Coasting To A Slowdown
A report from the Associated Press. “There’s a dark side to those delightfully low gas prices: Housing markets are slumping in communities that were recently flush from the U.S. shale oil fracking boom. Home sales are down sharply this year in North Dakota and the West Texas cities of Midland and Odessa. Home sales have also slowed in El Paso, and, more recently, in Houston. The Permian basin in West Texas and the Bakken Formation in western North Dakota quickly became magnets for workers. ‘It was not unusual to have a house on the market and, in less than a week, have multiple offers. It was a crazy market,’ said Scott Kesner, chairman of the Texas Association of Realtors.”
“That frenzy began to dissipate early in 2015 as the slump in crude dragged on, and it has since deepened. Real estate agents in Houston say the loss of oil jobs has resulted in less competition for homes — fewer are fetching offers from multiple bidders. On the buyers’ side, the oil industry’s woes are giving some the confidence to put in lower offers, said Tim Surratt, an agent with Greenwood King Properties in Houston. In Minot, North Dakota, which is located within the Bakken Formation, the housing market has cooled somewhat after being red hot for years, said Dorothy Martwick, broker-owner of Century 21 Action Realtors. Now, she said, the scales have tipped more in favor of buyers.”
“‘In 2011, you could ask whatever your wanted for your house and you might get someone to pay it,’ she said. ‘Now, you have to realistically put it on the market for what it’s worth.’”
NewsOK in Oklahoma. “Home construction in the Oklahoma City area, coasting to a slowdown all year, will probably hit the brakes early next year in face of the swooning oil-and-gas business. Edmond homebuilder Caleb McCaleb said that’s the thinking of his colleagues in the business. McCaleb said homebuilders have seen a buildup of their own new inventory, reason enough for them to retreat. ‘Where we’re seeing the trend, it’s starting to trend down’ he said, and builders expect to pull back sharply ‘just because of the energy sector.’”
The Alaska Dispatch News. “Anxiety about the economy has many Alaskans unsure of what moves to make when it comes to buying or selling a home. The answer appears to depend on the price of the house, according to the latest available real estate statistics from the Multiple Listing Service. Above $750,000, it’s a buyer’s market. The inventory for up-market homes is estimated at about one year and would likely be even higher but for the fact that some homeowners in that higher bracket are holding back for now because they can’t demand the prices they want, the report said.”
“‘Anecdotal evidence suggests that the less-motivated sellers simply withdrew from the market when their price objectives were not achieved,’ the report said.”
“David Windsor, an associate broker at RE/MAX Dynamic Properties who works in the upper tier of the housing market, said he expects a blip in the real estate market, but no crash. He routinely tells clients selling pricier properties to be prepared for the selling process to take about two years. ‘Everybody seems to be worried about the upper end, but I’m not at all. There are plenty of people both inside and outside of this state with money,’ Windsor said. ‘And I might add, a million dollars is not that much anymore, in my opinion. There are plenty of folks that can afford homes above a million dollars.’”
The Bismarck Tribune in North Dakota. “With fewer people streaming into the state, demand for housing has slowed in central and western North Dakota during the past year. As a result, buyers are taking more time, looking at as many as 20 to 40 homes rather than being required to act fast and ‘take it or leave it.’ While the number of homes sold is down and apartment vacancy rates are up, Nancy Deichert, executive director of the Bismarck-Mandan Board of Realtors, calls the small decline ‘a return to normal.’”
“Jeremy Petron, president of the Bismarck-Mandan Apartment Association, said a lot of units have been built and the influx of people into the area has slowed. He said the area may even be a little overbuilt when it comes to apartments. Combined, those factors have led to an average vacancy rate of 5 percent to 6 percent, according to an association survey. Vacancies at newer complexes are higher, around 10 percent, because most of those are higher-end apartments, Petron said. A high-end, three-bedroom apartment typically rents for $1,300 to $1,500 per month.”
“In Watford City, the number of vacant apartments is way up. ‘There’s a pile of them coming online now,’ said Gene Veeder, public relations director for McKenzie County Development. ‘Availability is much different than this time last year.’ Rent is more competitively priced, $1,200 to $1,600 per month for a two-bedroom is common, Veeder said. ‘You still see some $2,500 but not many,’ Veeder said.”
“A typical single-family home costs from $250,000 to $300,000. A 20 percent down payment makes it hard to get a loan and some might be reluctant to buy because they got upside down on a house previously. ‘We don’t have inventory of older homes on the market,’ said Veeder, adding that many were snatched up by companies for housing their workers and others were turned into rental units. ‘What we don’t see anymore is a $75,000 house going for $300,000,’ Veeder said.”
“‘Anecdotal evidence suggests that the less-motivated sellers simply withdrew from the market when their price objectives were not achieved,’ the report said.”
Are they planning to sell after the Souper Bowl, once oil prices again top $100 / bbl?
You mentioned this movie:
http://www.cbsnews.com/news/author-michael-lewis-on-wall-sts-delusion/2/
‘In effect, Lewis writes, Burry was doing the first real analysis of the creditworthiness of the subprime borrowers and the structure of the complicated Wall Street mortgage securities; the kind of work that was supposed to have been done by bond rating agencies like Standard & Poor’s and Moody’s, so that investors could accurately judge their risks.’
“What you were doing sounds to me like the job that the rating agency should have been doing,” Kroft remarked. “There’s no way the rating agencies had anywhere the manpower to look through all that was being issued,” Burry said.”Yeah, but, you’re one guy!” Kroft pointed out. “And you found it.”
‘Burry concluded that the subprime market would collapse in 2007.’
“He notices for the first time that there are pools, there are mortgage bonds supported by pools of loans, and most of the loans are, what you call negative amortizing interest only loans. Which means that, you, the homeowner, and buyer, you borrow the money, and you not only don’t have to repay your principal, you don’t even have to repay the interest. And if you just don’t pay anything, they just add to your loan,” Lewis explained.’
2007?
Saturday, December 11, 2004
Subprime Lending Surges
‘Pricing bubbles often end in a parabolic rise, which we probably saw last year. It is no surprise that what is holding up the market now is lending to so-called subprime borrowers. I view this as bad news for this market as these folks will be in financial trouble even faster. Consider that the risk to mortgage lenders increases, suggesting some desperation for borrowers. “Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired”..borrower.’
http://thehousingbubble.blogspot.com/2004_12_01_archive.html
‘There’s no way the rating agencies had anywhere the manpower to look through all that was being issued’
That’s a lie. In the spring of 2005 I was poring through PDF’s put out by Fitch, S&P and Moody’s on these loans and they saw what was happening. If you look back at my posts from the time, they concluded; the government is backing a lot of this stuff so bond holders will get paid.
‘According to Lewis, “all” of the people who made these terrible decisions left with a lot of money. “I didn’t run across a single character who didn’t get rich. Anybody above a certain level in all these firms made huge sums of money by any standard. And the people who were, I mean, this is where it gets a little creepy, the people who were most instrumental in building the subprime mortgage machine also happened to be the ones who had the most detailed understanding now of the securities in the rubble,” he told Kroft.’
“And they’re being paid all over again to sort through the mess because they’re the experts. That is an age-old trick on Wall Street, ’cause generally speaking, people who create disasters make a lotta money cleaning up the disaster because they’re the ones who know about the disaster,” he added.’
‘What about the CEOs? “Stan O’Neal at Merrill Lynch, and Chuck Prince at Citigroup are the most obvious examples. But they were paid not tens, but into the hundreds of millions of dollars to run their firms into the ground,” Lewis said.’
‘By the fall of 2008, with AIG and all of the big investment banks at some risk of going under, the government stepped in to bail out the very firms that had caused the crisis. A decision was made that AIG was too big to let fail, and that its gambling debts would be paid off 100 cents on the dollar and the company that benefited the most was Goldman Sachs.’
“Do you believe it had anything to do with their political connections?” Kroft asked. “It’s hard to know. There’s no proof. But it certainly didn’t hurt. It certainly didn’t hurt that the secretary of the Treasury was a former Goldman CEO. It certainly didn’t hurt that a lot of the people at the table were former Goldman employees. It certainly didn’t hurt that the air that everybody breathed contained the assumption that we can never do anything to harm Goldman Sachs. So sure, I mean, I can’t really see how their political influence didn’t have anything to do with it,” Lewis said.’
‘By the fall of 2008, with AIG and all of the big investment banks at some risk of going under, the government stepped in to bail out the very firms that had caused the crisis. A decision was made that AIG was too big to let fail, and that its gambling debts would be paid off 100 cents on the dollar and the company that benefited the most was Goldman Sachs.’
Nobody could have seen it coming! Wall Street pulled off a highly successful con, “after Mr. Paulson and Federal Reserve Chairman Ben Bernanke warned that the financial crisis could spread to Main Street from Wall Street and throw the country into a deep recession.”
The deep recession was already nine months old by September 2008, and destined to get far deeper despite the bailout.
Some of the debt donkeys who bought recently still consider 2004 to be pre-bubble.
‘According to the New York State comptroller, Wall Street employees split $20 billion in bonuses for 2009. That’s up 17 percent over last year, but it’s not a record. In fact, it’s a third less than the $33 billion Wall Street divvied up in 2007 - the same year everyone on Wall Street began to acknowledge the subprime mortgage losses that would reach $1.75 trillion.’
‘The size of the bonuses has left Lewis appalled but not really surprised. More than 20 years ago, Lewis collected a couple of bonuses himself as a young trader at Salomon Brothers, and he still can’t figure out what he did to deserve them.’
“I got two bonuses in 1986 and 1987. And it was like winning the lottery. The money was so shocking, even though it seems in retrospect so quaint. It was a couple of hundred thousand dollars. But I was 24, 25 years old. It was incredible that someone was gonna give me a couple hundred thousand dollars for what I’d just done. ‘Cause I couldn’t figure out what was so terribly useful about what I’d just done,” Lewis said.’
“And really what’s going on is the people at the top of firm wanna make a lot of money. And if they’re gonna make a lot of money they gotta pay the people under them a lot of money,” he added. “So it’s a very elegant form of theft right now.”
“Well, their argument has been, ‘Look, we’re entitled to these bonuses this year because we made all of this money,’” Kroft pointed out.’
“Yeah, no one ever asked ‘em, they never explained how they made all this money. All right, if you look at their businesses right now they’re heavily government dependent. That if you were a Goldman Sachs, a Morgan Stanley, or J.P. Morgan, you have access to a zero percent loan in virtually unlimited quantities from the Federal Reserve. You can take that money and reinvest it in Treasury bonds or in government agency securities and you will get the spread. And you could do it over and over. You’re essentially borrowing from the government, and lending the government. And taking a cut,” Lewis said.’
“So the government’s let them make the money,” Kroft remarked.’
“Well, the government is still subsidizing these firms because the losses were sensational. I mean, in the financial system they are now $1.75 trillion of losses from the subprime mortgage bonanza. And they’re firms that really, look, they really shouldn’t exist. If the market had been allowed to function they would not exist. They’d be failed enterprises,” Lewis said.’
“I mean even now if the government said, ‘We have nothing to do with these places anymore. We’re gonna let ‘em fail if they fail,’ They no longer have this effective government guarantee. And by the way we’re gonna cut out these subsidies that we’re handing them under the table, most of them would fail,” he added.’
‘Asked if he sees anything happening to reform the system, Lewis said, “There are several things that obviously should be done that have not been done. And you can’t explain to my mother why they haven’t been done. Only a really smart person on Wall Street could explain why they haven’t been done. But for example, all right, one of the things at the bottom of this crisis, we had these ratings agencies that called a lot of things AAA, gold-plated securities that were worthless.”
“And the ratings agencies are paid, of course, by the Wall Street firms for their ratings. Why is that allowed? Why can you buy a rating? That seems like a very obvious thing to change. And people talk about it, but it hadn’t happened. Credit default swaps, insurance contracts that we trade freely, but it’s not classified as insurance. This market is the closest thing to, sort of, ground zero of the recent calamity. And yet, nothing has been done to change the market. Nothing’s been done to make it more transparent, nothing’s been done to make it more like what it is, an insurance market. That’s an obvious reform,” Lewis said.’
Ask Lewis if somebody should go to jail. “Oh no, that would stifle financial innovation.”
That’s why his book and this movie are all over the media. The system is telling its own version of history, and it barely resembles what really happened.
“it’s a very elegant form of theft” that the deficit spending government is an essential partner in.
Seems like Lewis partneeed with Uncle Sam to downplay the government’s culpability in the subprime debacle and shift blame to the private sector.
It’s more than that, and I don’t know how these things are constructed. But it is very elaborate. Consider how early on the GSE’s couldn’t produce financial statements. Prices had barely even started falling yet! They weren’t loaded up with subprime at the time. Prime loans were the vast majority of defaults. Had the system worked, the GSE’s would have been delisted and would not have been able to issue AAA bonds. Lewis?
And there’s the prices. See, if you focus on vampire squids and CDO’s and the like, there isn’t much time to ponder - were the prices bad too? Can house prices ever be too high? Or is that us getting rich? And rich quick! No more slaving away at a job for 30 years, saving a little here and there, earning interest on it. By golly I’m a fiscal conservative! I bought a house and made 40% on it in two years!
The whole damn thing is a scam, maybe the biggest scam in history. And they can’t let it go. They can’t accept the days when executives don’t make $100 million a year, and pay $150,000 to hear one of their employees give a 15 minute speech. It would be barbaric. Now that means houses have to keep going up, indefinitely. Sure they stumbled a little a few years ago, but look how quickly they made that up. Just $4 trillion in QE, zero interest rates for a decade, zombie GSE’s backing the whole thing up. What could go wrong? Lewis?
So no one is studying house loans now because, well because the government will be there. But that was the exact excuse Moody’s and Fitch gave in the spring of 2005.
“I got two bonuses in 1986 and 1987. And it was like winning the lottery. The money was so shocking, even though it seems in retrospect so quaint. It was a couple of hundred thousand dollars. But I was 24, 25 years old. It was incredible that someone was gonna give me a couple hundred thousand dollars for what I’d just done. ‘Cause I couldn’t figure out what was so terribly useful about what I’d just done,” Lewis said.’
Apparently it pays handsomely to work in the primary target zone for the Fed’s helicopter drops of newly created fiat money.
“Just $4 trillion in QE, zero interest rates for a decade, zombie GSE’s backing the whole thing up. What could go wrong? Lewis?”
Apparently all these boring details in the back story would not play well on Hollywood.
‘And I might add, a million dollars is not that much anymore, in my opinion. There are plenty of folks that can afford homes above a million dollars.’
And they all want to live in Alaska…
You don’t normally get rich by being dumb enough to pay millions for a house in Alaska.
Or anywhere else for that matter.
Am in Alaska now. It’s a beautiful place with a serious white trash problem.
It is a beautiful place. What are you doing up there this time of year? Hope you brought a flashlight.
Family troubles… here lending moral support.
It’s pretty grim having 4 hours a day of vaguely bright gloom.. On the plus side, it’s too cold and miserable to go out and play, so I’m getting a LOT of work done. On the minus side, I’m getting flabby and sick from lack of physical activity.
I was up there on summer and it was the opposite. I didn’t see a dark sky until near when I left the first week of September. The people I knew told me the worst months were January and February because when the sun was out, it was usually cloudy. Good luck Russ.
Oh…. hi Central… err Russ… err whatever name it is.
Doesn’t Sarah Palin live there?
Why Rape Is Much More Common In Alaska
Erin Fuchs
Sep. 26, 2013, 6:44 PM
While researching a story on how Americans commit crime, we came across a disturbing fact. There’s a significantly higher number of rape reports in Alaska than most other states.
Alaska has nearly 80 rapes per 100,000 residents, and South Dakota is a close second at about 70 rape reports per 100,000, according to the FBI’s 2012 crime report. The next-highest is Michigan with 46 per 100,000.
Rape often goes unreported, so these statistics may be less reliable than other crime statistics. However, Alaska had a reputation for having a problem with rape before the FBI’s recent crime report came out. In 2010 a poll of nearly 900 Alaskan women found that 37% had experienced sexual violence. This chart also shows how much Alaska has struggled with rape over the years.
How did Alaska get to be such a dangerous place for women?
…
Rugged male dominated lawlessness.
Answer is simple.
Rapes and sexual crimes go underreported in suburban and urban areas. Secondly, sexual crimes are more often overlooked in urban areas, especially where the bar has been lowered.
Case in point? San Francisco.
Is it time to dust off the Oil City plan?
Except this time maybe a place like Houston may offer some really nice choices in a major metro area…
Regarding oil housing in the bakken shale region. Can you imagine being hunkered down for five winter months in this house? Hehe.
http://picpaste.com/bakken_oil_home.jpg
Pleasanton, CA Housing Demand Craters; Inventory Balloons 76% As Prices Freefall 42% YoY
http://www.movoto.com/pleasanton-ca/market-trends/
“‘In 2011, you could ask whatever your wanted for your house and you might get someone to pay it,’ she said. ‘Now, you have to realistically put it on the market for what it’s worth.’”
What a strange thing to say. The term “what it is worth”, when it comes to housing, comes down to what people are willing to pay, or rather, commit themselves to paying.
“What it is worth” is decided by what the comps are selling for, and what the comps are selling for is decided by - is voted on - by strangers.
It’s not that prices are “set” such as at Macy’s, instead prices are voted on, like they are in the stock market.
Voting prices up and down votes wealth up and down and that’s because wealth is determined by equity and equity is determined by price.
But not all the houses are subject to this voting, only the ones that are for sale are subject to this voting. So if the PTB can somehow convince voters of price to pay high prices for the houses that are for sale then the PTB will have preserved wealth for all the houses, whether they are for sale or not.
Houses, largely because they are so pricey (and thus are stuffed with wealth in the form of equity) usually are not bought whole, instead they are bought in chunks - “affordable” chunks - chunks that are contracted to be paid for, one chunk at a time, over a period of time that may extend out over several decades.
The seller will get his price all at once - all in one chink - while the buyer only has to worry about paying the current month’s chunk, a chunk that is doable - perhaps barely doable but doable Nevertheless.
IMO this phenom is what allows the system to work the way it is now working.
If the PTB can control the affordability of the numerous chunks that make up the prices of houses then the PTB will be able to maintain and control the prices of the big chunks - the prices of the houses themselves.
And, unlike the Macy’s phenom (and unlike what was taught in Econ101) it’s the high and rising prices of houses that draws in buyers.
PTB will have preserved wealth for all the houses, whether they are for sale or not ??
How is the wealth “preserved” if the property is not for sale or more importantly sold ?? Things can change in “minutes”…Just ask these people what happened to their preserved equity;
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiq4IqjtIHKAhUL4GMKHeLxDZUQFggcMAA&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FFukushima_Daiichi_nuclear_disaster&usg=AFQjCNFynJreobQjJchMa8B5f-lAEVBYOg&bvm=bv.110151844,d.cGc
And keep in mind Fukushima radiation is washing up on shore on the west coast.
“Huge Fukushima Cover-Up Exposed, Government Scientists In Meltdown”
http://www.zerohedge.com/news/2015-12-19/huge-fukushima-cover-exposed-government-scientists-meltdown
“Fukushima radiation just off the North American coast is higher now than it has ever been,”
Is Tuna Safe to Eat Post Fukushima?
http://www.thehealthyhomeeconomist.com/tuna-safe-post-fukushima/
“How is wealth ‘preserved’ if the house is not for sale or more importantly sold??”
Wealth is preserved and wealth is determined by the going prices of the comps - the same way wealth is preserved and determined when it comes to stocks.
Wealth is preserved and determined by the actions of strangers.
“Things can change in minutes.”
Yes! And it is in the interest of the PTB that they don’t, that things - prices - don’t change in minutes, or if prices do change in minutes they will change in the direction the PTB wants them to change, which is up.
Yes! And it is in the interest of the PTB that they don’t, that things - prices - don’t change in minutes, or if prices do change in minutes they will change in the direction the PTB wants them to change, which is up ??
My guess is that the prices in Fukushima are not back to peak…Nor are they in Greece…Or Spain…Or Portugal…Or Central valley California…Or Medford Oregon….Or many parts of Florida…Etc…So your broad suggestion that the PTB have the ability to control prices is flawed…
An enabler does harm even when only partially successful.
‘In 2011, you could ask whatever your wanted for your house’
2011 huh? And what appraiser backed that up? What was the share of government backed loans by 2011?
If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.
“What we don’t see anymore is a $75,000 house going for $300,000,’ Veeder said.””
And that’s about all a 10 year old house is worth….. $75k.
McKinney, TX Housing Prices Crater 14% YoY; Excess Housing Inventory Billows 72%
http://www.movoto.com/mckinney-tx/market-trends/
Dallas, TX Housing Craters; Prices NoseDive 25% YoY
http://www.zillow.com/north-dallas-dallas-tx/home-values/
You’d think zillow could line up their data points better
Oil = down
Cold = down
They have preited dallas +6% next year