Speculation And Hesitation
A report from the Wall Street Journal. “Wall Street wants to bring back the ‘low-doc’ loan. These mortgages, which are given to borrowers that can’t fully document their income, helped fuel a tidal wave of defaults during the housing crisis and subsequently fell out of favor. Now, big money managers including Neuberger Berman, Pacific Investment Management Co. and an affiliate of Blackstone Group LP are lobbying lenders to make more of these ‘Alt-A’ loans—or even buying loan-origination companies to control more of the supply themselves—according to people familiar with the matter.”
“Years of easy-money policies by central banks and ultralow interest rates are pushing investors to seek out riskier assets with higher yields, such as these Alt-A loans.”
The Tennessean. “Lisa Wurth, the Farmers’ Realtor, said the market is unbelievably competitive. She knows of one seller who received 21 offers in just one day. ‘It’s obviously a sellers’ market and absolutely a prime time to sell,’ said Wurth, president-elect of the Williamson County Association of Realtors (WCAR). Buyers have to be ready to move quickly, especially in certain price ranges, said Benchmark Realtor Sharon Brugman. ‘If you see a house for $300,000 or below, you have a bidding war on your hands. Even $400,000 and below. That’s a crazy-strong market,’ said Brugman.”
“Buying a home is a significant step, and WCAR President David Logan understands why clients often tell him they want to take time to pray over their decision before making an offer. ‘While you’re praying about it,’ he tells them, ’someone else’s prayers are being answered.’”
The Laguna Beach Indy in California. “The median price of homes sold in Laguna Beach during 2015 fell to $1.7 million, a 5 percent decline over a year ago and the first price drop in four years of escalating values. The total volume of home sales also declined for the year, to 384 transactions, a 6 percent drop compared to 2014’s levels, according to MLS data compiled by Frank Hufnagel, past president of the Laguna Board of Realtors. Hufnagel described the 2015 price decline as an ‘expected correction’ given the ‘overheated’ escalation in the three previous years, where median home prices locally rose at double-digit rates year over year.”
“And while a flurry of higher-priced $5 million homes found buyers last year, a sea change cooled the market at mid-year. Fewer prospective buyers traipsed through open houses and top-end homes began to languish. Last year, 22 homes priced at $5 million or more sold in Laguna Beach; today, 46 in that price range – or two year’s worth of inventory — are on the market, Hufnagel said. ‘The market is much healthier at the lower level,’ he said.”
The Real Deal on Florida. “Miami’s residential real estate sector is still sending mixed signals, though one seems clear: don’t expect many broken sales records in 2016. The city — including luxury enclaves on both the mainland and Miami Beach — experienced a big slowdown in sales activity during the final quarter of 2015, while pricing trends swayed depending on the neighborhood, according to fourth quarter 2015 Elliman reports.”
“For Miami, the data shows one major trend: the residential market has slowed. Sales for both condos and single-family homes in Miami Beach were down significantly and new inventory continues to surge into the market. ‘The market has transitioned out of this sort of frenzied situation from the last couple years to something that’s not as robust,’ Jonathan Miller, president of Miller Samuel and author of the report, told The Real Deal. ‘The sense of urgency is not the same.’”
The New Canaan Advertiser in Connecticut. “Reflecting on the year that was 2015 in New Canaan residential real estate, with its flat unit sales, lower median price and higher inventories, there was no common theme among realtors about why the market was the way it was. ‘The second half of the year, however, seemed filled with speculation and hesitation. The strong and late spring market seemed to come to a screeching halt at the end of June. Builders and contractors were crazed, which is sometimes a sign that people are staying put,’ said Rachel Walsh of William Pitt Sotheby’s.”
“Joe Scozzafava, an agent with William Raveis and president of New Canaan Board of Realtors, said, ‘Inventory is high and mortgage rates are still at historic lows. Almost 30% of the inventory is more than 180 days on market, and we have motivated sellers. Median prices have come down and we are seeing steady reductions in asking prices. It’s a buyers market.’”
“Perhaps more importantly, Scozzafava said, ‘Wall Street bonuses impact the local real estate market, and word is that they are similar or below 2015 levels.’”
“…‘low-doc’ loan. These mortgages, which are given to borrowers that can’t fully document their income, helped fuel a tidal wave of defaults during the housing crisis and subsequently fell out of favor. Now, big money managers including Neuberger Berman, Pacific Investment Management Co. and an affiliate of Blackstone Group LP are lobbying lenders to make more of these ‘Alt-A’…”
I guess we have to forget all lessons learned the last time and must relive them again before the Echo Bubble can finally implode?
“There has also been a rebranding effort: Most lenders prefer to call these products “nonqualified mortgages” due to the stigma attached to the Alt-A category.”
Bahahahahaha … IOW these pigs are being re-branded, re-named as hogs.
IOW these pigs are being re-branded, re-named as hogs.
Excellent! Pigs get fat…hogs get slaughtered…can’t wait.
Neil, please pass the popcorn.
Lessons are learned in retrospect. Apparently there was insufficient pain last time.
Apparently there was insufficient pain last time ??
You can’t be serious….
Dead serious.
The correction was interrupted very early on which resulted in the economic malaise we’re currently experiencing.
how long have i been saying this, zero interest on credit cards for 3-5 years would inject tens of billions a month from the ground up. only stipulation you cannot increase your outstanding credit limit.
More crushing debt and massively inflated prices is not a solution my friend.
We are a foolish people and we will get what we deserve.
Webster needs to include this as a third example of “insanity”.
“San Francisco Fed Apologizes For “Iowa Is… Iowa” Twitter Fiasco”
http://www.zerohedge.com/news/2016-02-02/san-francisco-fed-apologizes-iowa-iowa-twitter-debacle
“In retrospect, it is no surprise that the Fed is losing credibility with every passing day.
That said, we are delighted that in under three weeks, we have interacted directly with three regional Feds. At this rate soon Janet Yellen, if not Ben Bernanke himself, will finally address our concerns after 7 years of day after day demonstrating to the world and to the Federal Reserve how its actions have led this country to ruin, something everyone else is finally realizing too. Even if it is on Twitter.”
‘Bill Gross says central bankers are “increasingly addled” as their low and negative-interest rate policies fail to produce sustainable growth, with even U.S. Federal Reserve leaders showing uncertainty about their next steps. ‘How’s it workin’ for ya?’ — would be a curt, logical summary of the impotency of low interest rates to generate acceptable economic growth worldwide,” Gross wrote in his monthly investment outlook Wednesday. “The fact is that global markets and individual economies are increasingly ‘addled’ and distorted.”
‘Gross, who was among those warning that central bank policies were causing a housing bubble before it eventually burst, said a Fed governor once called him an “odd duck” and “increasingly addled” for his criticism.’
“Today’s Fed and other model based central banks are, to my way of thinking, the ones that have more and more become ‘increasingly addled,’ ” Gross wrote in his monthly note. “They all seem to believe that there is an interest rate SO LOW that resultant financial market wealth will ultimately spill over into the real economy.”
Did Bill Gross really warn that central bank polices were causing a housing bubble? I can’t say I remember that. And his then-firm PIMCO hired Greenspan as a consultant in 2007.
On the subject of PIMCO, the firm recently hired Bernanke, which makes the company’s advocacy of “Alt-A” mortgages even more disturbing.
IIRC, Gross hopped on the “housing bubble” bandwagon late in the game like all the other geniuses. There is a lot of rewriting of history that’s been going on as of late. This blog, from 2005-2007, and a handful of others Ben regularly linked to, were the only voices of reason in that insane period.
The thing is both the hawks and doves at the fed are getting it wrong. The hawks are anticipating runaway inflation (and here I mean higher prices on consumer items) any moment because of the money that they’ve been handing out. The doves are anticipating economic growth because of all the money that they’ve been handing out. The problem is that they’re both wrong until and unless that money makes it into the hands of actual consumers instead of circling around Wall Street looking for yield. It has simply boosted the concentration of wealth because the economy is demand limited. Companies simply don’t NEED to make more stuff because workers can’t afford to buy more stuff.
The RE bubble was what we got instead of sustainable growth, because if people buy more stuff simply because they can borrow more, when it comes time to pay those loans back we have problems. Increasing credit doesn’t do any long term good unless WAGES go up and the financial “industry” has ensured that there is little chance of that.
Again….. The issue is price.
Do you really believe wages are going to triple or quadruple to meet grossly inflated prices?
Of course not.
Demand and prices will continue to crater until prices meet wages.
“Again….. The issue is price.
Do you really believe wages are going to triple or quadruple to meet grossly inflated prices?”
More contortions from posters on this board praying for a miracle so that they’ll be able to service their debt.
He may not believe it, but he sure hopes so.
The contortions and gyrations are hilarious indeed. I never thought a herd of donkeys could pretzel themselves like that.
BTW, “Money for Nothing : Inside the Federal Reserve” is currently available on Netflix streaming, have not watched it yet myself but looks interesting…
https://www.washingtonpost.com/goingoutguide/movies/money-for-nothing-inside-the-federal-reserve-movie-review/2013/09/11/4996c774-1675-11e3-be6e-dc6ae8a5b3a8_story.html
Sacramento, CA Housing Market Craters; Prices Plummet 7% YoY As Excess Housing Inventory Piles Up
http://www.zillow.com/west-sacramento-ca/home-values/
“Perhaps more importantly, Scozzafava said, ‘Wall Street bonuses impact the local real estate market, and word is that they are similar or below 2015 levels.’”
Oh, the pain!
“Bonuses Get Squeezed On Wall Street”
http://www.wsj.com/articles/bonuses-get-squeezed-on-wall-street-1452212758
Indeed. Those bonuses are more than what many people will make in a lifetime.
“The median price of homes sold in Laguna Beach during 2015″
Prices are falling all around coastal CA…
Huntington Beach, CA Housing Prices Dive 4% YoY
http://www.zillow.com/huntington-beach-ca-92648/home-values/
“Cheap credit resulting in massively inflated prices and crushing levels of debt destroys an economy.”
“Buying a home is a significant step, and WCAR President David Logan understands why clients often tell him they want to take time to pray over their decision before making an offer. ‘While you’re praying about it,’ he tells them, ’someone else’s prayers are being answered.’”
________________________________/
But no matter what, Mr. Banker’s prayers are being answered. And his God is money. It reminds me of the song “Money” from the band Extreme, which satirized this kind of decadence:
And give us these days our daily bread
Only you we praise, almighty dollar
Money, my personal savior
Money, a material lust
Money, life’s only treasure
Money, in God we trust
Money
Now I lay, I lay me down to sleep
I pray to Lord, afford my roll to keep
If I should die before I wake
I’m gonna take all the f_____g money I make.
‘While you’re praying about it,’ he tells them, ’someone else’s prayers are being answered’
This guy is a piece of work. Urgency, scarcity and interventions of God all rolled into one.
‘The market has transitioned out of this sort of frenzied situation from the last couple years to something that’s not as robust…The sense of urgency is not the same’
There should never be a frenzy about buying real estate. How many articles have I found recently with people saying (self-interested people) stuff like, “you don’t have time to think.”? Could a mania be any more obvious? Janet?
I hope these people in Tennessee didn’t overpay on the way to getting their prayers answered. Of course, the lenders and appraisers would never let that happen.
The people of TN (and specifically, middle TN) are completely nuts. Want a house in a safe neighborhood that doesn’t need updating (gutting) from the front door to back? Get ready to pay $280,000+. Last week, I saw a listing for less than 700 sq. ft. that was $220,000 — and it looked like a crack house. I’ll admit I’m growing weary of waiting for the situation to correct, but I’m continuing to pile up cash for now. Meanwhile, all my 20- and 30-something coworkers are buying houses…
Fixt.
“Buying a home is a significant step, and WCAR President David Logan understands why clients often tell him they want to take time to pray over their decision before
making an offerlosing their ass.”‘Oil companies are cutting investment, slashing jobs and selling off pipelines and other assets as crude prices plunge. The latest warnings came from Exxon Mobil, which reported Tuesday that fourth-quarter earnings fell 58 percent in the oil giant’s weakest quarter since 2002. The results were even worse at BP, which posted a 91 percent decline in profit.’
‘Those reports follow Chevron Corp.’s first money-losing quarter in more than 15 years and Royal Dutch Shell’s warning that its 2015 profit fell sharply.’
“I expect continued layoffs, restructurings, and consolidation among oil and gas companies,” said Gianna Bern, an associate professor of finance at the University of Notre Dame. “We are witnessing the perfect storm in this industry.”
I’m confused. Don’t these companies know you don’t need profits to have your stock soar? They should be hiring, expanding, drill baby drill! It’s all about revenue, so grab it while these losers are misreading the future.
will DOE cut any jobs?
nope
all Feds secure w pensions ,hc you name it
Did you know that federal workers no longer have pensions, and essentially have a 401K, known as Thrift Savings Program (TSP)?
10 year at 1.80%
is my computer busted?
10 year at 1.80%
is my computer busted ??
No…It could be headed lower….
‘Breakdowns in financial stocks are becoming a little too routine for comfort of late. Dragged lower by falling interest rates and credit concern, the KBW Bank Index extended its three-day decline to as much as 7.5 percent earlier Wednesday — the fifth time this year a loss has exceeded 5 percent over such a stretch, data compiled by Bloomberg show. At times this week, losses from Bank of America Corp. to Citigroup Inc. have exceeded 10 percent.’
‘At 15.7 percent of the Standard & Poor’s 500, banks, brokerages and insurance companies are second only to technology companies as the biggest group and more than twice the size of energy producers.’
“Crushing the banks like this is a macro narrative,” Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee, said by phone. “It definitely puts a different tone on this selloff.”
‘More than $350 billion have been erased in financial shares in 2016, the worst start to a year in data going back to 1990. Volatility in bank shares is spiking to levels not seen since the financial crisis, deepening the rout that just sent stocks to the worst January in seven years. Instances when the KBW Bank Index fell more than 5 percent over three days in 2016 have exceeded all the occurrences in the past three years combined. At 23 percent of trading days, the annualized frequency is greater than any year except 2008 and compares with a two-decade average of 4.4 percent.’
‘The losses came as the 10-year Treasury yield fell below 1.86 percent for the first time since April while credit rating agencies warned of rising debt defaults among American businesses. Moody’s Investors Service Ltd. on Wednesday said that the number of U.S. companies that have the highest risk of defaulting on their debt is nearing a peak not seen since the height of the financial crisis, just one day after S&P downgraded some of the biggest U.S. explorers, citing oil’s plunge.’
‘The catalyst of wider net interest margin “just flew out the window,” said Brian Barish, the chief investment officer of Denver-based Cambiar Investors LLC. “The memory of 2008 is still deep and painful for most investors, and when the markets descend, banks wind up having some beta to the downturn,” he said, referring to banks’ volatility relative to markets.’
http://finance.yahoo.com/news/bank-selloffs-replacing-oil-rout-174832353.html
“WTI Plunges Below $30 As Crude, Gasoline Inventories Surge & Demand Crashes”
http://www.zerohedge.com/news/2016-02-03/wti-plunges-below-30-crude-gasoline-inventories-surge
At $29/bbl, oil prices are still massively inflated.
Basically what you all are saying is the FED’s low interest rate policy has inflated the price of many things but not wages.
So only people who have equity have benefited not workers wages so the economy is bifurcated.
Therefore in order to get back in balance the price of many things ( including houses) will have to fall back to what wages can afford to buy.
Or wages go up one or the other to get back in balance. All this borrowing to make up for low wages is not going to work.
“Basically what you all are saying is the FED’s low interest rate policy has inflated the price of many things but not wages.”
Check.
“So only people who have equity have benefited not workers wages so the economy is bifurcated.”
Check.
“Therefore in order to get back in balance the price of many things ( including houses) will have to fall back to what wages can afford to buy.”
Check … except … there’s that pesky debt thingy. Prices went up because the massive application of debt pushed them up. Prices may go down but this going down of prices doesn’t erase the debt that allowed them to be pushed up in the first place. No, prices that go down leave the debt that was backed by higher prices a bit … stranded.
Stranded as in unbacked, as in risky, as in difficult to refinance.
And the debtors…crushed.
Basically what you all are saying is the FED’s low interest rate policy has inflated the price of many things but not wages.
====================
It’s the Fed’s explicit role since Volker in the ’80s to fight wage inflation at the expense of price inflation. Does the Fed act when houses, goods, or medical service move outside their 2% target? No. And they have done a smashingly good job at crushing general wage growth.
===========
Therefore in order to get back in balance the price of many things ( including houses) will have to fall back to what wages can afford to buy.
===========
Wrong. The economy has bifurcated so the people and corporations with money can purchase (many things) leaving everyone else to rent them or for the upper classes to buy them with debt. Sure, prices may fall a bit, but at 4% drops per year, it’s going to take a really long time for them to adjust. Think about it - college degree plus 2 incomes now required, less children, no vacations, US has a relatively low home ownership rate compared to other 1st world countries - does that sound like ‘falling back to affordability’ to you?
Well…. not really. Not at all.
In the meantime, demand will continue to collapse.
“Wall Street wants to bring back the ‘low-doc’ loan. These mortgages, which are given to borrowers that can’t fully document their income, helped fuel a tidal wave of defaults during the housing crisis and subsequently fell out of favor.”
So basically we look ahead to one more “fake” price surge before the most spectacular crash ever. Roger that. Continue to liquidate hard assets….
It’s just another piece of the puzzle we’ve been seeing for about a year and a half. Remember the FHA raising loan limits? The FHA insurance giveaway last year was the biggie, I’m told, and first time buyers (foam, meet runway for the banks) have grabbed hold a bit. Overall it’s been drip drip for a while now as far as relaxing loan standards.
One thing about it though; it’s generally met with groans instead of what we saw in the 2000’s, when the Countrywide CEO was hailed on the front page of the WSJ for helping people get on the road to riches. And as the same WSJ says in the article above, the reception is not that warm from borrowers or investors. Even the Quicken guy poo-poos it.
Why buy a depreciating asset like a house at these grossly inflated prices when you can rent it for half the monthly cost of buying it?
‘a sea change cooled the market at mid-year’
Hmmm, not an oil area like Bakersfield. Coastal California, check. Golly what’s got into these buyers failing to “traipse through the $5 million” shacks? What happened mid-2015? Wasn’t that when stocks took a dump?
Falling Housing Prices