenon)
Don’t raise rates: Watch the explosion of commodity prices across the board (not just gold and silver, also agricultural and lead and other metals and you name it). Also watch as other foreign central banks decide not to purchase our debt. Oh yeah, and our dollar implode.
This is why we won’t see a 0.5% increase (could then be blamed for collapsing housing) and also why we won’t see a hold in rates yet either (would be seen as being soft on inflation).
Hence, watch the 0.25% raises continue, at least until SOMETHING happens that will allow the Fed to appear to be reacting out of necessity to economic fundamentals, as opposed to driving the economy one way or another.
clouseau
oops, LA Story beat me to it! (and was more concise)
Thanks Clouseau, but your point about commodities is right on the mark.
Huge risk with commodities causing an inflationary spiral, IMO. Soaring prices for metals will eventually work their way into PPI and CPI stats. That will spark inflation fears that will drive more money into commodities as a safe haven, which will drive inflation numbers up further. If this gets going, it will be very difficult for the Fed to get out in front of it.
Don’t you think it is possible that the price of commodities and precious metals, etc. are merely reflecting the vast amount of money injection being done behind the scenes? (think M3 no longer being reported with 8%+ increases in money supply reported prior to discontinuance)
Yes, auger-in, I think you hit it on the head.
You lost me with your post: You seem to be saying that if the Fed raises rates, then depression (or at least deflation) occurs. If they don’t, then inflation occurs.
It sounds like there’s a lot of room then for the outcome. The Fed can set the dial on interest rates for somewhere in between inflation and deflation and come out OK.
Tough time to be Fed chair now is. Act or don’t and you blamed will be. Yoda BB the best of luck wishes.
I’ve got an idea though:
What if (I know I sound crazy here), the Fed simply raises rates really slowly, 0.25% at a time in perpetuity… while speaking in roundabout ways about how they are targeting housing to get the message out there, hoping to get orderly control of housing… and also making it seem like they’re hawkish on inflation…
and at the same time quietly expanding money supply so that we can have a little stealth inflation so that nobody’s the wiser? I mean, first they’d have to stop publishing M3 or we’d all see it… but it seems like that could work… no?
Nah.
clouseau
Clouseau,
The American people would never fall for that!
Doug Noland, a column writer on “The Prudent Bear”, makes the interesting point that the Fed is no longer really incontrol of the money supply. The Fed might want to tighten and try to tighten, but too many other entities can now “print money” (i.e. debt), and the Fed’s no longer in the driver’s seat.
Clouseau, You and your crazy conspiracy theories. Just because all you mention is happening right now doesn’t make it true. Ah, wait a minute…
The M3 number can be found on http://WWW.economagic.com Search MZM (month to Zero Maturity) MZM = m3
Clouseau,
I think you’re exactly right. Been getting that feeling for a while now, myself.
In this way, it **just might** be possible to engineer a soft landing (not necessarily for the housing bubble, but for the credit bubble & economy, in general).
We can only hope…
20% drop? That would still leave us at bubble prices, at least in my area. Several years of gains would have to be shaved off before prices are brought back down to earth.
Prices will return to the mean, it just won’t all come in the form of falling nominal prices. The initial drop will likely be followed by a long period of stagnation, where prices are flat or slightly falling, while the rest of the economy catches up (inflation). In my area in the late 1980’s, inflation adjusted prices fell by about 30% between 1988 – 1997; 10% from falling home prices and 20% from prices staying flat while inflation caught up. My guess is that the initial drop will be more significant this time because of the crazy lending practices and already low interest rates. Last time around the Fed had room to cut rates and cushion the fall. Many people who find themselves upside down, but can afford the mortgage payment, will stay put unless they are forced to sell (job loss etc.).
We might not have the time needed for inflation to do the dirty work for us.
something around $1 Trillion + of mortgages are going to reset in the next 12-18 months or so.
Last time we had the “luxury” of 4-5 years of steady inflation to erode the value of homes, so that nominal prices only had to fall 10% or so. This time, we may only have 1-2 years or so due to the resets.
Although we can never count out hyperinflation. In that case, 1-2 years could be plenty of time. But I don’t think that the inflation needed for this would be fun for any of us!
clouseau
This looks a dumb deal for Wachovia. Paying a premium with the RE market past its peak. (like paying for a race horse past its peak, the results will be disappointing in the future.). Buying a company from the founders when they want to sell is rarely a good buying opportunity. Wachovia bought the Money Store from its founder in the late 1990’s and shut it at a loss. Looks like a repeat on this one.
Another example of CEO’s being overpaid. Several people on this blog can do better deals than this one by Wachovia. I know I can do a better job doing deals at 1/10 the salary of the CEO.
Oh, if this deals ends up bad. The CEO will have resign and bow out with a $50 to $ 100 golden parachute. Joe and Jane sixpack worker bee in the company will get laid off to cut costs, “to get the firm back to profitability.”
Meant $ 50 to $100 Million parachute.
A dumb deal indeed, trying to buy market share when the market has clearly been turning for the worse.
“With the takeover, Charlotte, N.C.-based Wachovia would pick up a 285-branch network spanning 10 states that would fill a void in the company’s operations. Golden West earned $1.5 billion last year, primarily from making the adjustable rate mortgage loans that have been its bread and butter for decades.”
Wachovia is buying a ticking time-bomb, Layoffs and huge losses in the near future. A repeat performance that no executive will be held accountable for.
2 thoughts here on these points:
1. People in finance (pronounced fuhnants) have no clue that there is a housing bubble, or that housing prices are even high. They are just going by what the appraiser says (I am not joking about this, they truly are clueless). I have a friend who owns a mortgage bank in OC, and he just tells me, “People are always buying houses”. Sure, just not as many as the past 3 years.
2. Lennar Corp is one of the biggest bagholders. They bought the El Toro Air Force base in Irvine, and are proceeding to build another city over the next 3 years. Good luck with that one.
John Doe
El Toro MARINE Corps Airstation. USAF not involved.
I used to live up in the hills over it. My parents bought an acre with nice ranch house for $50K in 1970. Sold for $185 in 1979. Dumb.
I tell you now, MCAS El Toro may make a come back. Lennar might be oh so happy to have Uncle Sam take that Albatross off it’s hands come next year
no joke. sell your Wachovia stock NOW, if you haven’t already… someone is going to end up with all those upside down foreclosures
So, first large layoofs in CA followed by smaller layoffs in NC?
top race horse off his peak is a “stud” horse, results could be great!!
Funny.
I can’t believe Wachoiva is buying Golden West. They’re just asking for a bank failure. Next thing we’ll see is a Washington Mutual and Wells Fargo merger. Well, I better not joke about it because it might happen.
Mark my words, Wells Fargo and Washington Mutual are going to cause a systemic breakdown in the banking system. Those two banks basically invented the subprime loans.
Think JDSU buying SDLI. Get the picture
there has to be explanation for this acquisition,, Wachovia management can’t be this stupid.. maybe someone here can provide valid reasons
This has to have been in the works for a long time. Barring that, there is no rational explanation.
The only possibility I can think of where this acquisition makes sense is that the majority of homeowners who have the Option ARMS in the Golden West portfolio are the types of “sophisticated investors” (yes, I hate the term as well but you know what I mean) that this type of loan was originally intended for. By that I mean borrowers with a decent amount of (soon to diminsh) equity, excellent income, reserves up the you-know-what.
I cannot imagine Wachovia propsing such an acquisition without poring over a good size sample of Goldenwest’s loans and scrutinizing them based on how they were underwritten but then again, who knows?
How can you scrutinize anything these days, with all of the liar loans and fraudulent appraisals in the mix? The only way I can see that they’ll be able to guage the quality of the portfolio is to watch the default rate as the market cools. Soaring appreciation over the past few years has hidden a lot of bad lending.
Youn scrutinize a liar loan by looking at the job description in the loan application, compare it to the verification of employment contained in the file and determine whether the amount of income stated/fabricated is “reasonable” (before responding please note the parentheses).
Similarly, when looking at the appraisal, you take a look at the comparable sales in the subject property’s in the vicinity and determine whether the value was grossly overstated and to what extent the values in that neighborhood are likey to be affected when values decrease.
By looking at a large number of loans in the portfolio you look at exactly how many loans were approved by stating/lying about everything versus verifying: If a disproportionate number of loans were stated, the credit histories of the borrowers were questionable, the amount of liquid reserves they showed was barely enough to qualify then naturally there would be a layering of risk that would render such a portfolio dubious. If, on the other hand, a large number of loans were originated whereby tax returns/ W2s were provided, bank statements showed plenty of liquid assets and reserves, credit scores and histories were above average and the loan-to-value averges of the originations showed enough equity to weather a downturn in values then such a portfolio would be less risky an acquisition.
You forgot World did and does their own appraisals - generally a lot lower than other appraisers in an area. And they stopped doing loans in most of LV in late 2004 in areas in LV where they still loaned max LTV 60%.
?
Is Golden West a correspondent lender of World Savings?
Ignore. I just read tom stone’s post.
WB has a LONG reputation of doing very stupid acquisistion going back over a decade. Anyone remember the $$$ store? That was a laugher… How about CoreStates? They ( then First Union) drove more business to other banks simply because existing CoreStates customers hated FU and did not want to be a part of the new union. Even the WB/FU “merger” was a joke. FU needed to change their name because they were hated so much in the industry. So they “purchased” Wb and then took WB’s name.. This company is very aggressive and IMHo cares nothing about its customers or employees. Regarding the timing, they are a grow at any cost organization. I bet they are using mosly stock to buy the company so it ain’t the CEO’s $$$$ , just the shareholders. “Crown Jewel” my arse.. it’s an ARM time bomb of a hot potato and it just got passed to WB shareholders.
Ah, yes, the Money Store. Jim Palmer. One of my best shorts ever.
Oh yes I have worked for companies that hate their employees. The good news is that the hate the customers more.
Is this the case here?
I think your last sentence nails the point. Many of the guys making some of the stupidest business moves in the history of the planet these days (like top management at WB) will get paid millions of dollars this year no matter how badly their shareholders get screwed. It is what economists call a principle-agent problem; the principle (shareholders) gets screwed because the agent’s (CEO’s and top management’s) incentives are terribly misaligned by excessive and poorly targeted executive compensation.
The CEO of Wachovia just wants to be the CEO of a bigger bank. That’s all
Who cares about fundamentals.
Plus, he gets a huge bonus, and if the deal goes bad, he has a golden parachute to save his a**
How much do these CEOs (and boards make?) BONE HEADS. Not worth it if THEY paid 30M ea. to be CEO. They are ruining their companies
I think that that is what the Fed has been doing for the past 12 months! The bubble situation has only worsened, though. Better to have jumped by 0.5 percent a few times in early 2005. Then Phoenix RE would not have appreciated that extra 30%, and it wouldnt fall so far from the peak.
No “.25 point and pause” announcement from the Fed tomorrow. We’ll get our additional .25 and nothing from the Fed that indicates tightening is over. The market is going to hate it because many are banking on the “pause” announcement. Of all the rate hike announcements of the last few months, this should be the one to keep our eyes on.
My roommate is moving to D.C. this summer and is thinking of buying a townhome out there.
Where can I find some evidence to show her that it’s still bubblicious out there? Or at least enough info to convince her that she should make really low offers? She believes that Phoenix is in housing bubble, but doesn’t believe me about D.C.
Easy - purchase price should be 200x rent. Maybe a little more, but not by too much. In parts of DC, it’s closer to 400x. That means that renting is so much cheaper, that appreciation either must shortly stop (and possible move backward), or rents must leap forward by massive amounts. If she can find any evidence that rents should double, then by all means she should buy 5 houses, not just one.
IMHO 200X rent is still pretty steep but probably not for DC. I was under the impression it should be like 150X, mabey a little more. If it is 200X, there are still plenty of decent prices where I live and ,IMO, my area is pretty bubbly.
Is she moving to D.C. proper or Northern VA or MD? Let her make up her mind based on her situation. I have a friend who sold last year and bought back in. He’s only 5 miles from work now and he was 50 miles away, so that’s better, and he also has a little mutt. Renting would not have appealed to him and as he bought in this area in 1998 it was a zero-sum game to him.
Northern Virginia April Statistics
April, 2006 Market Statistics
http://www.nvar.com/market/marketstats/apr06/index.html
Alexandria City SFH
Contracts -29%
Settlements -38%
Listings +242%
Arlington County SFH
Contracts -32%
Settlements -9%
Listings +145%
Fairfax County SFH
Contracts -35%
Settlements -22%
Listings +307%
Loudoun County SFH
Contracts -46%
Settlements -40%
Listings +286%
Prince William SFH
Contracts -45%
Settlements -35%
Listings +316%
Condos/Co-ops
Loudoun
Contracts -33%
Settlements -20%
Listings +517%
Prince William
Contracts -39%
Settlements -32%
Listings +607%
Tell your roommate to rent for a year when she first arrives. That will give her time to learn the area, the various neighborhoods, the commutes, and so on. Things are just too expensive here to make a bad mistake on a location you don’t like. And during that time, she can see where prices go.
OK smart people out there, I need some info. I posted this listing on my blog, whose price has been dropped from $620K to $490K. Here is the listing http://tinyurl.com/ffhbw
It was posted on Bubble Meter, where somebody astutely pointed out it requires a short sale application. I know this is a long time-consuming process, but why would you advertise this in the listing? Are they legally obligated to do so? Can someone expalin how this works in simple language, and if this presents a good opportunity fo rosmeone looking for a home in which to live (not flip)?
It’s called full disclosure. Also let’s you know that these people are in foreclosure or on the brink of it and that during the escrow process the bank can foreclose on it. Doubtful but I have seen it done.
If you see a listing like that it’s really out of the sellers hands at that point a lot of times the seller has already left the scene and doesn’t really care what happens. The price you pay, the broker’s commission, everything is determined by the bank. Why, because you are asking the bank to take a short on the money owed them. If a person likes the house and gets a good deal. i don’t see why it wouldn’t be a good opportunity. The only risk is the bank saying no to your price.
Thanks guys…I’m all about full disclosure! So is it very lender-dependent? Say this guy listed at $620K to make a profit, but now is at $490K, which is obviously below what he owes if he’s doing this. So what now? They apply for a short sale, and if it’s approved, how does the lender figure out what they’ll accept for the home? They can’t apply until they have an offer? These people bought in 2003 for $285K, and are underwater for over a half a mil? Talk about borrowing against your home! Damn–if this is what’s to come, I guess we should all familiarize ourselves with the term.
For those in the know, how does the process begin? I assume you make an offer, but that requires an application to the lender? Who pays? I read somewhere that sometimes the buyer can be responsible for the overage on wht the home sells for and what it’s appraised for? If this is true, what’s the incentive to buy? Do I come in with a major lowball offer, like $300K? All the web resources I’ve been able to find are vague, so it must be for a reason. If the seller is already planning on taking a loss and a big hit to their credit, what they hell do they care if the property goes for $1? Like Mrincomestream said, the seller is out of it, so they’ll present any offer that comes to the bank? Whew!
Not exactly. Any loan amount that the bank forgives is counted as income to the seller. Coming in on a lowball offer is usually only good after it becomes REO.
Unfortunately, there are so many Carlton Sheets wannabe’s out there that REO isn’t really a good deal any more. It guess it’s all attributable to disintermediation real-time easily accessible information. In some cases, REO sells for MORE than it’s really worth.
Low-balling won’t do much good for this particular house. You’ll still need to wait a few years before you can find good deals. If you’re serious, check out prices in 2009 or 2010.
John Doe
REO=? Sorry…but even if it is income, I thought it’s up to the lender? Or does the seller have to accept the offer first? Seems to me alot of work for a still-overpriced house that is no better than many others around that aren’t short sales, and THEY aren’t selling either!
So a “short sale” is the first step when an FB is overleveraged, has to sell, and can’t make the payments anymore? If these people can’t make the payments, wouldn’t the bank already be foreclosing? And if they can, why are they short selling? It’s just hard to grasp the logic of this–is that maybe the reason for the recent $60K drop==they just said screw it, we’re f’d anyway so let’s just drop it a bunch and hope we get an offer? You’d think they’d at least price it more attractively, like well below comps (which this is not), for all the extra work you have to do as a buyer…
REO= A property owned by the bank, A short sale although damaging looks a lot better on the credit report then say a forclosure or a bankruptcy.
The advantage of buying a short sale for a buyer really comes into play when the market is bottomed out and the seller is competeing against R.E.O.’s to get their property sold.
Banks don’t like inventory and I’m sure a lot of lenders no matter what they are printing in the paper see the writing on the wall.
The reason why they are not pricing well below comps is because the bank won’t go for a short sale if the price is too far down of what the percieved market is. The agent orchestrating the short sale has to present comps in the area. A lot of time those comps are verified against what the R.E.O’s department broker’s bpo suggests and then a decision is made as to whether a deal is accepted or not ie: if the bank is making over book value or breaking even on the deal they will accept a short sale.
I’d be wary of getting involved in REO or foreclosure or short sale property until I knew what I was doing. There are sources of information- but a couple paragraghs on a housing blog is hardly one of them.
Someone last week said that you can buy in N.VA. for the same cost as rent. I suppose if you put 50% down this may be true. This same expert does not know what a short sale is (?).
REOs are hard because the bank isn’t going to go with a deep discount until they are feeling pain. The first few houses they reposess will still be on the books as a profit (and various waterfall models and the like will let them believe this is an expected statistical event.)
Once they have twice the repo inventory that their model prdicts, and they’re paying repo firms to evict owners, and their inventory is sitting unrented, and the copper pipes, etc, are getting stolen in the middle of the night, and the liability from teen-ages using their houses as party locations becomes obvious, and their debt is getting downgraded, then they will start entertaining offers of 30 cents on the dollar (assuming they can’t just bulldoze the properties they own.)
I did short sales for sellers quite a bit in the early 90’s. They are a royal pain, but ultimately can results in good price (based on comps) for the buyer and a way out for the seller. If you get involved be prepared to be very patient. I bought my last house in 2000 as a short sale for about 100k under comps, but the escrow took almost 4 months!
We will see more and more short sales as this progresses. During the last bust, they were so common that our board of realtors made it a mandatory disclosure on the listing form. I am just beginning to see a few pop up in the mls around here.
Another situation: I’m looking at a place that is in preforeclosure. Seller is late on mortgage payments and taxes at least 30 days.
His debt is less than his asking, but greater then the comps. Why would he sell to anyone under his ask? Wouldn’t he just give it back to the bank instead of brining cash to the closing?
Is a short sale only when the property is REO?
No a REO property and a Short Sale are two very different beasts. Why give it back to the bank if there is a chance of selling?
No offense, but if his debt is greater than the comps, assuming you mean recent comparable sales, why would you consider even his debt as a buying price?
Chip,
That’s what I’m wondering. What is the strategy when someone owes more then you feel the house is worth and is in preforeclosure.
Do you just wait until the bank gets it?
Yes. At least. Maybe you just walk away and find another place. Most of these banks are not in panic mode yet. Once they are, and that could take a year or two, then you might get a great deal. If I were faced with what little I know about this particular scenario, I’d walk.
Prices have risen so much so fast here in Florida that I think it would be very possible to buy a short sale and still get screwed, equity-wise, as prices retreat further. Is this possible in the D.C. area? That fact that a lender is losing money on the sale is not evidence that the property is fairly valued or undervalued — if comps ramped up quickly prior to the last sale of the property, the lender may have lent too much based on a “desired” or padded appraisal. I’d at least do my homework on that part — tax records are a good place to start. Or pay someone to sleuth it.
‘Right now, I’m not as concerned about the Fed overshooting on interest rates,’ says Susan Phillips, a former Fed governor. ‘The key risk is inflation.’
Hey Susan, inflation has already hit the price of automobiles, energy, healthcare and homes. The only left to fear now is that an accurate assessment is published.
It’s still a penny for my thoughts. And 2c for my opinions. So, there is no inflation.
# of “reduced” listing in craigslist is a rough correlation, at least in terms of psychology (key as per shiller)
Miami craigslisting showing reduced were growing at a regular pace (30-50/mo)and then in the last 4-5 weeks, this has simply caught fire..
from 400 in march end it is now 708…A rough measure of sellers’ desperation..
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these are all valid indicators for the wise, non-sheople. unfortunately, there are still alot of sheople….
the wachovia-golden west deal is supposed to close in the 4th quarter,but i doubt it will at least at that price.world saving is the lending arm,and they are notoriously for “loose” underwriting…i’m being nice,and tight on appraisals.these appraisals are all based on comps in a severely inflated market,which has begun to deflate…..so if the wachovia auditors do their job”due diligence”…..wachovia will either walk away,or drop the price offered subtantially…i understand that there is a lot of stock,and not much cash on the table in this deal…so maybe they can trade inflated paper for inflated paper.when i said world has loose underwriting,i meant it,but i’m sure the incidence of encouraging fraud was no greater than at other institutions…maybe a few loose cannons like ameriquest ….
Tom,
The powers to be at both banks have too much $$$ to be made by the merger. It’s going through. Wait for the info on the buyout packages for senior execs.
My knowledge of World Savings is different. I’ve had some personal experience with their operations, and I took out some loans from them in the mid-90’s. They were a very “no-frills” (cheap) operation back then. The didn’t have Post-It notes for their back-office people - it was too wasteful. Employees were supposed to use scratch paper. You had to go through several hoops just trying to get a box of paperclips. Lights were turned off in various parts of the building to save on energy costs.
Golden West/World Savings survived the S&L crisis due to their solid loan underwriting and expertise with ARMs. As was mentioned earlier, they use their own appraisers. They hold just about all of the loans they underwrite. Unless things have changed a lot over there in the past few years, I would hardly call them “notorious”.
However, the co-CEO’s of Golden West are very savvy, and have controlled the company for ages. That they are looking to sell now is an interesting sign. Perhaps they also see real estate values topping out and rough times ahead, and realize now would be a good time to get out. Or they could believe that their business model has done as much as it could, and to get bigger they needed to merge. I wonder if the Golden West CEO’s will stay on and help run the company, or retire?
BillB — useful insights. Thanks.
It would be wise of them to retire and leave the company before the ARMs reset and strangle GDW’s shareholder value.
The last photo (#78) in the photo gallery is an eye-opener and should scare the remaining fools out of any intention to buy a home. Was it taken in CA?
re the WAMU blip above: what is a “traditional correspondent division” and where is this mystery organization located?
I keep hearing from friends, etc. that WAMU is closing or has closed Seattle offices and departments (home loan specifically) but so far no official word.