‘No Mercy Now, No Bailout Later’
Some housing bubble news from Wall Street and Washington. “The slowdown in the housing market is being driven by growing inventories of homes from overbuilding and by speculators leaving the market, Toll Brothers CEO Robert Toll said Thursday. ‘The housing market is experiencing an oversupply, to put it mildly,’ Toll said during the luxury-home builder’s annual analyst conference.”
“‘The supply is coming from speculators who bought in 2004 and 2005 who are now sellers, and to make matters worse aren’t buyers anymore,’ he added, noting that many homes built by more aggressive builders also are sitting unsold now.”
“Toll management said that the company plans to continue to grow the number of its selling communities and buy back more shares. ‘We’ve been using excess cash flow to repurchase stock, and will continue to opportunistically buy back more,’ said Joel Rassman, chief financial officer. So far this quarter, Toll Brothers has repurchased about 1.65 million shares through Wednesday.”
Peter Coy writes this at Business Week. “It’s getting harder and harder for real estate agents to put a happy face on the market. And now it’s suddenly looking like the Federal Reserve will raise interest rates again.”
“Bernanke’s gladiator-like aggressiveness on inflation is producing scowls at the National Association of Realtors, which worries that higher mortgage rates will make the housing market even softer. The group put out a public statement on the issue this week.”
“Mortgage bankers also see the market slowing, but they aren’t echoing Realtors in asking for a pause in rates. ‘We’ve never publicly given the Fed instruction on how to conduct monetary policy,’ Douglas Duncan, chief economist of the Mortgage Bankers Assn. said.”
“Most economists don’t think Bernanke is actually trying to reinforce a bear market in housing, but they do say that the market has turned decidedly bearish. (Economist) Richard DeKaser, calculates that over the six months through April, median sales prices have fallen at a 4.4% annual rate for new homes and at a 5.6% annual rate for existing homes.”
“‘If employment falls, that could precipitate price declines and all the speculation that’s supported the market would be expunged,’ says DeKaser. ‘You could see things swing the other way to where there’s an irrational fear.’”
“To put it differently, some economists say: What goes up must come down. One housing bear, (economist) Ian Shepherdson wrote June 6: ‘Ultimately, we expect the level of home sales to head down to, or even below, the long-term trend. When bubbles burst, they usually burst properly. Gentle deflations are rare.’”
A reader posted this report from earlier this year. “(Fed) governor Donald Kohn hammered home the Fed’s hawkish strategy in blunter language during a speech in Frankfurt. ‘If real estate prices begin to erode, homeowners should not expect to see all of the gains of recent years preserved by monetary policy actions,’ he said. In other words, no mercy now, and no bail-out later.”
‘If employment falls, that could precipitate price declines and all the speculation that’s supported the market would be expunged’
‘H&R Block Inc. said Wednesday that fourth-quarter earnings fell 4.5 percent as the company began restructuring its mortgage business..The company’s mortgage business continued to disappoint as higher interest rates have cooled the housing market. H&R Block has announced plans to cut 1,200 positions in the division and reduce the number of offices. ‘
‘a leading CRM and marketing solutions provider for mortgage originators released its quarterly survey results showing decline among originators across the nation. When asked if this confirms speculations of a housing bubble, Dan Itkis, the CEO of BNTouch responded: ‘I think we’re seeing the market contraction separating less experienced loan officers from the seasoned professionals who have been through this sort of thing before, and forcing those without a good adaptable marketing plan to suffer the consequences.’
‘I think we’re seeing the market contraction separating less experienced loan officers from the seasoned professionals who have been through this sort of thing before, and forcing those without a good adaptable marketing plan to suffer the consequences.’
An adaptable marketing plan? Please! I don’t care how much your marketing, your not getting the deals right now. Rather, the “seasoned professionals” have been living according to their leaner years and socking their surplus from the bounty into various savings vehicles, knowing that real estate is cyclical. Also, any “seasoned professional” would have been able to indentify this as an insane bubble at least three years ago and positioned himself accordingly. This is how one survives. It’s too late for a “marketing plan” to rummage up loans.
Mortgage originations never drop to zero. Even in a bad market, there are always some real estate deals being done because of death, divorce, relocation, etc. In those (these) downtimes, the “seasoned professionals with the adaptable marketing plans” get a bigger piece of the shrunken pie. They won’t be writing as much business as they were when the market was booming, but they’ll be getting a shot at what business is being transacted.
I posted this on yesterday’s thread for Richmond VA. Laura Burns is very delusional, or in denial. She should go to Egypt.
What magical genie does this woman in RIchmond want to pull out of her A$$? I guess she is expecting the PPT to come and rescue her, or Bushie and his buddies? Maybe Jesse Jackson, the biggest idiot around, might come to her rescue? Or Useless Ted Kennedy?
Laura Burns said she and her husband were grateful they had been able to weather their financial storm without losing their house. But she said the experience had left her somewhat bitter.
“I have no faith in the American dream anymore,” she said. “You bust your hump year after year, going to work and paying your taxes. Then you get in a hole, and there’s no one there to help you out of it. The government doesn’t help you, the bank doesn’t care.
“If someone legitimately can’t pay their bills — not won’t, but can’t — there should be some type of help for you. We found out there wasn’t.”
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Who is Laura Burns and to what article do your comments refer to ?
Sorry.. but I have no clue who she is.
There will be no $$$ to help Laura Burns get thru her cancer treatment cash flow problems but you can bet there will be plenty to bail out the banks for their bad decisions….$$$ from the pockets of Joe Taxpayer and the pockets of the Laura Burns family adding insult to injury.
If they were prudent and had an “emergency savings account” like any financially sane person does, they would have been able to pay their bills. Since I am sure they live way beyond their means they didn’t have said account and suffered the consequences. I have no sympathy for the financially stupid. Life isn’t always fair Laura, get a helmet.
I agree, she has control over her own spending; why should I pay for her mistakes?
I didn’t read the story, but medical bills can bankrupt almost any family if you are unlucky enough. My mother got extremely sick and her medical bills over the course of three years were over $8 million dollars. What family can save up for that? Even medical insurance gives out after awhile.
This is a real problem with health care. Everyone wants to give their family the latest and greatest in medical care–damn the costs. In reality one can receive 90% of the care at 50% of the cost, or better.
You also need to stop doctors from providing the medical care because they are afraid of lawsuits. A family can say “No medical care” and the doctors will do it anyway because they don’t want to get sued. Of course, if they did away with malpractice lawsuits, the quality of medical care in this country would suffer because a lot of unqualified doctors who would practice medicine *forever* regardless who got hurt.
There is a narrow type of health insurance with “catastrophic” in its title. The deductible is $5K or $10K or perhaps $25K, but it is, or was, very affordable. It covers only the catastrophic type of loss that would otherwise bankrupt people. I liken it, roughly, to life insurance relative to a personal savings account. I think anyone who does not have a comprehensive and renewable health insurance policy should have such coverage. Huge bills that someone else incurs are most unfortunate, but that still doesn’t make them *my* bills.
I don’t know of any plan that has a larger lifetime maximum than $3 million. This is what my mother had. Most plans cut off after $1 to $2 million and, as far as I know, all plans have lifetime maximums.
Most of the largest insurance companies offer 5 million Lifetime Payable Maximum.
“Huge bills that someone else incurs are most unfortunate, but that still doesn’t make them *my* bills.”
I feel that way about the Pentagon budget.
The FED Burned Laura…… before Laura Burned you…….. cry me a river Laura Burns.
“Then you get in a hole,”
you get in hole because you are stupid and/or greedy.
Debt is a hole.
The first rule of being in holes is to stop digging.
Or the tried and true debt never sleeps.
“If someone legitimately can’t pay their bills — not won’t, but can’t — there should be some type of help for you. We found out there wasn’t.”
There is someone to help- it’s called disability insurance. One must have the foresight to puchase it ahead of time though.
This makes me see all kinds of red. Our youngest daughter has been seriously ill most of her life…we ran thru one 2 mil insurance policy and no one bailed us out! I’m I bitter? No, I’m grateful she’s better now and I’m proud that we worked this out on our own…we don’t owe anyone, and they don’t owe/own us. Life is tremendously unfair, but the measure of true character is in how you adapt to and overcome the “unfairness”. Unfortunately, there are many in this country who scream “help me” at the slightest hint of adversity. Just listen to the radio ads that hawk these so-called debt elimination companies…their premise is always “big bad credit card companies” and “woe is me, poor pitiful debtor, hounded by the bad guys”…like, who the hell ran up the credit cards??? Ghosts???
When did shame go out the window???
No quarter given, none taken is definitely lost on the masses today.
Better do some reading up on those so called “disability insurance” policies. Turns out that they don’t work the way most people think they do. I read one story about a woman who actually sold disability insurance to corporations. When she needed to collect, guess what? It wasn’t there.
At some level, the ability to discharge debt through bankrupcy is supposed to be the main preventor of predatory lending. The idea is that some people are unlucky or dumb enough to dig themselves into a hole they can’t get out of. Maybe banks, who can be presumed to be smarter than the average Joe should be careful who they’re handing shovels to. I disliked the way that the bankrupcy law was changed not because I think that responsibility for ones decisions is a bad thing, but because the banks were should have been aware that some of these people were bad risks. I see it as bailing banks out of their bad business decisions. And Claudia is right, medical costs can easily make just about anyone insolvent these days.
That’s true enough….I’d like to add that while we were paying off massive medical debt, I’d regularly watch illegal immigrants flood the emergency room (I was there a lot!) for free services. No one held them accountable for their debt! I even overheard one couple, who brought their child to the ER for a sore throat, speaking to one another to Spanish that they should pretend not to understand English, and to exaggerate their child’s condition in order to qualify for free ER services and medicine. The overwhelming cost of medical care in this country is being driven up by non-paying patients, and burdened on the ones who have no recourse…again, the people that actually have a job and an address get the bill, while the transient and the illegal pay nothing…my experience is with sick kids…it’s horrible that any child suffers, illegal or not, but how does our system figure it’s fair to charge citizens about a zillion more percent than they charge non-citizens? I’m not getting all political here, I just can’t understand how this can continue.
Equally troubling is the number of millionaire citizens who try to shelter their assets so they can get free care too. Medical care won’t get any cheaper/better/more fair until everyone is forced to pay the same consequences — which is pay until you run out of money and assets.
Nursing home administrators can tell you about loads of people who shelter assets, some legally and some not, but I think all the loopholes should be stopped.
There are countless reasons why Health Insurance is expensive. In the spirit of this Blog, I would like to remind everyone that these are FOR PROFIT corporations whose decisions are made based on the BOTTOM LINE, and not the care provided to the patients.
Health Insurance executives take in Millions of Dollars in salary and bonus money, and provide kickbacks and plenty of money to politicians to keep the gamed rigged.
Executives in CA recently received $600 Million in bonus money due to the BC/Anthem merger.
I have to disagree - as much as I agree with you on shame and responsibility - that’s it all the debtors fault. It’s a two way street.
Why does the lender lends today to someone who filed for bankruptcy yesterday? Why does the lender lend a million dollars to a pizza delivery guy? What happened to due diligence?
>and I’m proud that we worked this out on our own ..
I do appreciate your integrity - but what you fail to realize is what part providence played in it. It is easy to get carried away and lose humility when everything is attributed to ones own effort.
I have seen people in homeless shelters who have done all the right things and still ended up there. It’s nice to beleive that integrity and hard work is all that’s required- but that’s hogwash. I have gone from being hungry to earning in 6 figures without ever taking a handout - and what I have learned is that I could have still ended up in penury ins spite of all my effort.
The system is so rigged that people like you end up picking on those even worser than you, when in fact both of you are being sucked dry by bigger fish.
That’s in general. About healthcare, the private market does not work. And will never work. Because to make money, companies have to avoid insuring costly patients. And insurance works only if risk is spread among a pool of healthy and sick people. If all the sick people get left out, their insurance will get prohibitively expensive and they will end up on the taxpayer. For health insurance to work, it must be single payer and compulsory. Unfortunately that’s not going to happen in this country till it gets much, much worse - too many vested interests in the current system. They have spinned it so that prevalent conventional wisdom is that it’s all those illegals/transients/addicts and deadbeats that make medical care so expensive. We’ll have to stop treating illegals, stop treating the poor, stop treating the uninsured and cut off treating the underinsured. We’ll have to run through all these scapegoats, and then finally when no more are left, we’ll wake up to the real problem. Oh, we’ll eventually get there. But so what, the plunder can be continued till then, with the help of people who get taken in by the spin.
All this is moot, if your hold the principle that “I am healthy, and so I dont want insurance and therefore insurance is not needed, You have cancer, tough luck, you get screwed”.
It seems like fewer and fewer companies are offering health insurance as a benefit and a lot of those that do have downgraded coverage and increased the amount employees have to pay to have coverage. Eventually, when enough people are forced out of private insurance, the country will have to take a hard look at how we provide medical care in this country.
I know a lot of people who no longer have health insurance because they simply can’t afford it.
Excellent post, Bubbagump.
Well said, Bubbagump.
“Gentle deflations are rare.’”
I think wall street is finally coming to grips with the changes in ATM financing and its impact on the stock market. Very interesting day today.
Simmsssays…wacky gifts for Father’s Day
http://www.americaninventorspot.com
A reader posted this report from earlier this year. “(Fed) governor Donald Kohn hammered home the Fed’s hawkish strategy in blunter language during a speech in Frankfurt. ‘If real estate prices begin to erode, homeowners should not expect to see all of the gains of recent years preserved by monetary policy actions,’ he said. In other words, no mercy now, and no bail-out later.”
I hope Bernanke and the FED are true to their words. Asset prices, be it stocks or real estate, are not their concern. Their job is to set monetary policy, oversee the banking industry, and monitor inflation. Besides, if housing and the economy were as strong as we are lead to believe, then another 25pt hike to 5.25% is nothing. Isn’t the historic mean for the FF rate about 6.25% or so? Guess things aren’t fundamentally sound after all.
I have heard it said that Fed policy is neutral when the Fed rate is equal to the annualized GDP growth rate. GDP growth is around 6%-6.5% right now, so the Fed would actually still be slightly accomodative at 5.5%
Of course, if GDP growth were to suddenly fall off a cliff, the situation could change without further rate hikes.
Posted elsewhere, but worth a mention here: Kohn just added to the growing chorus of Fed governors who are bluntly hinting that more rate hikes are on the way as long as inflation is heating up–
http://tinyurl.com/klbxa
“‘The supply is coming from speculators who bought in 2004 and 2005 who are now sellers, and to make matters worse aren’t buyers anymore,’ he added, noting that many homes built by more aggressive builders also are sitting unsold now.”
Wow, who could’ve seen that coming? Maybe Tool should have read this blog about 9 months ago.
Maybe he did..he sold a ton of his stock 9 months ago
LOL! Good point.
Toll sold his personal stock and the company has been doing a stock buyback? Hmm…
That’s how you legally steal money. They learned from Enron.
Yep, use your head and you become a pillar of society.
Use a gun and you are a dangerous person to locked up.
The lesson is to use your head and street smarts.
Bernanke’s gladiator-like aggressiveness on inflation is producing smiles on the faces of U.S. workers that earn U.S. dollars and want to use those dollars in the future.
Bernanke is all talk. What inflation is he fighting? Oil closed over $70 a barrel today, and gold is holding over $600. The only thing Bernanke is affecting is the stock market (housing was falling on its’ own). Bernanke could burn the NYSE to the ground, and destroy the housing market totally, and it wouldn’t stop inflation. Inflation is based on GLOBAL forces, and interest rates are rising globally. Bernanke isn’t in control; he is just trying to keep up with foreign countries. The dollar is toast, regardless of what he does.
Every word BB says has more effect on the US economy than all words on this blog. Don’t forget that.
Deflating the stock market is deflating a ton of liquidity/easy money, which will eventually work its way into decreasing inflation.
Markets all over the world are linked very tightly. The ECB/BOJ are going to respond in kind to BB’s moves if they wish to keep exchange rate stability. Although the USD has its own share of problems, BB’s perceived hawkishness looks like it will be good medicine.
Also remember, BB has only spoken. He still isn’t done raising rates.
Deflating the stock market while commodity prices remain high leads to stagflation, not deflation.
Dear Mr. Watcher,
Stagflation is not a good outcome, but I believe that the alternatives are not better. If you have a better policy in mind, please expound (this is a serious request, as ideas should be vetted).
ECB raised a quarter point today.
As over-all consumer damand cools, so will commodities.
Rising interest rates around the world are deflationary, they are restricting credit. They are in response to too easy credit in the past.
As for BB and asset prices…if asset prices (houses) are falling sharply that, in and of itself, is a credit contraction. It would be idiotic to raise interest rates further restricting credit. The inflation we see is due to past laxity not current. There is a large lag.
Gold is $600 but was $700 last month. Rising oil prices aren’t inflationary either, necessarily. They may RESULT from inflation in credit, or they could be a sign of lack of investment in the past, or lack of new discoveries.
If oil were to run out and the price were to spike, would that mean the Fed should destroy the economy to try to get it back down in price? Doesn’t make sense.
Inflation in house prices was due to too easy credit. Now house prices are falling. But BB needs to be careful he doesn’t turn a recession into a depression.
As for raising interest rates…the last time we headed into a recession and inflation was rising (early 1990s) interest rates were CUT, not raised.
Japan had a housing melt down and their interest rates were and still are 0. 30 year long bond in Japan is 2.5% or so.
And our currency isn’t really weak except against the Euro. It was 88 yen / dollar under Clinton at one point now it’s 113yen / dollar. That means it’s strengthened.
Brian, of course the dollar looks good against the yen. We raised our rates and they didn’t, for years. That’s cherry picking. Our currency is dropping against the euro, canadian dollar, etc. except for the current dead cat bounce (three whole days!). As for high oil prices not being inflationary, you are the only person I have heard make that argument. Energy costs will be passed through. The gold correction has been modest, IMO. Continue to raise interest rates to support USD and you weaken the economy, which weakens USD. Stop raising and see USD begin to plummet. There doesn’t seem to be a way to support the USD for much longer, IMO.
“Rising oil prices aren’t inflationary either, necessarily.”
Please put down the crack pipe and step away from the computer.
Lingus: That’s the first intelligent coment that you have made recently. Thanks for that, even though it was made (sort of) in jest. Good Point.
You mistakenly equate intelligence with agreement. You just happen to agree with me in this instance.
Bernanke is all talk. What inflation is he fighting?
God, he’s been in office for only a few months!
I’m as ready to crucify stupid govt behavior too but I’ll give him a little time!
I don’t blame Bernanke. He is trapped by circumstance. The situation is really too far gone to be saved. If they really try to tamp down inflation, they would have to pretty much gut the economy, and that would collapse the USD anyway. It’s a frustrating situation.
GFY
My previous comment is for watcher.
Bernanke’s gladiator-like aggressiveness on inflation is producing smiles on the faces of U.S. workers that earn U.S. dollars and want to use those dollars in the future.
So true. Rescuing the dollar will encourage saving, too. I applaud BB’s firm stance. Besides, if the US $ continues to slide against other currencies, we’ll lose the economy anyway. And what good would that do anyone?
I too aplaud BB’s stance. I accept his form of guiding the market is very different from Greenspan’s… But that seems to be what is required.
While stagflation is not a good outcome, I’m afraid that the do nothing option is far worse. The comodity speculation is too far out of hand and must be brought in quickly. To me, we’re already in high inflation (oil, home prices, metals, etc.) Its time to cool the economy. Yes, its painfull… but both sets of my grandparents sat me down and let me know what it was like to live through the worse alternative.
The market’s spooked (both real estate and stocks). I don’t doubt we will have one last rally in both. But beware what comes are way this fall. It would be best *not* to have the rally… But sigh… I think we will.
Since I’m cash heavy, my interest is more long term.
Neil
He has got to play the hand he was dealt.
The hand he’s got is the Volcker playbook if he wants to succeed.
OR Miller if he wants to fail.
The next guy will get a better hand and might be another Greenspan.
But for now the Piper’s got to get paid.
“The slowdown in the housing market is being driven by growing inventories of homes from overbuilding and by speculators leaving the market, Toll Brothers CEO Robert Toll said Thursday.
….duh
Toll sounds more and more like one of the posters here over time, which raises the notion of bubble consensus to an entirely different level. I don’t here him gloating much anymore these days about how they are going to “get the shorts”!
If I were a Toll and I wished to keep my income steady, I would build more houses this year than I did the last. Screw my old customers.
The problem is they had idiots working for them that overbought overpriced land… they can’t make them much cheaper without losing on every one of them. If anything, they will be taking writedowns on land next year and building to the moon as you request…
Yensoy - I think there is useful logic in that. Otherwise one would have to argue that it is never in a company’s interest to continue production, even at a loss. I suppose it is a bit of domestic “dumping,” a sacrifice fly or two late in the game, to be able to stay in the game.
Correction: “…to continue production, if it is at a loss.”
The bubble sure does seem to be taking its Toll.
Let’s see, 40% of the new jobs created in the last couple of years have been in real estate. All of the real estate jobs are now in trouble, as lenders are cutting jobs (see Ameriquest, Washington Mutual, and others), homebuilders are cancelling projects (see condo developers in FL, Vegas, and elsewhere) that will lead to losses of construction jobs (or, at the least, the creation of far fewer new jobs), and sales of real estate are tanking almost everywhere, so real estate agents are taking it in the shorts. With real estate being the engine of growth for the past couple of years, and that engine being not so gently throttled back, the economy is slowing. Add rising interest rates (see BB’s comments, as well as Kohn and other Fed members recently), which will further slow the economy, as well as the loss of the home ATM to fund consumer spending, and job losses appear inevitable. This looks to me like one giant spiral heading down the toilet, and right now everything is just gathering momentum around the edges. As that momentum gathers and feeds on itself, the plunge is sure to follow. The only questions remaining are the timing and the extent of the fall. Personally, I’d like to see it happen as quickly as possible. The pain may be a little more, but it will disappear quicker and the healing can start faster. The quicker it goes, though, I think the farther the fall will be, as the psycholigical effects will be pronounced. Again, for me, that’s not such a bad thing - I want to buy my first house, so the quicker and further house prices fall, the better it will be for me to buy. I realize that a hard fall could jeopardize my job, along with others, but I’m in a field (law) where there always seems to be work, even if you have to change your focus a little.
Well said, wait and buy your house in a couple of years at much lower price than today’s.
>>wait and buy your house in a couple of years at much lower price than today’s.
Depends on which location. I have been tracking the Asian strong hold cities like Alhambra, San Gabriel, and nothing has come down.
dl,
I’ve been tracking/renting in Alhambra for years now. Believe me, a 200% appreciation over the last 3 years is not going to sustain itself regardless of the Asian contingency here. Last I checked, Alhambra was 50% Asian even in 2003 when the prices were pre-”irrational exuberance”.
Being underwater is being underwater regardless of ethnicity….bottomline somebody’s gonna want their loan repaid.
Go to Bangkok today and see the high-rise skeleton remains of Asian exuberance there before their last bust.
Fantastic remarks.
Very well put. The Fed’s long term policy of printing/providing virtually unlimited money/credit is just plain inflation. Maybe it can be justified for a one shot deal, like 9/11 or something, but as a long term policy it can only blow up the dollar in the long run.
How about raising the fractional reserve requirements, and printing a little less cash? A little loan regulation in the mortgage business couldn’t hurt either.
I find it ironic that realtors want the FED to stop raising interest rates now, given that they were completely silent when the FED was lowering interest rates.
There was a nice window open for them for a little while, but the window is closing. The fat lady has sung. Elvis has left the building. I guess it’s time for many of them to go back to school and get find a useful profession. I feel truly sorry for them.
I don’t feel sorry for the Flippers, Realtors, Mortgage Brokers, and Loan Officers who recently entered the field because it was easy money with low barriers to entry. What did they expect, really? That this nonsense would go on in perpetuity and the median house in SoCal would be $1M for shitty 1500 sqft ranch in marginal neighborhood??? No, I don’t feel sorry for them because they were effectively stealing money out the system and now that system is broken.
they were effectively stealing money out the system and now that system is broken.
Fookin’ hey, you got that right eom…
As a co-worker of mine used to say in scientific terms: “The fecal matter has made contact with the blades of the rotating oscillator”
Irrational fear replaces irrational exhuberance.If BB is truely a man…he will reward the savers. More will be revealed.
He and his fellow Fed governors have pretty much lashed themselves to the mast regarding the prospect of at least one more rate hike. The fact that the ECB just tightened increases the odds…
I think BB and the other members of the Fed have realized they will be publicly derided and have just decided to do the right thing. Lashed to the mast is a great analogy.
I’m back to wondering will it be an 0.25% hike or a 0.50% hike… My personal “gut feeling” is that a 0.50% hike would stake this undead beast and shock the markets “just enough” to provide the best mid and long term economy.
2007 is going to suck (economically). World wide. We won’t be able to buy as many bit of junk from Asia. Thus Asia won’t be able to buy their European luxuries. In a global economy… we all go down together and the ship that was keeping everyone else afloat is about to broadcast an SOS…
Neil
I’m a Realtor and I ask Why?? Why feel sorry for them. It’s as simple as you live by the sword you die by the sword. If you flipped off all your cash on Hummers, Vegas, Bimbo’s and a 2.5 mil shack your soon to be upside on. Quite frankly you deserve it. I say this because I just had a conversation with an a$$wipe who’s only been in the game 3 yrs made $250k last yr and is sweating bullets right now. Truly funny stuff. I asked why didn’t you stash some cash you know how violatile the game is as far as income. I just recieved a blank stare in response. Truly funny.
Good story. Sounds like one of my “uncles.” (Grr… hate to admit that.) He brags about “once being a millionaire,” but conviently forgets to note that when his house of cards came tumbling down it took him 25 years to finally get the IRS off his back and repair his credit repaired enough to actually own property… Grrrr… (The IRS is not a forgiving creditor…)
Neil
The first thing I get when I read this article is that NOBODY is arguing we have a bubble anymore. Nobody said “but its not a bubble”. Or “Its different this time”.
The next thing I found interesting is we have a median price decline of 4.4% for new homes and 5.6% for existing homes. Doesn’t sound like much, but a) we are just getting started and b) $400K x 5% = $20K which will start to put some people under water, believe it or not.
Between these first two points, we’ve got a bubble and it is starting to pop.
Now we get to this: “‘If employment falls, that could precipitate price declines and all the speculation that’s supported the market would be expunged,’ says DeKaser. ‘You could see things swing the other way to where there’s an irrational fear.’”
What is with the “if” ? Housing is crashing or at least really slowing down. The stock market is now tanking too. Banks around the world are tightening and vowing to fight inflation. Layoffs are INEVITABLE. Not “if”. Should be “WHEN”.
“all the speculation that supported the market would be expunged”.
That is an interesting word, “expunged”. What does that mean ? All the people who invested in RE and pumped the market up are now going to lose their shirts ? Sounds reasonable to me.
“‘You could see things swing the other way to where there’s an irrational fear.”
Kind of like what happened today in the stock market for a while. At one point the DJ was down 170 points. Me thinks some people got margin calls and had to sell to keep their broker happy. Me thinks a similar sort of thing might happen in the housing market. Too much leverage + declining markets + job loss = PANIC.
The remainder of 2006 is going to be very interesting, both in stocks and in housing.
” I feel truly sorry for them.”
You have a bigger heart that I do.
‘We’ve never publicly given the Fed instruction on how to conduct monetary policy,’ Douglas Duncan, chief economist of the Mortgage Bankers Assn. said.
Geez did he really say this? He had to throw the word “publicly” in there? He is way to honest for his industry…he needs to be in another business…or, perhaps, no business at all.
I think he was just getting a swipe in at the Realtors, who *did* pubicly “give advide” to the Fed.
Denial
Anger
Bargaining
Has the NAR just given the first instance of bargaining?
Yes, there will be much wailing and gnashing of teeth. It has already begun and, unfortunately, the best stories will remain veiled behind attorney-client privilege forever. But it’s going on even as we speak.
IMO, the next wave of disclosures will be lawsuits, perhaps class-action lawsuits, against builder-owned finance groups, which have been willfully misstating their applicants’ income to qualify the applicants for loans over the past six to twelve months. (I know this for a fact, but can’t discuss). Essentially, builders themselves placed people in houses they have no way to afford and they did so using mortgage fraud. There will be some half-hearted prosecutions (builders are EXTREMELY well-connected politically) so it will fall to the private sector to try to get them before they file for bankruptcy. Misery all around.
Are any of the builders as well-connected politically as Ken Lay used to be?
“Toll management said that the company plans to continue to grow the number of its selling communities and buy back more shares. ‘We’ve been using excess cash flow to repurchase stock, and will continue to opportunistically buy back more,’ said Joel Rassman, chief financial officer. So far this quarter, Toll Brothers has repurchased about 1.65 million shares through Wednesday.”
Do you think it is in the best long term interests of the company for management to buy back shares? The cycle has turned. They should be storing cash on hand to weather the storm. I thought Robert Toll and all of his buddies had already sold out.
Buying shares back keeps the price up while insiders dump their options.
Exactly, how about paying a special dividend instead ?
Aren’t dividends taxed as ordinary income? Stock sales are taxed as capital gains, at a lower rate.
Options are taxed at ordinary if less than 12 months.
So if you’re controlling somebody else’s (all shareholders’) money it DOES make sense to buy at a market peak.
You just wait, as this housing market decline accelerates, David Lereah will come back and blame it on the Federal Reserve. When someday interrogated by Congress about is constant cheerleading misguiding the American public, he’ll say “the real estate boom had wings…until the federal reserve clipped them…” and, “not a bubble, just a balloon that was deflated too rapidly by policymakers” and, “airplanes usually come in for a soft landing, but if you have a pilot at the controls determined to crash it, there is little that can be done.”
This is RIGHT ON THE MONEY. I’ve been thinking for a while about how that weasle was going to dig himself out of all the bull$hit he’d be spouting for the last year about the asset inflation. Now he has a scapegoat. “Everything would have been fine if it weren’t for the big, bad, Fed Chairman. I’ll get you my pretty and your little Board too”
I took it as a signal of embarassment at David Liar-ah’s comments yesterday on interest rates. A not-so-obscure slap.
sorry…that was to nest under anoninca’s comment.
My point was this:
So, is this economist saying that the MBA has PRIVATELY “…given the FED instruction on how to conduct monetary policy”?
Is he admitting to good old fashioned private, cigar-smoke-filled-barroom coercion of the FED?
We get your point, the answer is NO.
He’s saying that, unlike Lereah, he will not presume to lecture the Fed via the media (i.e. in public).
Zip Realty shows Az inventory at (drum roll please)
48,511
Now back to your regularly scheduled program
How many sales were there for those same cities in May?
the fed can stop interest rate increase tomorrow, housing will continue to tank. sheer momentum. who/what will be blamed next by the NAR? in this blog, we blame the politician for anything — i do not have a clue why.
in this blog, we blame the politician for anything — i do not have a clue why.
The politicians have told us many times that they are in control and going to protect us… they only need to raise taxes a little bit to do it.
“Mortgage bankers also see the market slowing, but they aren’t echoing Realtors in asking for a pause in rates. ‘We’ve never publicly given the Fed instruction on how to conduct monetary policy,’ Douglas Duncan, chief economist of the Mortgage Bankers Assn. said.”
——————————————————————
Douglas Duncan announced in 2005 that he had sold his house and is renting until such time as house prices fall and he will buy again.
My first reaction to this fact is that Duncan was smart to get out when he did, and maybe ethical in letting the public know it.
Duncan got out last year, Barrack got out last year, Pimco execs got out last year and again this year. They just locked in their gains, smart move for sure. The people who will suffer most are the ones that bought in 04-05, and it looks like the Fed won’t try to save them.
This is very interesting:
http://realtytimes.com/rtcpages/20060608_medianpriceeight.htm
The average price of a Silicon Valley home is $800K.
The timing is perfect. Today Intel announced that it is cutting the price of its chips by 60% so it can go head to head with AMD, who has been stealing market share. Its a price war. And Sun is laying off 5,000 people. Tech is a dog these days. Tons of supply and no demand.
Look out below.
“Condos remained at the half million dollar mark, matching the $500,000 median from April and besting the $490,000 median from May of 2005″
Someday soon we will absolute laugh at these prices. What fools !
I’ve been periodically checking Pulte.com for the Waltham “Wellington Crossing” condos they have been advertising… ALWAYS with the prices listed as “From 603K…”
Now I just checked it and it says “Prices from 319K to….”!!!
Whoa, Nellie. I’ve got to check some others.
FYI, That’s in MA
Bernanke’s gladiator-like aggressiveness on inflation is producing scowls at the National Association of Realtors, which worries that higher mortgage rates will make the housing market even softer. The group put out a public statement on the issue this week.”
Par for the course for this PAC monied, POS monopoly.
Interest rates and inventory to the moon bay bee!!
Hey now let’s not forget good ole GARY (T)WATTS, have not heard a peep from his corner lately. Maybe slipped out the back door because he saw the linch mob of sheeple who took his advise gunnig for his ass. May be we should all email the little bugger
Even better go here and see his comments and many blogger comments (from here).
http://blogs.ocregister.com/lansner/archives/2006/04/insider_qa_housings_1_fan_gary.html#comments
Yuk, yuk — from Watts: “A. What will change my forecast for 2006 would be a continued build-up of listings during the June and July months with my theory of the “Inverted Year” not coming about. If that continues to occur — and the sales stay “soft” — then I may not achieve my original forecast and will have to establish some new numbers for the rest of the year.”
In other words, if I am proven wrong, I’ll have to establish some new numbers for the rest of the year. ‘Bout like asking the teacher if you can re-take the test.
It’s already in the bag, he’s on vacation till ‘07.
Back in the 80’s, Deeds in Lieu of Foreclosure were commonplace. I called my brokerage practice “crisis management in conjuction with disposition” (Try to rent ‘em out while holding them cash flow negative, for a later sale - in lieu of foreclosure). Now they call it Selling Houses Short:
http://www.financialsense.com/fsu/editorials/2006/0607c.html
“Bernanke’s gladiator-like aggressiveness on inflation is producing scowls at the National Association of Realtors, which worries that higher mortgage rates will make the housing market even softer. The group put out a public statement on the issue this week.”
What a joke! All BB has to do is scowl into the camera and whisper “Boo!” and all the specuvestors and flippers begin to quake in their boots. Such hypersensitivity to Fed statements indicating their serious commitment to uphold their price stability mandate shows just how desperately dependent on easy money the housing market has become.