Economic echoes

From the NYT via the Rutland Herald:

Economy echoes trend of the ’90s

It is five years into an economic expansion and most Americans are still waiting for their share. Inflation is swallowing pay raises. Businesses are hiring, but forecasters worry that the economy may be about to stall.

“If this is a recovery,” the leader of the political opposition complains, “I can hardly wait for the recession.”

This may sound like the stuff of yesterday’s headlines. But it comes from 1996, when Bill Clinton was president and his rival was Bob Dole, the Republican nominee. The economic expansion in question, which got off to a sputtering start in March 1991, was to become the longest period of uninterrupted growth in the nation’s history.

Now, a little more than five years into an expansion that officially started in November 2001, the economy is showing remarkable parallels to the situation of a decade ago. “It’s striking how similar they are,” said Robert J. Gordon, an economics professor at Northwestern University.

The overall rate of growth has followed a trajectory almost identical to the first five years of the 1990s expansion. Now, as then, corporate profits have surged; the stock market has, too. But just as workers have finally begun to reap some of the spoils of a growing economy, many forecasters worry — as they did a decade earlier — that the expansion is running out of steam.

What is striking, considering these similarities, is how little effect the policy choices of Democratic and Republican administrations seem to have had on how both growth cycles played out.

Few economic forecasters expect the current growth cycle to have the length and vigor of the 1990s boom, which continued for 10 years from trough to peak.

Yet fewer still expected strong growth in the mid-1990s. In early 1996, forecasters polled by the Federal Reserve Bank of Philadelphia predicted that the economy would grow merely 1.8 percent that year. The economy ended up growing at twice that pace.

Average Americans were more pessimistic then than they are now. According to Gallup’s most recent snapshot of public opinion, last month 52 percent of Americans rated economic conditions as either excellent or good. In May 1996, at a similar moment in the previous expansion, only 30 percent did so.

“Consumers don’t expect a slowing economy,” said Richard T. Curtin, who heads the surveys of consumers at the University of Michigan. “According to consumers, we are going to improve.”

Given the parallels, perhaps it is not surprising that the economy is providing the same sort of political ammunition as it did 10 years ago.

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78 Responses to Economic echoes

  1. njrebear says:

    The Internet boom that started around 1996 single-handedly propelled growth. What do we have now? We are at the end of a boom cycle unless house price continues to increase for the next 4 years.

  2. jayb says:

    “many forecasters worry — as they did a decade earlier — that the expansion is running out of steam.”

    Why are forecasters masters of the obvious sometimes. No sh!t the expansion is going to run out of steam. It’s all cyclical. Why do they bother paying those people.

  3. sas says:

    Interesting piece out of the Denver Post:

    “Zero-down lenders folding”

    http://www.denverpost.com/ci_5263213

    SAS

  4. James Bednar says:

    More short-sale news, from the Contra Costa Times:

    Loan forgiven, not forgotten

    Homeowners should know that although debt can be forgiven, it’s never forgotten.

    When a short sale, deed-in-lieu agreement or foreclosure occurs and a residential lender loses money on a loan, the lender will most likely file the loss with the Internal Revenue Service, and the former homeowner may end up owing thousands of dollars in taxable income.

    It comes in the form of a 1099-C, or Cancellation of Debt. According to the IRS, the cancellation or forgiveness of a debt is the same as if the lender handed the homeowner cash and shook hands.

    “That’s probably where we see kind of the biggest surprise on the part of our clients,” said Jackie Pearlman, senior tax research coordinator for H&R Block’s headquarters in Kansas City. “Not only are they not aware it existed but are very surprised to understand that it’s income. The concept is really alien to many people.”

  5. James Bednar says:

    From MarketWatch:

    Home Depot posts lower profit

    Frank Blake, recently installed as CEO, called results for the most recent fiscal year “disappointing” and said they reflect “challenging” conditions in the housing market as Home Depot and smaller rival Lowe’s Cos. do battle.

    Quarterly sales were similarly sluggish for Home Depot, rising 4% to reach nearly $20.27 billion. Sales at stores open longer than a year, the industry’s growth benchmark known as comparable-store sales, fell 6.6%, however.

    Analysts, on average, had been looking for Home Depot to generate earnings of 50 cents a share on revenue of $20.8 billion, according to estimates compiled by Thomson Financial.

  6. James Bednar says:

    From Seeking Alpha:

    Why This Market’s Fairy Tale Can’t Last Forever

    When the unraveling is fully underway, there will be a flood of lurid headlines. Amid the avalanche of hearings, lawsuits, arrests, and trials, stories about violent strikes and protests will vie with news of plunging markets and businesses going belly up. Every day, tales of foreclosures and broken lives will blanket the airwaves. Many financial institutions will shut their doors, often with little warning. Rumor-filled bank runs will be commonplace. Finger-pointing will also be widespread, as politicians, regulators, and corporate chiefs scramble for cover in the face of increasingly hostile public opinion.

    Meanwhile, Americans will scratch their heads and wonder how it all went so wrong so fast, or why they had not been aware of the dangers before. In reality, we should have seen it coming. Signs of impending doom were everywhere, plain for all to see, in the years leading up to the wide-ranging meltdown. Still, even if people had been aware of the gravity of the situation, it seemed that few cared all that much.

    Perhaps that’s it: Americans just didn’t want to know. Or maybe they actually didn’t see anything wrong or out of the ordinary. Everywhere you looked, policymakers, politicians, and pundits insisted that the financial system and the so-called Goldilocks economy were alive and well, and there was no reason for anyone to believe otherwise.

    Then again, perhaps it was just too easy to believe the fairy tale that the good times could last forever.

  7. James Bednar says:

    Interesting piece from Barbados newspaper, Nation News:

    Mortgage horrors for Bajan-Yankees

    AN UNUSUAL HOUSING CRISIS is affecting Barbadians in New York, often causing them to lose homes they bought less than two or three years ago.

    According to mortgage brokers, court officials, elected representatives and real estate agents in the city, Bajans and other West Indians are among the hardest hit.

    That story is being heard repeatedly in New York City these days. That’s because more and more Caribbean immigrants from almost every country in the region are falling behind in mortgage payments.

    “It’s a real crisis in our community,” said New York state senator John Sampson of Brooklyn. “Real estate agents and some mortgage finance companies are taking advantage of the desire among West Indians to acquire a piece of property.

    They know that we wish to acquire property and they are leading people up the proverbial garden path. West Indians measure success by the property they own and they are just being taken advantage of.”

  8. James Bednar says:

    Looking for confirmation.

    I’ve heard similar stories from 2 other people, and just heard the same story for a third time yesterday. To me, 3 times is a trend.

    In all three cases, individuals purchased very expensive homes.

    The builders were all eager to deal, but with one caveat, that they provide the discount to the buyer in the form of cash at closing.

    Now, this wasn’t a mortgage-fraud situation (two of these were all-cash deals financed by the sale of other properties), but it is certainly disconcerting. In all cases, these deals were offered by the builders to keep comps high, because they had additional homes to sell.

    In the last deal of this type that I heard, the cash-back amount was $300,000. When the buyer inquired about why the builder wanted to structure the deal this way, the builder clearly stated that there were additional units to sell, and that the builder couldn’t afford to take an equal discount on all properties.

    Very interesting..

    jb

  9. AL says:

    the last deal of this type that I heard, the cash-back amount was $300,000.

    Did buyer paid taxes on this 300K???

    If not they are liable for taxes and IRS may go for them.

    Thats one huge problem with cash backs….

    Imagine being hit with 100K taxes two years later and interest on those 100K as well.

  10. Clotpoll says:

    Why bother polling the public on their “feelings” about the country’s economic health? It’s like asking Homer Simpson to comment on the latest developments in string theory.

    Close to 60% of adult Americans consider a lottery ticket an investment. I’d guess that 95% of all Americans know more about American Idol contestants than the country’s economic health.

    Has anybody here seen the promos for Fox’s new game show, “Are You As Smart as a 5th Grader”? Utter brilliance: the entire show consists of adults being asked questions directly from 5th grade textbooks. Evidently, contestants fail miserably, leading to memorable moments of high comedy.

    I predict it will be cancelled due to public outrage.

  11. Al says:

    Current American sentiment is build on shows like this: I call them:

    “Make Me Feel Good About Myself By Comparing Me With Complete Idiots”

    Current shows are not motivating you to self-improve they are motivating you to sit on the couch and think – I am so much better then those people.

  12. BC Bob says:

    Fed’s Bies this morning. Topic, mortgage market risks.

  13. James Bednar says:

    Another blow dealt to AC. New Jersey had better find a way to turn AC into Macau, and do it quick.

    Empire Resorts gets NY governor’s approval for tribal casino

    Empire Resorts Inc. said Tuesday that New York Gov. Eliot Spitzer issued a “concurrence” to an April 2000 finding that a gambling operations in Sullivan County run by the St. Regis Mohawk Tribe would be in the best interests of the tribe and wouldn’t hurt the surrounding communities. Empire, Las Vegas, said a gubernatorial concurrence is required by the Indian Gaming Regulatory Act of 1988. Empire said Spitzer also signed the Tribal-State Compact Amendment, authorizing gaming at a Monticello, N.Y., site where the tribe plans to build a casino.

  14. pesche22 says:

    AC needs to bring Steve Wynn to the party
    It one of the hopes they need.

    A non stop train from NYC direct to AC
    no stops in NJ shows what the AC industry
    thinks of NJ.

  15. curiousd says:

    “A non stop train from NYC direct to AC”

    Is that true? How long of a ride is it?

  16. njrebear says:

    It was reported on NPR today that the greed part of ‘fear and greed’ index was at a all time high.

  17. RentL0rd says:

    Jim, #8
    The builders were all eager to deal, but with one caveat, that they provide the discount to the buyer in the form of cash at closing.

    Aren’t cash backs illegal in NJ?
    Am I missing something that’s specific to builders?

  18. James Bednar says:

    Illegal in what sense? Two of these deals were cash. We’re not talking about attempting to defraud mortgage companies with inflated appraisals.

    jb

  19. Lindsey says:

    Re post #10

    Clot, you clearly overestimate the American public’s ability to be outraged.

  20. Home Depot profit falls on housing slowdown
    Tuesday February 20, 9:31 am ET
    By Karen Jacobs

    ATLANTA (Reuters) – Home Depot Inc. (NYSE:HD – News), the world’s largest home improvement retailer, posted a 28 percent drop in fourth-quarter profit on Tuesday as the weak U.S. housing market depressed sales.

    http://biz.yahoo.com/rb/070220/homedepot_results.html?.v=5

  21. RentL0rd says:

    jb, #18 –

    12 states—Alaska, Kentucky, Louisiana, Mississippi, Missouri, New Jersey, North Dakota, Oklahoma, Oregon, South Carolina, Tennessee, and West Virginia—prohibit fee sharing with unlicensed individuals or gifts as inducements to consumers.

    from:
    http://www.realtor.org/rmomag.nsf/pages/lawjan06

    I am not sure how ‘official’ the above article is, but I have heard this from HungryAgents.com and also from a couple of Realtors here.

  22. Lindsey says:

    Getting back to the original subject, it is worth noting that much of the “growth” of the last five years is actually just increased deficit spending by the government.

    From 1992 to 1996 the federal deficit rose by about $1 trillion, from 2002 to 2006 the federal deficit rose nearly $3 trillion.

  23. gary says:

    Clot, I hear Brittany’s locks are going on Ebay for over a million!! Like, awesome dude!! ;)

  24. RentL0rd says:

    Clot, #10
    Why bother polling the public on their “feelings” about the country’s economic health? It’s like asking Homer Simpson to comment on the latest developments in string theory.

    There’s a saying –
    Why blame the traffic when YOU are the traffic.

    What’s more bizzare than sending our young into a needless war.

    ok, back to RE

  25. James Bednar says:

    Rentlord,

    That is a different matter entirely, the article you post focuses on agent commission rebates. NJ RE licensure law makes it very clear that commission rebates or incentives of this type are not allowed to be paid to non-licensed individuals.

    jb

  26. RentL0rd says:

    I don’t understand the difference.
    Let me put it this way:

    If I buy a house from a builder, the builder can give me a cash rebate of $100,000, and that’s legal.

    But, If I am using a buyers agent, if the buyers agent gives back $10,000 at closing, thats Illegal?

    hmmm.
    From what I can tell, in both cases I am not a licensed person so I should not receive anything in the deal – according the law. No?

    Sorry, but I don’t understand the difference

  27. James Bednar says:

    I don’t understand the difference.

    The “difference” is that a commission and a commission rebate are one in the same, they are both considered a commission. Thus, if a broker pays you, a nonlicensed individual, a rebate on a commission, they are in violation of licensure law.

    Credits and debits, made at closing, between the buyer and seller, are an entirely different matter.

    jb

  28. curiousd says:

    BC Bob, thanks for this. Seems I’m behind. 2 comments…
    1) a 2.5 hour train to go 120 miles… when will we get a TGV (Euro) like train over here?

    2) I guess this explains the 25% increase in AC values in the last 12 months… man, i’m behind.

    thx
    curiousd

  29. RentinginNJ says:

    Illegal in what sense? Two of these deals were cash. We’re not talking about attempting to defraud mortgage companies with inflated appraisals.

    In all cases, these deals were offered by the builders to keep comps high, because they had additional homes to sell… the builder clearly stated that there were additional units to sell, and that the builder couldn’t afford to take an equal discount on all properties.

    It sounds like they are trying to defraud future customers by artificially manipulating the market to make it appear stronger than it really is. They are tricking the next guy into believing that they are buying at fair market value by pointing to comps that, in reality, included a cash-back provision.

    I have to wonder if consumer protection laws apply here?

  30. James Bednar says:

    Artificially inflating comps?

    You mean like including cars, new home upgrades, vacations, offers to pay closing costs and plasma TVs without adjusting the sales price for those incentives?

    jb

  31. chicagofinance says:

    curiousd Says:
    February 20th, 2007 at 10:57 am
    BC Bob, thanks for this. Seems I’m behind. 2 comments…
    1) a 2.5 hour train to go 120 miles… when will we get a TGV (Euro) like train over here?

    C: the train goes down the notheast corridor line, past Trenton, into North Philly and turns into NJ following the Philly to AC line….hardly direct

    it is more of the “one seat” concept than any major breakthrough

    you could do it now by taking Amtrak to 30th Street Philly and switch…but it is expensive and time consuming

  32. chicagofinance says:

    no stops in NJ makes sense……people in Jersey drive…read the description…they are after the people in NYC who don’t have cars and refuse to take the bus with the alcoholics and lowlifes

  33. njrebear says:

    http://finance.yahoo.com/expert/article/richricher/24515

    Unfortunately, despite our understanding of booms and inevitable busts, it’s always near the top of a boom that “dumb money” buys in. Currently, this has set the scene for a potential market bust of which few people are aware.

    For the next two years, I’m cautioning people to watch their ratios between good debt and bad debt, and keep liquid reserves such as cash, gold, or silver.

  34. RentinginNJ says:

    You mean like including cars, new home upgrades, vacations, offers to pay closing costs and plasma TVs without adjusting the sales price

    Depends on the situation. In many cases, the purpose of the plasma TV is really to placate existing owners, who don’t want to feel like they bought too high and got “ripped off”. The giveaways are typically well advertised and gladly offered on a non-discriminatory basis to anyone willing to buy. Is this really fraudulent or just a marketing gimmick?

    In the other example, however, the builder appears to be willfully manipulating the market with the intent of tricking the next buyer into believing the market supports a price level that it really doesn’t.

  35. SG says:

    February 20, 2007 07:00 AM Eastern Time
    Realogy’s Alex Perriello to Keynote the Sixth Annual National Real Estate Online Convention & Exposition
    50,000 Real Estate Professionals Expected to Attend the Free Conference

    Sixth Annual National Real Estate Online Convention & Exposition
    PARSIPPANY, N.J.–(BUSINESS WIRE)–Alex Perriello, president and chief executive officer of the Realogy Franchise Group, will deliver a keynote address entitled, “Creating Real Value in the Virtual World” during the sixth annual National Real Estate Online Convention & Exposition. Perriello’s keynote will be accessible to all convention attendees on the Internet as of 12:01 a.m. on Feb. 22. Convention attendance is free and open to the general public. Registration information can be found at: http://recyber.cyberconventions.com.

    The presentation, delivered in a virtual forum, outlines essential strategies for delivering the utmost value to consumers in an industry that is being revolutionized by the internet. The presentation will address critical areas including: strengthening Internet marketing prowess, improving the online consumer experience, evolving Internet business practices ahead of consumer behaviors; and assuming a leadership role in servicing customers and the development of new Internet technologies.

    Fifty thousand real estate professionals are expected to attend this seven-day virtual event, which will be held online Feb. 18 – 24. This year’s event also includes an additional keynote address by 2007 National Association of REALTORS® President Pat Vredevoogd Combs, vice president of Coldwell Banker AJS Schmidt, plus over 30 Nationally recognized real estate trainers, authors and industry experts.

    http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070220005117&newsLang=en

  36. James Bednar says:

    Let’s make the discussion even more complicated.

    You make an offer on a house ($500,000) and it’s accepted. Before closing, you send over your inspector and he finds an issue with the foundation. The repairs are estimated at $25,000. The buyers do not want to deal with the repair, but are willing to pay for it. They credit you $25,000 for the repair, at closing.

    Did you pay $500,000 or $475,000 for the home?

    jb

  37. gary says:

    A little OT but we have CNBC on here at work with no sound (I can’t turn it up) and they were talking about the subprime market. They were also showing a chart of the 30 year fixed over the last year. Is/has anybody been watching? Can you fill us in on what they’re saying? Thanks.

  38. Jay says:

    A major European investment bank is forecasting a slump in world financial markets. Dresdner Kleinwort says according to its Fear/Greed Index, the end is nigh for the bull market.

    The Fear/Greed Index measures the global market’s appetite for risk. It compares the price of shares with the price of bonds.

    When the index is low, fear is the dominant emotion. Investors tread warily. But when it’s high, greed is in the driving seat and no one seems to believe that prices can fall.

    The index, says the investment bank, has just hit an all-time high and that means a full-scale slump in riskier assets could be in the offing.

    Andrew Hilton of the CSFI think agrees that financial markets are vulnerable.

    There is no doubt that if there were what we call an “exogenous shock” — something that comes in from left field and swipes the markets — that a lot of people could be very badly exposed.

    But the authors of the Fear/Greed Index do not expect euphoric investors to heed their warning. Said one of them, “It’ll be about as effective as yelling, ‘Cliff edge!’ to a thundering herd of lemmings.”

    http://marketplace.publicradio.org/shows/2007/02/20/AM200702204.html

  39. RentL0rd says:

    Gary, looks like the ‘Subprime scare’ video is available online at cnbc.com as well.

    Next time when we crash into Weicherts place, we need to pick up some good head-phones ;-)
    LOL

  40. UnRealtor says:

    njrebear #34, check the reader comments at the end of Kiyosaki’s article — he’s thoroughly savaged:

    http://finance.yahoo.com/expert/article/richricher/24515

  41. skep-tic says:

    some interesting stats re: migration out of the NE by young adults:

    CT has lost 30% of people aged 25-34 since 1990

    RI and MA have each lost 20%

    Don’t have the numbers regarding NY/NJ, but I’d expect it to be similar.

    And perhaps even more interesting is the fact that the outmigration is not limited to the low skilled

    (below is from the WSJ 2/13/07)

    “Over the past decade college-educated workers . . . now appear to be tilting instead to more affordable, family-friendly places. Since 2000, Riverside, Phoenix, Charlotte, Las Vegas and Dallas all have been among the big net gainers with such migrants. In contrast New York, Boston, L.A. and even the Bay Area, a big winner in the 1990s, appear to have become among the highest net losers.”

    “Overall, according to data collected by Pepperdine University’s Mike Shires, the average real income — after factoring in taxes and the cost of living — of workers in professional business services is actually higher in places like Phoenix, Denver, Houston and Dallas than in the pricey environs of San Francisco, New York, Boston or L.A.”

    It seems obvious that mass-outmigration of college educated young adults is highly negative for RE in this region of the country over the long term

  42. UnRealtor says:

    A very interesting map.

    Essex county lost 45,000 people between 2000 and 2005:
    http://enterprise.star-telegram.com/ARCIms/Maps/clt/2007/irsmig.asp?map.x=363&map.y=203&pick=&action=bg

    Bergen county lost 27,000 people during the same period.

    Union county lost 26,000 people.

    Bergen county lost 55,000 people.

  43. UnRealtor says:

    Oops, for the second “Bergen county lost 55,000 people” that should have read:

    “Hudson county lost 55,000 people.”

  44. njrebear says:

    #41 UnRealtor,
    What is the timestamp on the comment?

  45. UnRealtor says:

    “What is the timestamp on the comment?

    Pretty much all of them!

  46. gary says:

    Rentl0rd,

    Thanks. Yeah, good old Jimmy boy!! :)

  47. Craig says:

    #34
    For the next two years, I’m cautioning people to watch their ratios between good debt and bad debt, and keep liquid reserves such as cash, gold, or silver.
    *********************************************************************

    Seems like pretty basic advise to me….and not just for the next 2 years. I would think that one would always want to watch their bad debt and have liguid reserves available…

  48. pesche22 says:

    well , well, well, its finally coming
    out .NJ is loaded with illegals.

    my , what a suprise.

  49. BC Bob says:

    “Federal Reserve Governor Susan Bies said the mortgage market for borrowers with poor credit is behaving in a “very problematic way,” though the broader banking industry will probably avoid a crisis.”

    Bies said 10 percent of subprime borrowers are delinquent on a mortgage they took out in 2006.

    “Those early delinquencies are a sign of significant deterioration in asset quality, because people usually don’t default on loans within the first few months of taking them out,” she added.

    The U.S. housing market as a whole, which is suffering the worst slump since the early 1990s, may still take time to find its footing because of the number of unsold homes, she said.

    Overbuilding in the past few years has led to an accumulation of unsold homes, she told reporters. Reducing the stockpiles “could take us a year to two years depending on where the location is.”

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_V2Ar414DpM

  50. Richard says:

    jim, the selling price will be recorded as $500k with $25k coming out of the sellers pocket or the money handed over by the buyers at closing. there’s a 2 edged sword with wanting the sellers to do the work so the buyer doesn’t have the risk. you typically don’t have a choice of contractor, they can do things ‘to code’ but cheaper than you’d of done it. flip side is if the job is more money they pay.

  51. RentL0rd says:

    #52, Richard –
    we are discussing the gray line between legal and illegal commissions/incentives.

  52. njrebear says:

    “Bies said 10 percent of subprime borrowers are delinquent on a mortgage they took out in 2006. ”

    we are inching towards the 20-25% mark predicted by the Center For Responsible Lending.

  53. BC Bob says:

    bear [54],

    Also, record margin debt.

  54. njrebear says:

    http://finance.yahoo.com/q?s=NFI

    after hours : novastar down 27%????

  55. njrebear says:

    NovaStar mulls change to REIT status; reports quarterly loss
    http://www.marketwatch.com/News/Story/Story.aspx?guid=%7bF493B7EA-6B80-40C1-AA8C-61E2640B45D4%7d&siteid=yhoo&dist=yhoo

    said late Tuesday that it’s considering whether to change its Real Estate Investment Trust status after the subprime mortgage lender reported a fourth-quarter net loss. REITs have to distribute at least 90% of their taxable income as dividends. NovaStar Chief Financial Officer Greg Metz said the company expects to recognize little, if any, taxable income in 2007 through 2011, so “management is currently evaluating whether it is in shareholders’ best interest to retain the company’s REIT status beyond 2007 given the asset, income and other REIT related restrictions the company must operate within.” NovaStar reported a net loss available to common shareholders of $14.4 million, or 39 cents a share, in the fourth quarter. Mortgage losses and provisions cost the company more than $40 million during the period. The lender said it had $154 million in cash and available liquidity at the end of 2006. “Our current reserves are adequate to cover the repurchase risk for all loans sold to date,” Scott Hartman, chief executive, said in a statement

  56. njrebear says:

    Wells Fargo: Layoffs Due to Tighter Credit Policy

    http://www.charlotte.com/mld/charlotte/16740937.htm

    The cuts are the latest fallout from problems in the business of subprime lending — lending at high interest rates. Demand for new high-rate loans is shrinking even as defaults on existing loans are rising, leaving lenders with less revenue and more expenses.

    Wells Fargo, like other large mortgage lenders, has responded to the defaults by tightening the requirements for new loans, further shrinking the volume. The Fort Mill office, which is part of the company’s subprime operation, will have less work to do.

    “We tightened our credit policy,” Wells Fargo said in a statement. “This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans.”

    >>
    Source CR

  57. BC Bob says:

    [58]

    “We tightened our credit policy,” Wells Fargo said in a statement.

    The spigot is starting to reverse.

  58. pesche22 says:

    getting reports , if you want a cash out
    deal,it will cost you about 9%. plus you better have good credit.

    also 90/10 deals tough to come by.

    uh oh,

    subprime takes it in the shorts …

    happened quickly

  59. James Bednar says:

    The spigot is starting to reverse.

    Keep in mind that we haven’t yet seen the full impact of the CSBS nontraditional mortgage guidance. Only half the country has adopted the guidance at this point. It isn’t the cause of the subprime meltdown, but it shouldn’t be ignored as “toothless” either.

    http://www.csbs.org/Content/NavigationMenu/RegulatoryAffairs/FederalAgencyGuidanceDatabase/State_Implementation.htm

    jb

  60. chicagofinance says:

    I see nothing to suggest a meltdown is imminent, nor even expected.

    If you want quaking, talk about layoffs that will affect Manhattan. That causes people to pee and poop around here (sorry, too much baby on the brain).

  61. Zac says:

    JB #8 and Al #9
    Thanks for bringing that up, the whole issue of being taxed on the cash-back totally escaped me.

    And yes I heard of a deal down here in Tinton Falls that the builder discounted almost 500k off the list price.

  62. metroplexual says:

    Average Americans were more pessimistic then than they are now. According to Gallup’s most recent snapshot of public opinion, last month 52 percent of Americans rated economic conditions as either excellent or good. In May 1996, at a similar moment in the previous expansion, only 30 percent did so……….

    I am sorry but why this year(s) to compare to? Was this not the bottom from the last RE boom? I use to work for Gallup and I know how they can skew data.

  63. njrebear says:

    Novastar down 30%+ in after hours trade.

    For those of you who were planning to go long on stocks that had a high short ratio – Novastar had 40% of it’s stocks short.

    http://finance.yahoo.com/q/ks?s=NFI

  64. bergembubbleburst says:

    chicagofinance: Its usually when no one sees it coming, and all appears well, that we get hit with these things.

    But things in the boiler room of the ship if you will (the sub-prime market are starting to blow up, perhaps it is only a amtter of time before the upper decks get hit.

  65. chicagofinance says:

    sub-prime would be nice if it were a canary in a coalmine, but really it overstates the case

    the markets are really intact, don’t get all hot and heavy over just this

    I’m not saying that everything is deliriously great, but don’t ignore the facts

  66. njrebear says:

    more downgrades…

    S&P says downgrades 7 bonds backed by 2nd-lien mtgs

    http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070220:MTFH26192_2007-02-20_22-32-10_N20216672&type=comktNews&rpc=44

    The company cut ratings on bonds in the MASTR Second Lien Trust issues. MASTR is an issuer unit of UBS AG.

    S&P has stepped up actions on securities backed by second-lien loans — often called “piggyback” loans since they are created concurrent with first-lien mortgages — as the cooling housing market sparks losses just months after the loans were created.

    S&P last week lowered ratings on a “BB+” bond backed by 2006 second-lien mortgages issued by The Winter Group’s Terwin Mortgage Trust to “CCC”.

  67. Clotpoll says:

    rebear (65)-

    Not every heavily-shorted stock is ripe for a squeeze. Sometimes, the shorts are there for a good reason.

  68. Clotpoll says:

    rebear (68)-

    If/when PMI becomes tax-deductible, the “piggyback” market could well dry up and blow away. The vast majority of the piggyback seconds I see are a PMI dodge. I don’t have the national stats at hand, but I bet a little digging would reveal that a huge percentage of these loans are only for that purpose.

  69. Clotpoll says:

    Of course, when a predatory, POS first mortgage has a piggyback second along for the ride, it’s the financial equivalent of “dusting” a joint with PCP. Sort of like a misery accelerator.

  70. njrebear says:

    clot,
    What is the average PMI rate? Does one pay PMI on the first 20% of the loan or is it for the entire loan amount?

  71. njrebear says:

    clot,
    http://web.wn.net/~usr/javafun/calculate.htm

    From the above calc, it looks like PMI for a 400K property is 260/month. After tax benefits it is $200/month.

    That’s $200/month a 100% borrower needs in real cash. That’s $200/month that buyers should qualify for. On an above average 75K/year salary, nearly 3.2% of income will go towards insurance.

    I feel elimination of 80/20 will make dent in sales.

  72. njrebear says:

    http://www.1001mortgages.com/CalculatingPMI.htm

    If you use the above rates, monthly insurance after tax benefits is $300+/month.

    On a 75K salary, it is nearly 5% of salary towards insurance :)

  73. Clotpoll says:

    rebear (73)-

    It’s on the whole loan amount. Type of property purchased, LTV ratio and personal credit history plays into the premium calculation…no hard & fast formulas here. I’m not an expert here…perhaps some lurking mortgage pros can fill in the blanks?

    The ability to pay PMI should be taken into account during qualification. However, the piggyback second that allows the buyer to avoid PMI often has no more qualification parameters than the first mortgage. In many cases, the second is simply offered to the buyer once he qualifies for the first.

  74. njrebear says:

    clot [76]
    thanks.

  75. njrebear says:

    Media report BOJ’s Fukui proposes target rate at 0.5%

    http://www.marketwatch.com/news/story/media-report-bojs-fukui-proposes/story.aspx?guid=%7BAC28FEC4%2D1303%2D46C4%2DAD2A%2D892513198670%7D

    HONG KONG (MarketWatch) — Japanese media reported Wednesday Bank of Japan Governor Toshihiko Fukui has proposed the central bank lift its benchmark interest rates by 25 basis points to 0.5%. Japan’s national broadcaster NHK, Kyodo News and the Nikkei reported Fukui made the proposal during the meeting of the nine-member policy board, without citing sources. The media reports did not say whether the proposal had been approved. No official announcement has been made by the Bank of Japan

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