Where The Rubber Hits The Road
Readers suggested a topic on the current housing bubble issues. “How will the standoff between Treasury and FHFA resolve? And will the Romney camp catch wind of this and take a stand? I have no idea where he stands on housing issues, and I tend to pay attention.”
One asked, “How about discussing how divergent our experiences are in the R/E arena, as it relates to our world(s). 1) How much do you and significant other (if any) make (AGI). 2) How much tax (as a %) did you pay last year vs. the Romney’s 13.9%. 3) (Optional) What kind of work you do and physical location. Number and type of deductions?”
“For example, I am retired, my wife is an invoicing specialist. We are both around 60. Our AGI last year was a paltry $43K, yet we paid more than Romney at 15%+. We are in SoCal and our house is paid off. Nothing left to itemize.”
Another question, “I wonder if the fiscal cliff will effect the housing market? I also wonder if the bottom has been reached in places like Detroit, Phoenix, and Cleveland. Is it time to invest in a vulture REIT? If you wait to long, you could pay a much higher price, and no I’m not a troll. When the housing bubble starts again, and you know it will, how much smaller will it be after an entire generation has been burned?”
The Idaho Statesman. ” Tony Koonce, 25, bought a home in Twin Falls three years ago because his parents said it was a good idea. ‘Then about a year later I had a job change, and I had to figure out what to do with the house,’ said Koonce, who is single.”
“Koonce, director of marketing for a Boise property management firm, says he’s renting out his Twin Falls home but has no desire to buy another. ‘It comes down to flexibility versus stability,’ he says. ‘As opportunities arrive, I don’t want to be bolted to the ground by an asset.’”
“Koonce reflects what may be a national trend. People in their 20s and 30s have made up the majority of home buyers for decades. But some economists say today’s Millennials may have cooled to the idea of homeownership because of the recession, a slow recovery, uncertainty about the future and financial burdens such as student loans.”
“Tim Cornwell, a partner in the San Francisco office of the Concord Group, a national real estate consulting firm, says Millennials may be delaying home buying, but most still believe in homeownership. When it comes to settling down, Millennials want to own homes where their children can be safe and amenities like parks are nearby, he says. That means Boise and similar places with high quality of life and a low cost of living could capture younger home buyers, especially if there are jobs to support them, he said.”
“‘At the end of the day, people are saying now is the time to buy in this generation,’ he said. ‘We know this is the cheapest housing is going to be for our foreseeable future.’”
Public News Service. “Oregon’s new Foreclosure Avoidance Mediation Program went into effect last week - maybe just in time to keep a few older homeowners from losing their property. A new report from AARP’s Public Policy Institute says more young homeowners may be delinquent on their mortgages - but the delinquency rate has increased faster among people 50 and older. The study says nationwide, three million of these older owners are still at risk of losing homes.”
“Angela Martin, executive director of Economic Fairness Oregon, says adjustable-rate mortgages can take much of the blame. ‘These were loans that were inappropriate for their financial place in life, and when it came time to adjust to that higher mortgage payment, they didn’t have the income to sustain it. And the promises of, ‘Don’t worry about it, you’ll refinance when that time comes…’ fell through.’”
“Martin says lack of home equity limits a person’s ability to fix their financial problems - and can change their plans to move, downsize or retire. ‘You now owe more on your home than it was worth, so you can’t sell it without permission from your bank. So, you’re tied to your home, unlike Americans have ever been tied to that home. It’s no longer your nest egg, and it’s no longer something you can liquidate when the time comes.’”
The Crookston TImes. “Kjell Thompson has long dreamed of owning her own home, but until recently she thought it out of her reach. Her life changed about a year and a half ago, when she bought a four-bedroom rambler, financed with a U.S. Department of Agriculture Direct Home loan that gave her a 30-year mortgage at 1 percent interest. The loan covered all of her costs, with no down payment required.”
“Thompson, 38, qualified because of her low income and her need for safe housing. A single mother, she works three jobs and earns about $25,000 a year. ‘I just believed that we would wake up that next morning in our own home, and they would have a different perspective on life, and they did, and they do, and they’re proud of me,” she said. “And every day we pull in this driveway it’s a dream come true, and every night I climb in my bed and know this is mine. … And I am so thankful.’”
“There are almost 24,000 active USDA mortgages in Minnesota. That’s up 52 percent since 2009. The popularity of USDA home loans has exploded in just the past three years, doubling to nearly 1 million.”
From KPCC. “Edward DeMarco, the acting director of the Federal Housing Finance Agency, isn’t backing down when it comes to his long-held view that the two government mortgage giants, Fannie Mae and Freddie Mac, shouldn’t reduce loan principal for underwater borrowers. As the FHFA points out, ‘more than 50 percent of the Enterprises’ — that’s Fannie and Freddie — ‘underwater borrowers are located in five states, and more than 70 percent of the Enterprises’ underwater borrowers are located in ten states. In contrast, these five states account for 29 percent of the U.S. population, and the ten states account for 39 percent of the U.S. population.”
“To the FHFA, this means that underwater loans are not “evenly distributed.” Essentially, it doesn’t want to sign on to principal forgiveness nationally when the problem of underwater loans is isolated in states that have been disproportionately affected by the financial and housing crises. DeMarco is also reluctant to get the FHFA into the business of rewriting mortgage contracts, especially in states like California and Florida — which together account for a third of Fannie and Freddie’s underwater inventory: ‘Whether homeowners live in areas where house prices have fallen dramatically, perhaps fueled by extensive housing speculation or the collapse of the local economy; purchased homes at the top of the market with little or no money down; or refinanced, extracting equity that had been built up over many years; they are not responsible for the drop in house prices that has caused them to be underwater, but they are responsible for the contractual commitment to pay their mortgages.’”
“This is where the rubber hits the road. The FHFA is concerned that if it offers a national plan of principal reduction, it would encourage underwater homeowners, located in relatively few states, to give in to a moral hazard and look for ways to reduce their loans, even if they’re current or could benefit just as effectively from principal forbearance.”
From Forbes. “By Steve Berkowitz, CEO of Move, Inc., operator of Realtor.com. Millions of Americans, myself included, applauded when the nation’s five largest lenders and attorneys-general from 49 states reached a landmark $25 billion settlement last March. While the settlement was good news for distressed borrowers, the processing of foreclosures slowed dramatically during the 18 months of negotiations. The slowdown created a shadow inventory of more than 1.5 million shuttered homes ─ nearly twice the number of foreclosures sold last year and representative of about 39% of the 3.6 million+ foreclosures completed nationally since the start of the housing crisis in September 2006.”
“If this wave of foreclosures is released into local markets without concern for their impact on home values, many of our local real estate markets could be threatened. Thus, the long-awaited recovery, so critical to restoring value and equity back to our real estate economy and American homeowners, could saddle several major markets with foreclosures for years. A survey Realtor.com recently conducted found that more than half of all Americans (55.7%) are concerned that backlogged foreclosures will lower home values in their markets.”
“Our nation’s lenders and real estate leaders must work together to preserve the price stability gained over the past 18 months by controlling the flow of foreclosures back into for-sale inventory. By working together, lenders and real estate leaders can maintain the stability of our local markets by keeping another wave of foreclosures from sending America’s real estate markets under water.”
The Island Packet. “The Hilton Head area real estate market is considerably healthier than it was one year ago, according to a report by South Carolina Realtors. Sales of homes, condominiums and villas in June were up more than 60 percent over June 2011 and are up about 23 percent overall year to date. June’s surge — the highest increase of any of the state’s 16 regions for the month, according to the report — was accompanied by a 21-percent decrease from June 2011 in the average number of days homes spent on the market.”
“Hilton Head Realtor Charles Sampson partly attributed the spike in sales to banks’ placing distressed properties back on the market. ‘Sellers are saying, ‘I’ve waited long enough,’ he explained.”
The kids that can’t get jobs because you won’t vacate them can’t afford to overpay for your house to finance your retirement, so you can’t retire and vacate the job.
Quite the death spiral, literally.
The federal government likes to give people the impression it has a plan for these millions of house sales and downsizings from the retirees, but they can’t cope in reality. And the home builders can’t make anywhere near as much money on a 2BR 1-story shack that granma and grampa would need for their retirement years. No, the home builders will still crank out 3BR/4BR monsters, just like the pickle we’re in with GM (which only wants to crank out SUVs and trucks, since those are the most profitable).
Yup and yup.
You guys live in a world called reality.
FWIW, the Japanese have also jumped onto the SUV/Truck bandwagon.
Boom-and-bust cycle has characterized Sacramento real estate since 1976
Today we’re in the trough of the cycle, and the stage is set for home prices to rise again, economists say. Tight inventory, record-low interest rates, the most affordable home prices in years and the market already heating up in the Bay Area have started to drive up Sacramento area prices.
“Could (another boom) happen? Yes,” Case said. “Will it happen? A qualified ‘no.’ ”
The median-priced home in the city of Sacramento sells for 20 cents on the dollar compared to the median-priced home in San Francisco. That’s a bigger spread than a decade ago, when all those bargain hunters from the bay came here, according to tracking firm Zillow.
Those SACBEE comments are not bad either; lots of peeps “get-it” now.
“Tim Cornwell, a partner in the San Francisco office of the Concord Group, a national real estate consulting firm, says Millennials may be delaying home buying, but most still believe in homeownership.”
Too bad so many Millennials are broke, jobless and buried under a mountain of student debt. But maybe if they keep the faith, the membership benefits of the Ownership Society will soon grace their destinies.
“‘These were loans that were inappropriate for their financial place in life, and when it came time to adjust to that higher mortgage payment, they didn’t have the income to sustain it. And the promises of, ‘Don’t worry about it, you’ll refinance when that time comes…’ fell through.’”
I conjectured last night in conversation with my cousin’s friend that the Libor scandal might be related to screwing creditors out of returns on variable rate mortgage investments.
Whad’ya know: My conjecture is already covered in the MSM!
Libor: The Global Interest Rate Benchmark
Who’s Varying Your Interest Rate?
Saturday, August 4, 2012
By Harley Hahn
One of the most important economic concepts is that money is worth money. In other words, if you want to borrow money for a certain amount of time, you must pay a fee, called “interest,” for the use of that money. The amount of the interest you pay is set by the “interest rate.” For example, let’s say you borrow $1,000 for one year at a rate of 8%. The interest you owe will be 8% of $1,000, or $80. Thus, you must pay back a total of $1,080.
With some loans, such as a fixed-rated mortgage, the interest rate remains the same for the life of the loan. However, with many other types of borrowing the interest rate is adjusted from time to time. If it goes up, you pay more money. If it goes down, you pay less. This is the case, for example, with variable rate mortgages, with credit card borrowing, with student loans, and with many types of commercial loans.
In fact, throughout the world, there are, at any time, hundreds of trillions of dollars of outstanding transactions that depend on variable interest rates. Since these interest rates are extremely important to the global economy and since, from time to time, they must be adjusted, it is only fair to ask: Who is responsible for changing the rates?
As odd as it sounds, the majority of such interest rates are changed, indirectly, by an obscure London-based organization called the British Bankers’ Association (BBA). Each weekday, at 11:00 a.m. London time, the BBA issues updated values for 150 short-term interest rates. What few people realize, however, is that as important as these magic numbers are to the global economy, they are calculated from raw data that is, for the most part, simply made up, and that the whole system is based on faith. Let me explain.
…
“an … obscure London-based organization called the British Banker’s Association…”
These are the guys that indirectly decide what the interest rates will be for - what? - hundreds of trillions of dollars?
Does anyone here think these guys might tend be a bit popular at cocktail parties, that they will be invited to such parties every night of the week, that everyone at these parties will be eagar to remind them - the British Banker Association guys - as to just how smart and clever and wonderful they are, will laugh at all their jokes, will be sure to remember them at Christmas time?
Oh, and there are the chicks! The hotties! Nice and firm and so young and so … appreciative.
Why just a little bit of a promise of interest-rate tweaking - a little whisper into such a delightful little ear - can (and does!) produce astounding WONDERS to fulfilling one’s ever-present carnal needs.
Banksters have needs, too.
Delay in maid’s civil charges against DS
Updated: 03:31, Sunday August 5, 2012
Representives of US hotel maid Nafissatour Diallo and former IMF director Dominique Strauss-Kahn are still negotiating in a civil suit and countersuit.
The two parties were still negotiating in the civil suit and countersuit, and there was no need for a court appearance at the present time, David Bookstaver said.
The lawyers for Strauss-Kahn and the maid Nafissatour Diallo were to have appeared on Tuesday before Judge Douglas McKeon in the Superior Court of Bronx County.
Neither lawyer for the two sides was available to comment.
The one-time head of one of the world’s most important international finance agencies was arrested on May 14, 2011, on charges he had attacked Diallo as she cleaned his room at the Sofitel near Times Square and forced her to perform oral sex on him.
He was held briefly in solitary confinement and then under house arrest, until the criminal case was dropped due to doubt about the reliability of the maid’s account.
In May 2012, McKeon allowed Diallo’s civil law suit to go forward and dismissed Strauss-Kahn’s lawyers’ appeal that he had diplomatic immunity at the time of the alleged assault on the housekeeper.
Strauss-Kahn has filed a 1-million-dollar countersuit against the maid.
…
How much money does that maid have any how??
(puts pinky to corner of mouth)
One MILLION dollars!
“… and that the whole system is based on faith. Let me explain.”
Charlie Brown: “Doesn’t anyone remember what Christmas was all about?”
It’s the Great Pumpkin, Charlie Brown
“There are almost 24,000 active USDA mortgages in Minnesota. That’s up 52 percent since 2009. The popularity of USDA home loans has exploded in just the past three years, doubling to nearly 1 million.”
What other lending agencies does Subprime Sam use to push loans into the hands of low-income households besides FHA and USDA?
Will Uncle Sam ever stop pushing the kind of mortgage products that brought the world financial system to the brink of all-out collapse in 2008?
Will fedgov ever even own up to complicity in this never-ending debacle? Propaganda can only serve to cover up before underlying truth reveals liars for what they are.
End of the ‘Ownership Society’
Oct 10, 2008 8:00 PM EDT
Remember the ownership society? President George W. Bush championed the concept when he was running for re-election in 2004, envisioning a world in which every American family owned a house and a stock portfolio, and government stayed out of the way of the American Dream.
These families were, of course, conservative, or at a minimum traditional and nuclear, consisting of a heterosexual married couple and at least two kids living in a stand-alone home with a yard, a car or two and a multimedia room with a flat-screen television. The latter was a new addition to this 21st-century simulacrum of the 1950s “Leave It to Beaver” idyll. But the dream was the same.
Such a country would be more stable, Bush argued, and more prosperous. “America is a stronger country every single time a family moves into a home of their own,” he said in October 2004. To achieve his vision, Bush pushed new policies encouraging homeownership, like the “zero-down-payment initiative,” which was much as it sounds—a government-sponsored program that allowed people to get mortgages without a down payment. More exotic mortgages followed, including ones with no monthly payments for the first two years. Other mortgages required no documentation other than the say-so of the borrower. Absurd though these all were, they paled in comparison to the financial innovations that grew out of the mortgages—derivatives built on other derivatives, packaged and repackaged until no one could identify what they contained and how much they were, in fact, worth.
As we know by now, these instruments have brought the global financial system, improbably, to the brink of collapse. And as financial strains drive husbands and wives apart, Bush’s ownership ideology may end up having the same effect on the stable nuclear families conservatives so badly wanted to foster.
…
These families were, of course, conservative, or at a minimum traditional and nuclear, consisting of a heterosexual married couple and at least two kids living in a stand-alone home with a yard, a car or two and a multimedia room with a flat-screen television.
heh… yeah… This profile is what I saw all over the state of Delaware from late 2004-2006. Of course the Mrs and I were attempting to understand how they were pulling it off. The requisite SLOBurban in the driveway of a circa 2000-2006 house, money to spare.
Now?
These same clueless fools are finding all their $hit parked out on the curb while they scramble to find a place to live.
What a mirage!
“America is a stronger country every single time a family moves into a home of their own,” he said in October 2004.
That’s true, for a house of your own that you actually OWN, not OWE on. The big problem then as now, is that people have totally confused borrowing with owning. Hence my frequent use of the term “homedebtor”.
Bush was part of the problem. All these so-called leaders with high IQs and educations, and they couldn’t see what the frickin’ problem was. The era of 1998-2008 was highly educational for myself; I finally learned that you can’t stop an empire in decline. You can’t even slow it down. Anyone who tries, has no allies and ultimately invites doom upon themselves.
Operative Word: Empire
(yeah…. we’re an empire so get over it people)
“DeMarco is also reluctant to get the FHFA into the business of rewriting mortgage contracts, especially in states like California and Florida — which together account for a third of Fannie and Freddie’s underwater inventory…”
Come to think of it, I heard last night that Fannie is somehow involved with the SoCal home my cuz just bought, which went into foreclosure when the former occupants defaulted on their $1m+ loan…
So much for the GSE loan caps.
After the 30% off sale price and (most likely) sizable downpayment, I suspect my cuz’s loan was under the cap…will ask him when I see him again next week.
So, Fannie was involved in your cousin’s loan, not the previously foreclosed upon occupant’s loan?
I believe the chain of loan servicers was from WaMu (former loanowner’s originator) to JPMorgan-Chase to Fannie, but I was reluctant to press for details as my cousin was busy hosting a party.
Will try to get better information next time we catch up…
Can anyone imagine the Treasury Secretary trying to strong arm the Fed (also an “independent agency”) the way he is the FHFA?
I can’t.
FHFA Rejects Treasury Request for Mortgage Debt Writedowns
By Clea Benson - Jul 31, 2012 2:04 PM PT
Jacob Kepler/Bloomberg
Fannie Mae and Freddie Mac have together drawn almost $190 billion in Treasury aid since they were taken under U.S. conservatorship in 2008 when they were on the brink of insolvency due to investments in risky loans.
Fannie Mae (FNMA) and Freddie Mac won’t forgive principal on delinquent mortgages they guarantee even as the U.S. Treasury Department offers them incentive payments for writedowns, the companies’ regulator said today.
Fannie Mae and Freddie Mac have completed 1.1 million loan modifications since the end of 2008, and have engaged in more than 1 million other transactions to avert foreclosures, including short sales or repayment plans. Photographer: Joshua Lott/Bloomberg
Months of analysis showed there would be no clear benefit to taxpayers if the Federal Housing Finance Agency changed its policy barring the government-owned mortgage-finance companies from loan modifications including debt writedowns, Edward J. DeMarco, the agency’s acting director, said at a briefing with reporters in Washington.
“We concluded the potential benefit was too small and uncertain relative to unknown costs and risks,” DeMarco said.
The decision follows months of pressure to reverse the policy from activist groups and congressional Democrats, who touted it as a way to keep more families from losing their homes to foreclosure. FHFA has been in talks since January with Treasury officials, who offered Fannie Mae and Freddie Mac (FMCC) as much as 63 cents for each dollar of principal reduction, using unspent funds from the Troubled Asset Relief Program.
Treasury Secretary Timothy F. Geithner criticized FHFA’s decision in a letter to DeMarco.
“I do not believe it is the best decision for the country,” Geithner wrote. “The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled homeowners.”
…
“I do not believe it is the best decision for the country,” Geithner wrote. “The use of targeted principal reductions by the GSEs would provide much-needed help to a significant number of troubled
homeownersbanks.”+1 And a dog biscuit for you!
“Treasury Secretary Timothy F. Geithner criticized FHFA’s decision in a letter to DeMarco.”
Well, that’s pretty much it for DeMarco’s term. He’s through. I’ve seen this in every financial fraud’s forensic analysis after the fact. There’s a main trending, or a zeitgeist, and the tiny minority of officials that try to stand in the way of that, get demoted, reassigned, fired or just harassed until they resign.
Brooksley Born, the Cassandra of the Derivatives Crisis
As head of the Commodity Futures Trading Commission in the late ’90s, Born would wake up at night “in a cold sweat,”; her fears, as we know too well, came to pass. (By Carol Guzy — The Washington Post)
By Manuel Roig-Franzia
Washington Post Staff Writer
Tuesday, May 26, 2009
Friends nudge the woman who saw the catastrophe coming.
They want Brooksley Born to say four words, four simple words: “I told you so.”
Ah, but she won’t — not at legal conferences or dinner parties. Not even in a quiet moment in her living room, giving her first interview with a major news organization since last fall’s economic collapse.
She just smiles, perched ever so properly in an upholstered armchair at her Kalorama home.
“More coffee?” she asks daintily, changing the subject.
A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as over-the-counter derivatives could play a crucial role in a crisis much like the one now convulsing America. Her efforts to stop that from happening ran afoul of some of the most influential men in Washington, men with names like Greenspan and Levitt and Rubin and Summers — the same Larry Summers who is now a key economic adviser to President Obama.
…
A full THIRD of all Phoney and Fraudie underwater shacks are in CA and FL?
This is not going to end well for CA.
“There are almost 24,000 active USDA mortgages in Minnesota. That’s up 52 percent since 2009. The popularity of USDA home loans has exploded in just the past three years, doubling to nearly 1 million.”
I’ve heard of a few people who got these loans. They have no skin in the game. And, they are not high wage earners. “Subprime Sam” is shoehorning people into houses who have no business being “owners.”
They’re big in N AZ too. This lady in the story is working three jobs, obviously each is part time.
The FHA loans are already going into default at a high rate. So where oh where are the posters here decrying ‘loans designed to fail’?
“This lady in the story is working three jobs, obviously each is part time.”
And she is a single mom, which puts her into one of the Democratic Party’s privileged classes which qualify for special goodies provided by others who don’t qualify for special goodies.
“Subprime Sam” is shoehorning people into houses who have no business being “owners.”
Because the housing bubble isn’t over. Not by a long shot. We’re still in the DENIAL phase of the “stages of grief”. So there will still be spikes of speculation activity even in an environment of greater malaise. Today, even despondent people will try to flip houses if ever given the chance. It’s all they know. All they are looking for is a chance. The 1998-2008 heyday totally obliterated sanity, which is why it’s a generational crash that will take generational time to recover from.
Flippers probably look back on that first score the same way a heroin addict does.
I’ve seen a few thousand waterfront houses up close in the past few weeks. Almost all of the ones for sale are recent oversized, over landscaped, arched window bubble houses. Practically zero construction in progress. Denial seems to be eroding.
‘…We’re still in the DENIAL phase of the “stages of grief”…’
Mired there by the same kind of financial engineering and magical thinking that set the bubble aloft to begin with…
USDA RD buying is big in upstate NY/VT/NH/ME and has been for decades. Most of the folks I know who buy through USDA don’t have a pot to piss in or a window to throw it out.
“This is where the rubber hits the road. The FHFA is concerned that if it offers a national plan of principal reduction, it would encourage underwater homeowners, located in relatively few states, to give in to a moral hazard and look for ways to reduce their loans, even if they’re current or could benefit just as effectively from principal forbearance.”
If the financial system ever recovers from the seemingly-endless ongoing debacle at hand, it will be due to efforts to restore sanity like this one.
If.
All manias eventually end, at least so far in the course of financial history…
I have no doubt of that. But the question was, “if the financial system ever recovers”, which prompted my laconic response. There’s no requirement that the financial system will recover. It’s my opinion that having so recently opened a permanent pipeline into the public treasury, the system has entered a fatal spiral of addiction. It will take more risks now, not even needing public involvement. The Leviathan of derivatives will be prodded and poked until it rises bellowing from the deep, in a sound heard around the world.
America’s financial destiny is not sealed in stone. There is really nothing to stop us from following Iceland’s lead or Sandy Weill’s suggestion, for instance. If a president like Andrew Jackson or Teddy Roosevelt were elected, the effort to break up Megabank, Inc could come down from the top.
America should start by figuring out how to get out of The Monster’s death grip. Unfortunately, both of the leading presidential candidates are indebted to The Monster.
Too-Big-to-Fail Prevention Is Tested in Post-Crisis Iceland
By Omar R. Valdimarsson - Aug 3, 2012 4:24 AM PT
Iceland was brought to the brink of bankruptcy when its biggest banks failed four years ago. Now, the site of the world’s most spectacular financial collapse is becoming a pioneer in banking reform.
“We’ve been burned by this and that’s why we have to look very closely at what we need to do to prevent it happening again,” Economy MinisterSteingrimur J. Sigfusson said in an interview. “Icelanders are more interested in taking greater steps than small steps when it comes to regulating banking.”
His party, the junior member in Prime Minister Johanna Sigurdardottir’s coalition, has submitted a motion to parliament to stop banks using state-backed deposits to finance risky investments. The move puts Iceland on course to become the first western nation since the global financial crisis hit five years ago to force banking conglomerates to split their business.
It’s a proposal that’s gaining traction elsewhere. Even Sanford “Sandy” Weill, whose 1998 creation of New York-based Citigroup Inc. (C) triggered the Gramm-Leach-Bliley Act that paved the way for financial behemoths, now says investment banks should be separated from deposit-taking banks. Opponents including JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon say diverse businesses are needed to spread risk across divisions and stay competitive.
The Icelandic lawmaker who presented the motion, Alfheidur Ingadottir, says the best way to stop banks creating asset bubbles is to pass laws akin to the 1933 Glass-Steagall Act, which separated commercial and investment banking in the U.S. for more than six decades.
…
All manias eventually end, at least so far in the course of financial history…
Has anyone ever taken down an entire nation trying to keep one going before?
“Our nation’s lenders and real estate leaders must work together to preserve the price stability gained over the past 18 months by controlling the flow of foreclosures back into for-sale inventory. By working together, lenders and real estate leaders can maintain the stability of our local markets by keeping another wave of foreclosures from sending America’s real estate markets under water.”
Is any politician out there willing to step up and point out that price fixing is illegal in America, unless the government does it?
Definition of ‘Price Fixing’
Establishing the price of a product or service, rather than allowing it to be determined naturally through free-market forces. Antitrust legislation makes it illegal for businesses to decide to fix their prices under specific circumstances. However, there is no legal protection against government price fixing. In an ill-fated attempt to end the Great Depression, for example, Franklin Roosevelt forced businesses to fix prices in the 1930s. However, this action may have actually prolonged the downturn.
Dumb questions of the day:
1) Has the U.S. real estate market ever before been as manipulated as currently, or does it just seem different this time due to the internet providing a window into manipulation?
2) Will market manipulation work indefinitely, or will an eventual avalanche of fundamentals-based capitulation eventually crush the effort?
1. A 5 year old can $queeze juice from a cut lemon
2. Goldenman$ucks Inc., [et. al.] can too, with different volume re$ults. (not to mention the additional profit$ garnered from the re-proce$$ed $kin-peels)
They are $marter than a 5th grader, & “ethical” too!
“By Steve Berkowitz, CEO of Move, Inc., operator of Realtor.com. Millions of Americans, myself included, applauded when the nation’s five largest lenders and attorneys-general from 49 states reached a landmark $25 billion settlement last March. While the settlement was good news for distressed borrowers, the processing of foreclosures slowed dramatically during the 18 months of negotiations. The slowdown created a shadow inventory of more than 1.5 million shuttered homes ─ nearly twice the number of foreclosures sold last year and representative of about 39% of the 3.6 million+ foreclosures completed nationally since the start of the housing crisis in September 2006.”
Got stoopid?
Crisis In The Housing Market
4:07 am Tue July 31, 2012
Is Housing Recovery Real? Not Everyone Is Convinced
By Yuki Noguchi
Credit Justin Sullivan / Getty Images
A construction worker carries lumber while working on new homes in San Mateo, Calif., in March. Homebuilding is at its highest level in nearly four years.
Originally published on Tue July 31, 2012 4:08 pm
Housing, the sector that led us into the recession, now looks to be one of the brighter spots in the economy. Homebuilding is at its highest level in nearly four years. More homes are selling, and at higher prices.
The question, of course, is whether this is a solid enough foundation to sustain a full housing recovery.
Lawrence Yun, the chief economist for the National Association of Realtors, says housing woes are largely behind us.
“It’s been a harsh downturn, but the downturn is over,” he says. “Now we’re beginning to turn the corner. [The] question is: How fast will we be turning that corner?”
He points to increased home sales, rising rents and low interest rates among several reasons why he’s certain the housing market is pointing in the right direction. And low inventories mean that price increases “will surely be sustainable,” he says.
Yun says it may be counterintuitive, but in places like Las Vegas, Phoenix and southern California, the number of homes for sale is at a fraction of where it should be in a normal market, and the competition among buyers is fierce.
And, he says, this housing recovery isn’t just regional. Across the country, demand for homes is driven by investors as well as millions of families who put off buying a home in recent years until the market started to improve.
“It’s a self-reinforcing process, where the increase in housing market activity begins to boost consumer confidence about homebuying,” Yun says.
Glenn Kelman, the CEO of online brokerage Redfin, says he shares in some of that confidence.
“We’ve been a bear, and now we’re a bull,” he says.
To be more accurate, he says his company is a small bull — a calf, maybe — on the market. That is in spite of the fact that some people believe there’s a vast backlog of foreclosed homes that are about to hit the market. Kelman’s not buying it.
“Every conspiracy theorist in real estate believes that there’s a huge chunk of inventory that the banks have just been holding back, waiting for our hopes to rise so that they can dash them again, and I just don’t believe it,” he says.
…
The Liars Club is really working hard at lying to the public.
Beware my brothers and sisters….. beware.
With lies this blatantly stoopid, only a complete moron needs to worry…
Politics breeds strange bedfellows.
Politics
Romney May Roll Out Welcome Mat for Fannie and Freddie: Street Whispers
By Dan Freed 08/02/12 - 06:30 AM EDT
NEW YORK (TheStreet) — Government sponsored enterprises Fannie Mae and Freddie Mac may be Republicans’ favorite villain, but if Mitt Romney makes it to the White House they could find themselves with a new ally.
According to a popular Republican narrative, the government forced banks to lend to people who couldn’t possibly pay their mortgages, with Fannie and Freddie providing much of the capital. The result was a corrupt scheme to buy votes through dangerously risky home loans while lining the pockets of powerful Democrats.
The Obama Administration has signaled a desire to wind down the GSEs, though since they are pretty much single-handedly supporting the fragile U.S. housing market at the moment, no one wants to move too quickly. As a result, four years after the mortgage giants were placed under government conservatorship, we still have little more than a few vague proposals about what to do with them.
Anyone who thinks a Romney Administration would be faster to phase out the GSEs should think again, however, according to Brian Gardner, analyst at Keefe, Bruyette & Woods. Speaking at a KBW conference on Wednesday, Gardner argued Romney would most likely be slower than Obama to address the GSEs, since “no sitting President running for reelection is going to touch the issue.”
…
“Anyone who thinks a Romney Administration would be faster to phase out the GSEs should think again, however, according to Brian Gardner, analyst at Keefe, Bruyette & Woods. Speaking at a KBW conference on Wednesday, Gardner argued Romney would most likely be slower than Obama to address the GSEs, since “no sitting President running for reelection is going to touch the issue.”
+1 Too many “free market” suits for Walmart to absorb.
Mitt Romney’s Economic Adviser Isn’t Giving Very Good Advice
By Matthew O’Brien
Aug 4 2012, 9:30 AM ET 7
Repackaging the Bush agenda, just with austerity, is not the path to prosperity.
(Reuters) Romney economic advisor Glenn Hubbard apparently has a very short memory.
In a Wall Street Journal op-ed making the case for Romney’s economic agenda, Hubbard presents a strikingly ahistorical account of the past few years — not to mention sprinkling in one big questionable assumption. Let’s take a tour of some of the lowlights.
“We are currently in the most anemic economic recovery in the memory of most Americans.”
Does the memory of most Americans go back a decade? If it does, then they can remember a more anemic recovery — at least when it comes to jobs. The post-2001 recovery had the slowest job growth of any postwar recovery. It also had the slowest private sector growth of any postwar recovery. It’s puzzling that Hubbard doesn’t remember this, considering that he was the chair of President George W. Bush’s Council of Economic Advisors from 2001 to 2003.
Now, the economy did grow faster then than it has now. But that’s because the government grew as much as it did then; it’s shrinking now. Really. So why does this weak recovery feel weaker than that weak recovery? Well, the tech bubble recession was much milder than the housing bubble recession — in other words, we’re in a deeper hole this time around. All else equal, we would expect a better recovery from a worse recession, but all else is not equal. As Harvard professor Kenneth Rogoff has shown with over 800 years of data, recoveries from financial crises are long, slow slogs. It’s doubtful that recycling Bush-era policies will get us out of this ditch faster. It didn’t ten years ago.
“[U]ncertainty over policy–particularly over tax and regulatory policy–slowed the recovery and limited job creation. One recent study by Scott Baker and Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago found that this uncertainty reduced GDP by 1.4% in 2011 alone.”
…
” … As Harvard professor Kenneth Rogoff has shown with over 800 years of data”
vs:
“… you have 2 minutes!”
“Give it your best shot!”
Yet many Obama supporters believe that only if the Republican’s wouldn’t obstruct, the economy would be roaring.
BS.
It would be a long, slow slog either way, and neither D’s, nor R’s could change that.
All that said, one thing that Obama has added to the equation that wouldn’t necessarily be there with the R’s is uncertainty, which is bad for making long-term decisions as a business:
1. Healthcare law phased in over a period of years;
2. Financial reform that is 2 years old, and still not finalized.
The patchwork quilt of spending/taxation that doesn’t allow anyone to plan more than 1 year in advance is BOTH parties fault…F them both for that.
Quick aside, we are aware one company that less than a year ago thought they needed a new building built for them. However, given the uncertainty with government spending (they are a government contractor in part), they don’t know whether they need that building, or only 20% of the space, or 50%, or 100%. The program they work on is highly unlikely to be eliminated completely, but knowing how much more than 20% they need is impossible to determine.
So in the meantime, no building is being built, no architects are working, no contractors working, and no new employees are being hired by the company. So they wait for government.
These are people who would be working (private and public sector contractors), if it weren’t for government being unwilling to do their jobs to figure out what level of spending will continue.
So that company doesn’t know how much government cheese to expect in the future, so they are in a quandry as to what to do?
How about getting off their azzes and find more business perhaps?
Government money is a hard habit to break for those independent bootstrapper Republicans.
Obama and Romney Should Say What They’ll Do About Housing
By the Editors
Jul 30, 2012 3:30 PM PT
For an economy that’s growing at an anemic rate of 1.5 percent, you would think there would be more discussion of the U.S. housing market on the campaign trail. The sector has powered past recoveries and is responsible for as much as one-fifth of gross domestic product.
Yet President Barack Obama has made little more than a passing reference to housing in his campaign, calling it a drag on the economy and recommending an expanded mortgage-refinancing program. Presumptive Republican nominee Mitt Romney has said the government should avoid intervening and allow the housing market to “run its course,” wherever that may lead.
In an election viewed as a referendum on the economy, this verges on political malpractice. Voters deserve a substantive conversation about whether housing can be revived, to what extent mortgage credit should be restored and what, if anything, the government can do to achieve these goals.
Housing has been largely absent from the current recovery, as a glut of distressed properties and tight mortgage credit weigh on the sector. Residential investment is up only 8 percent since the economy hit bottom in mid-2009, compared with an average of 43 percent in the first three years of the previous three recoveries. House prices and construction have recently shown some signs of life, but home sales fell in June, mortgage delinquencies ticked up and banks are making little progress in getting rid of their vast inventories of foreclosed homes.
The Obama administration’s efforts to help struggling homeowners through various loan modification programs could charitably be termed timid, incremental and largely ineffectual. One in five mortgage borrowers owe more than their homes are worth, the same level as when Obama came into office. Many still pay high interest rates because they can’t refinance. Three taxpayer-subsidized mortgage juggernauts — Fannie Mae, Freddie Mac and the Federal Housing Administration — account for more than 90 percent of the financing that does occur, helping keep private capital on the sidelines.
Romney says the best thing for the housing market is a growing economy, and he seems to eschew any type of government assistance for troubled borrowers. In February he told a Nevada TV station that “if people are looking for someone to promise that they’ll write them a check, that the government will give them money, they should vote for President Obama.” Whether this means he would roll back the government’s current efforts is a mystery.
…
They should do nothing about housing. Let the market correct for once.
Bill, that is precisely what the politicians will not do. They can’t be honest about the economic reality. They can’t tell Americans to expect further price falls in housing, since that would “harm” the majority, who either have mortgages, or own 100%. And really, it harms prospective buyers (which includes the minority who rent), since the new paradigm for a house purchase is to have it appreciate like a company stock. So it needs to keep rising, and that means it should have a higher price the next day after purchasing.
The market is still broken, since almost nobody wants real price reductions. Sure, technically a buyer wants a low price, but only so he can immediately turn around and sell it for a higher price. And lending still dominates the market; as we know, lending encourages overbidding. The summed effect of all these and other forces is that all market participants want high prices.
The market will not return to stability EVER until we once again have buyers who want housing for prices that are low as possible.
I cast about on the internet for info on Romney’s housing plan, and this is about all I could come up with:
http://www.romneyhousingplan.com/
Is there any way to figure out if it is for real? If not, please post anything you know of that really is real.
Your link produces a video. Shows words superimposed attributed to Romney. “Don’t try and stop the foreclosure process. Let it run its course and hit the bottom.”
That’s exactly what I want Romney to do if elected. Do nothing but let it take its course and hit the bottom.
But I would not vote for him. If it’s one issue it’s because he is an extreme social conservative.
I realize a lot of posters here take exception to Obama’s policies, but you have to hand it to him for transparency. For instance, it is pretty clear that if he is reelected, then his Treasury Secretary plans to go for full-throttle housing stimulus until the housing market recovers.
By contrast, what would Romney do if elected?
CRICKETS: CHIRP! CHIRP!
Law of the political jungle: Either define yourself, or be defined by your rival.
‘World News’ Political Insights: Mitt Romney Looks for August Reset
PHOTO: Republican presidential candidate, former Massachusetts Gov. Mitt Romney speaks to reporters after he campaigned at McCandless Trucking in North Las Vegas, Nev. on Aug. 3, 2012.
ANALYSIS by RICK KLEIN
Aug. 5, 2012
The nation has met Barack Obama’s Mitt Romney. If it’s going to meet Romney’s version of himself, it will happen this month, or not at all.
It was supposed to start last month, with picked-up ad spending and a foreign trip built around a choreographed Olympic moment. But the foreign trip fell flat amid distractions at every stop, and Democrats continued to break through with their assault on Romney’s transparency and business record.
Republican National Committee Chairman Reince Priebus fired back today on ABC News’ “This Week,” calling Senate Majority Leader Harry Reid “a dirty liar” for his unsubstantiated suggestion that Romney didn’t pay taxes for a decade.
“This is just a made-up issue,” Priebus said. “And the fact that we’re going to spend any time talking about it is ridiculous.”
While Priebus is right to call out Reid for making an irresponsible claim, the fact that Republicans including Romney, himself, are forced to respond to it speaks to the need for Romney to find a fresh start in his campaign’s proactive messaging.
Republicans are complaining about Democrats’ campaign tactics, while Democrats are talking about a topic they much prefer to defending the Obama economy. Reid doesn’t need defenders for his real message to penetrate, and Romney’s refusal to release more than two years’ worth of taxes keeps the issue open for exploitation.
“I do know that Mitt Romney could clear this up in 10 seconds by releasing the 23 years of tax returns that he gave to John McCain when he was being vetted for vice president,” Democratic National Committee Chairman Debbie Wasserman Schultz responded on “This Week.”
…
“Koonce reflects what may be a national trend. People in their 20s and 30s have made up the majority of home buyers for decades. But some economists say today’s Millennials may have cooled to the idea of homeownership because of the recession, a slow recovery, uncertainty about the future and financial burdens such as student loans.”
And this is a problem because we desperately need to saddle them with 30 years of payments at today’s prices before we can let prices fall. What can we do to get them to cooperate?
Remember a few years back when the under-30 set were savvy real estate investors and the over-30-somethings just didn’t get it?
That was over two decades ago I think.
Tell them “financial slavery” is patriotic!
“We know this is the cheapest housing is going to be for our foreseeable future.”
We know? I’d like to read more about that…
Apparently the chump can’t see past October 2012.
To comment on the fiscal cliff topic, yes I think it will affect the housing market and those jobs that will be cut are in nearly every state. A heavy concentration in Washington D.C., Virginia, and Maryland. Remember, not only defense jobs, but jobs in the social security and Medicare administration will be cut.
Also a whole bunch of middle class tax cuts will expire January 2. Not just upper income tax cuts.
Congress’ response? They just began a five week recess. No concern. Letsee…five weeks takes us to mid-September. Within nine weeks the general election and the 60 day layoff notice to 10 percent of the defense employees.
Peaceniks and non-interventionists and libertarians such as Ron Paul better be sure their next door neighbors are not defense sector workers. NODs will be coming up, followed by more foreclosures and more shadow inventory. At least ten more years of house price cuts are on order.
The smart small investor is socking cash under a mattress and also buying an ounce of gold every few weeks, not as much into stocks as into gold, and not as much into gold as into cash!
Yeah, a whole lot of stuff has being kicked down the road. Pensions, state budget woes, too much to mention. I think we just passed one year since the S&P downgrade of the US debt. Just the undeniable fact of where interest rates are show we are in recession. I remember the day when the media would discuss ‘what rates are telling us,’ etc. No more. It’s just ‘borrow people, what’s wrong with you’?
This daily drumbeat of ‘housing is up, up up’ rings kinda hollow in the face of it all. It’s like this; I got some materials. I got some land and labor. But if I stick them all together and make a house, it’s some magical money machine.
Once stuck together, magic money machines qualify for a plethora of government subsidies…
It’s easier to bring up those hot button issues and kick the can down the road in an election year.
Ron Paul is from Surfside Texas. Its booming there.
They just finished reversing a pipeling from Oklahoma to move oil down to the refineries to become gasoline. DOW is building a new chemical plant due to the cheap energy costs (natural gas).
No defense plants in that area ’cause of hurricanes.
This gets more interesting by the week:
http://tinyurl.com/preview.php?num=TheObamaJobsSequestor
“The White House is clearly starting to worry. In a sign of panic, the Obama administration this week moved to hide the coming job losses. The Labor Department directed defense contractors to ignore the law and skip layoff notices, since sequester remains “uncertain.” (Companies may well send them out anyway, since Labor can’t protect them from lawsuits for failing to give due warning.)”
I read one account that Obama wants to open national debate about America’s role with its defense (and perhaps foreign policy?). For an instant I had hopes that perhaps he’s really a libertarian mole who is now prying open the smelly box of the Wilson doctrine, which was only made possible by the enactment of the permanent income tax and permanent capital gains tax and the establishment of the Federal Reserve. But that would be giving Obama too much credit. This move by the Labor Department disproves the theory that Obama is really a libertarian mole.
In fairness to Obama, it seems to be SOP to paint lipstick on the pig during election year as needed. For instance, you may recall George W. Bush’s Treasury Secretary Hank Paulson firing a top WH economist in December 2007* who was about to release a realistic economic outlook suggesting the U.S. economy might go into recession in 2008. Paulson substituted his own version of the economic outlook suggesting the economy would do fine going forward. It was not until after the 2008 election that the National Bureau of Economic Research dated the start of the recession to December 2007, suggesting the economy was already in deep doo doo on George W. Bush’s watch long before Obama’s inauguration, or even before the financial system went up in smoke in Fall 2008, also on George W. Bush’s watch.
* I can’t find the story; perhaps revisionist historians have cleaned the internet of all evidence?
The link gets you to tinyurl.com link preview page From there can click on a link to the article
I meant the story about how Paulson fired the WH economist with the grim outlook in December 2007…
From Neal Boortz:
http://tinyurl.com/SequestrationLayoffsTurnUgly
“These people are going to learn that they’re going to be jobless in 2013 just days before the election. That would be because of a federal law .. .the WARN Act, that requires these defense contractors, and other federal contractors, give 60 days’ notice of any large scale layoffs. Sixty days before 2013 happens to fall right around the beginning of November; Election Day is November 6th.”
I thought the same thing a couple weeks ago.
So are we serious about the deficit or aren’t we?
Do deficits only matter when money is being spent on social programs?
No we are not serious about the deficit. Republicans want to stop government spending except when it comes to defense. And yes we spend WAY too much on defense and need to stop being the world cop. We’ve become mostly a nation with the Department of Offense.
Our biggest mistake was the Wilson Doctrine. Our next biggest is the defense of Israel at all costs, putting innocent American necks on the chopping block.
Every real estate pimp in the U.S. is now jumping up and down screaming about the bottom. Buy now or get priced out forever, folks!
I don’t expect a single one of these jumping jackasses to own up to it when it turns out this really wasn’t the bottom after all.
WEEKEND INVESTOR
Updated August 3, 2012, 5:46 p.m. ET
Is the Real-Estate Rebound for Real?
By JOE LIGHT
For investors, “home” is no longer a four-letter word.
The real-estate sector, for the first time in years, is serving as a beacon of relative strength in an otherwise weak economy. Standard & Poor’s on Tuesday reported that home prices in its S&P/Case-Shiller 20-city index rose 0.9% in May from the prior month, after adjusting for seasonal trends, and have risen 2.6% since bottoming in January.
Some of the world’s smartest investors, including Warren Buffett, are taking notice, placing big bets on a continued recovery in the housing market. Other kinds of real-estate investments—including real-estate investment trusts that own shopping malls, apartment buildings and hospitals—also have been among the best performers this year.
For ordinary investors, the rebound serves as an opportunity to rethink how much of their portfolio should be in real-estate investments—and to participate in the rebirth of a sector they once left for dead.
“After the recent returns we’ve seen, people are naturally asking ‘Have I already missed it or is there further upside to come?’ From our perspective, yes, there’s further upside,” says Frank Haggerty, a portfolio manager at money manager Duff & Phelps Investment Management who comanages a $1.3 billion mutual fund that invests in commercial-real-estate companies.
There is reason for optimism. Not only are single-family home prices steadily climbing, but the Joint Center for Housing Studies at Harvard University in a June report said inventories of new, single-family homes in March were at the lowest level in 49 years. The upshot: It would take fewer than six months to sell the current inventory, the traditional boundary between a strong and weak market, says Eric Belsky, managing director of the center.
…
‘inventories of new, single-family homes in March were at the lowest level in 49 years’
And this is from the NAR:
‘The slowdown created a shadow inventory of more than 1.5 million shuttered homes ─ nearly twice the number of foreclosures sold last year and representative of about 39% of the 3.6 million+ foreclosures completed nationally since the start of the housing crisis in September 2006′
Note some shadow inventory counts put it at several million units.
U.S. real estate investors can console themselves by noting how much worse the situation is in China, where there are supposedly tens of millions of vacant housing units.
Beijing Alone Has 50% More Vacant Housing Than The US
Submitted by Tyler Durden on 06/05/2012 10:16
Putting some housing things into perspective. From the (less than credible) NAR:
Meanwhile, half a world away, from a just released report in Beijing News (google translated):
So, broadly speaking: US: 2.5 million available homes; Beijing - one city in China - has 3.8 million??
That is all.
Apparently vacant houses are no problem. In fact, more are being built worldwide as we speak.
Just think how much more profitable Megabank, Inc could be if only they could make the shadow inventory disappear into a puff of smoke.
Markets
6/26/2012 @ 4:48PM
10 Million Underwater Mortgages And Shadow Inventory Worth $246B Mean Housing Trouble
A Foreclosure sign is seen in front of a bank-…
Housing markets are still deep in the gutter, despite slight improvements - Image credit: AFP/Getty Images via @daylife
Don’t be so sure the housing market is on its way back to health. Despite the first monthly increase in home prices in 7 months, as the Case-Shiller indexes showed on Tuesday, there are still more than 10 million properties with underwater mortgages, and a shadow inventory of 1.5 million, or four months supply. Negative equity will continue to take its toll on consumption, while the shadow inventory, worth about $246 billion according to CoreLogic, will constrict lending and probably affect banks’ earnings.
Home prices rose 1.3% in April, according to both the 10-city and 20-city composites that make up the Case-Shiller indexes. On a yearly basis, home prices fell, but the decline was smaller than in previous months. Many have been claiming the housing market is on the verge of a comeback, with Barclays, for example, expecting prices to rise about 3% in 2012.
The negative conditions that have prevailed in residential real estate could continue for a lot longer than some of these people expect, though. A note by Goldman Sachs’ global economics team highlights the risk. Noting that there are between 10 and 11 million properties with underwater mortgages, Goldman’s analysts explain:
The U.S. economy faces several threats. Domestically, a looming fiscal cliff and the threat of another debt ceiling debate have already eroded market confidence. Stocks in the U.S. completely broke down in May, with the Dow falling more than 8% to the first week of June. Furthermore, the European sovereign debt crisis has flared up again, with Greece threatening to leave the euro (even though that risk has dissipated), and Spain and Italy facing soaring borrowing costs that could push them out of capital markets. Beyond that, even China and the emerging world is slowing.
Out of those 10 million mortgages that are underwater, about 3 million remain “severely underwater,” which means the initial loan-to-value ratio (LTV) is 125% or more (in other words, the value of the mortgage is at least 25% higher than that of the property). While seriously delinquent mortgages (at least 60 days) have declined, the percentage of loans in foreclosure has remained stubbornly high, at about 10% of underwater mortgages.
Homeowners remain highly leveraged, according to Goldman, and overleveraged homeowners will definitely need to cut back on consumption. Borrowers with high negative equity are also many times more likely to default.
According to CoreLogic, the shadow inventory stood at 1.5 million in April, which translates to 4 months of supply. After having peaked at 2.1 million in 2010, the shadow inventory has declined, but still remains elevated; its total dollar volume is $246 billion. This means firms holding these assets on their balance sheets, like JPMorgan Chase, Bank of America, and Citigroup, will continue to see pressure on their profitability. Homebuilders like KB Home and Lennar, though, have managed to outperform markets, despite the shadow inventory.
…
There have been very few articles from the MSM the first half of this year mentioning “fiscal cliff.” None of the articles pronouncing the real estate is bottom ever mentioned “fiscal cliff” or “sequester.” I regarded them as shallow. The next few months reality will set in.
The last 3 houses that sold on my street were all cash sales, one of which was right next door to me. The “investors” immediately rent them out. There must be companies out there doing this, its very strange, I’m thinking eventually the whole street could be owned by 1 “investor” or company. It will be interesting when things turn south again, or if the investor company goes belly up.
Don’t buy until the dust settles on the housing bubble, in 2014-2015 at the earliest, according to this economist, who apparently is not in the employ of the NAR.
DAVID ROSENBERG: The Housing Bust Isn’t Over, We’ve Got 2 Or 3 More Years Of Pain
Matthew Boesler | Jun. 26, 2012, 9:27 AM
Gluskin Sheff chief economist David Rosenberg was on Bloomberg TV this morning talking about the U.S. housing market
Rosenberg said that although home prices do appear to be carving out a bottom, there are major issues that will put downward pressure on prices for a while yet.
On shadow inventories and foreclosures, Rosenberg told Bloomberg:
I’ll say this for Rosenberg: He’s consistent.
http://www.moneynews.com/StreetTalk/DavidRosenbergHousingDouble-DipStraightAhead/2010/12/28/id/381228?s=al&promo_code=B5E2-1
‘ ‘ Housing is very likely to double-dip, says David Rosenberg, the economist known for calling the original housing crisis in advance. The Gluskin-Sheff economist says that all of the government efforts to arrest the downturn “merely distorted” the reality of the 3.7 million homes waiting to be absorbed by a weak U.S. economy. “Here we are three to four years after the initial detonation, and we’re still left with this gargantuan inventory,” Rosenberg told CNBC. ‘ ‘
So here’s my question with reports that MERS deed of trust assignments are going into high gear.
We are all aware that there is a massive shadow inventory out there, how do we know what we’ve read has been accurate. For example anecdotally I know people who haven’t paid their mortgage in years, but still haven’t gotten an NOD. These people presumably don’t show up on the lists of people in the foreclosure process. Similarly some of the housing advocates have been claiming we have turned a corner because delinquencies are down, but how can we trust that banks are reporting on this honestly? Outside of FHA insured reporting requirements isn’t it in a banks best interest to under report delinquencies (and how often do banks do anything not in their best interests)?
Don’t forget that banks sold off most of those mortgages.
True, but they are still servicing the loans. And presumably there are reasons for under reporting caused by this relationship as well (just as banks don’t just put all of the REO assets on the market at once, there must be some benefit to them).