Preliminary April sales and inventory data for Northern New Jersey is in..
The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.
(click to enlarge)
The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.
(click to enlarge)
The third graph displays only April sales, 2000 to 2007 YOY.
(click to enlarge)
The fourth graph displays an overlay of Sales and Inventory from 2003 to 2007.
(click to enlarge)
The last graph, new this month, displays the year over year change in inventory on a monthly basis.
(click to enlarge)
Note: GSMLS has revised a significant portion of the dataset. I’ve found revisions that go as far back as 2004. Graphs have been updated to reflect these historical revisions. I don’t have any information on why the dataset was revised, nor the source of the changes in sales volumes.
what does A* mean on listings in the status column?
Attorney Review
Are the revisions up, down, or both?
I’m sure you know why I’m asking.
Thanks Grim! Awesome charts as usual, by the way.
You can see the revisions by comparing the data to March.
https://njrereport.com/images/mar07_yoy.gif
Where are the immigrants? Why aren’t they buying housing anymore? What’s up with housing?
Unemployment is still low? Plenty of jobs? What’s up with housing?
Wall street had record bonus payouts this year? What’s up with housing?
They are not making any more land? What’s up with housing?
Reechard is still waving the bull flag and trying to keep his spirits high. What’s up with housing?
BTW Reechard, Westfield is for those who can’t afford the Summit/Short Hills/Millburn so keep your 10x networth stuffed were the sun don’t shine.
Is it me or is gsmls increasing by about 100 homes a day?
grim:
I don’t know man – your freaking charts are starting to look like the end of 2001 A Space Odyssey. You are the Stanley Kubric of NJ RE Charting.
Revision might be the wrong word. The data changed, don’t know how or why it did, it just did. I’ll have to do more digging to determine why.
jb
My personal favorite chart is the sales/inventory overlay.
Sales are only half the story. When you plot both together, you see the big picture.
https://njrereport.com/images/mar07_salesinventory.gif
JB..
anyway to display error bars? or would that make the slide too busy?
sas
maybe don’t have to put error bars, maybe just display them in text?
I think your graphs would have more weight if we could see how much statistical “error” are in the graphs. Pretty important when comparing this year to last, when the numbers seem pretty close.
Or are they displayed and I can’t see it?
SAS
#10
That report is telling. The scaling somewhat obscures the time relationship. Since the entire housing stock is not in play, a revised graph with a floor for housing would show this better.
I looked at Craigs list last night for the first time in a while. It seems that suddenly there are lots of begging ads.
The fan blades are turning and something is headed their way.
SAS,
How about if I graphed the YOY percent change in sales?
jb
.. on a month by month basis.
BOE hikes rates to 5.5%
Bank of England hikes base rate by quarter-point to 5.5%
The Bank of England lifted its key interest rate by a quarter point to 5.5%, as inflation hit 3.1%, well above the central bank’s targeted 2% level. A quarter-point hike was largely expected, though there were some in the City who predicted a half-point lift.
From Bloomberg via the APP:
Toll Bros. 2Q earnings below forecast
Toll Bros. Inc., the largest U.S. luxury home builder, said second-quarter profit was lower than forecast and blamed a lack of buyer confidence for thwarting a housing recovery.
…
Chief Executive Officer Robert Toll was asked on a conference call if the increased number of “F” grades he gave to the company’s markets implied that business was slipping and he answered “yes.”
…
“It seemed to us that we were not getting better,” he said. He gave grades to some of the company’s markets: Orlando, Tampa and the west coast of Florida earned an “F”, as did the New Jersey suburbs and Chicago.
…
New York City’s urban markets earned a “B+,” along with the city’s far suburbs and nearby Connecticut. Minnesota was a “C-” market, “a whole lot better than it was,” Toll said.
From the Times Leader:
Police link fires, burglary attempts
Kunkletown man was charged Wednesday with setting fire to several vehicles in an unsuccessful attempt to lure a Hazleton man out of his home so the residence could be burglarized.
Police in Hazleton and White Haven say Justin T. Vernon, 19, was part of a group of five people who made several unsuccessful attempts over a several-day period in April to burglarize the home of Edward John Maranuk of 935 Seybert St.
…
Sharer, Quinones, Powers, Booth and Vernon planned to burglarize Maranuk’s home to obtain money so Powers could avoid a foreclosure on her home.
From USA Today:
Is home slump a speed bump for spenders?
Will the housing slump level consumers?
Economists are debating whether a sharp drop in home sales and price appreciation will depress consumer spending, which is about two-thirds of the economy. The theory is that a sharp rise in home equity helped push spending up faster than income starting in the late-1990s until last year. Now, as the housing market sours, consumers not only feel less wealthy, but have less equity to use for other spending.
Some businesses say they are already seeing the fallout of falling home sales and what could be the first dip in national median home prices since the late ’60s.
“All you have to do is look at those states that have the most distress in housing; you have the biggest decline in auto sales,” says Mike Jackson, CEO of AutoNation, the nation’s largest auto retailer.
Anyone here keep close tabs on retail stats?
ECB holds at 3.75%
Transcript from the Toll call, courtesy of Seeking Alpha:
Toll Brothers F2Q07 (Qtr End 4/30/07) Preliminary Earnings Call Transcript
Okay. Connecticut is a B-plus; New York ex the suburbs are B-plus; New York urban, which is for us Queens, Brooklyn and Manhattan, are a B-plus if not an A; New Jersey City and Hoboken are a B-plus; New Jersey suburbs, oddly enough, when you juxtapose them against the New York Dutchess County, Putnam County suburbs, you would think you would have the same result but you don’t because you’ve got in New York City — I mean, in the New York suburbs, a B-plus and in New Jersey, same proximity to the same metropolis, you’ve got an F. It may be due to the tax situation in New Jersey.
JB,
Once again, great work on the charts. My fav is sales/inventory. It’s amazing how the March sales #’s are very close, going back to 2004. The downward sloping trend, May-July, is obvious.
I imagine a sales # of 3,000-3,200 will not occur this May-July, 2007. The downtrend is firmly entrenched.
Chief Executive Officer Robert Toll was asked on a conference call if the increased number of “F” grades he gave to the company’s markets implied that business was slipping and he answered “yes.”
…
“It seemed to us that we were not getting better,” he said. He gave grades to some of the company’s markets: Orlando, Tampa and the west coast of Florida earned an “F”, as did the New Jersey suburbs and Chicago.
…
New York City’s urban markets earned a “B+,” along with the city’s far suburbs and nearby Connecticut. Minnesota was a “C-” market, “a whole lot better than it was,” Toll said.
It sounds like all those areas are based on the “mass” of speculation.
I give Robert Toll an “F” for failing to direct/steer his company in a changing market. I’m sick of CEO’s blaming external forces (weather, subprime, speculators, interest rates) for their company’s misfortunes. They have no problem accepting praise when their companies do well, but when they do bad it’s NEVER because “they failed to see the changing signs in the market”. It’s because of external forces outside of their control. Bullsh*t. A good CEO should guide his company through any change, if he can’t see it coming, maybe he/she shouldn’t be in that position.
Great charts JB.
It seems Inventory climbs about 4000 between April & Sept (Peak every year). This seems to be happening for last few years. By this measure, we should be looking at peak inventory this Sept to be around 28,000.
I guess Realtors should tell sellers to drop prices fast or catch the falling knife here. I wish the NAR publishes something for home sellers also. They have been only writing about buyers.
From BusinessWeek:
Homebuilders in a Hole
When Kara Homes began building Horizons at Birch Hill, a community for active seniors, the plans were ambitious: 228 spacious residences that weren’t typical cookie-cutter McMansions. But four years later, the project in Old Bridge, N.J., has been abandoned by Kara, which is now in Chapter 11. A dozen or so homes stand unfinished, the front doors swinging in the wind, and the half-built clubhouse bears a large “Unsafe for Human Occupancy” sign.
“It’s not a great situation, but we’re all hanging together,” says Frank Ramson, one of the development’s 70-odd homeowners. “What’s killing us is the uncertainty of how long it might take another builder to step in.”
Ramson isn’t alone in his angst. The downturn in the housing market has caught the nation’s homebuilders by surprise, leaving many overextended with costly land they can’t develop and unfinished homes they can’t sell. The financial strain is starting to show. From Arizona to Arkansas, dozens of small- and midsize builders have filed for bankruptcy over the past six months.
I was thinking about what drives RE markets either UP or DOWN.
On the upside, everyone was saying its because of low interest rates, which I conclusively proved that rate of price increase far outpased the rate of decline in Interest rates.
On the downside, everyone is now saying its Subprime mess. Looking at the numbers JB posted, I see every year NNJ approx 10000 houses are sold. Even if you take 20% to be subprime related, its only 2000 houses. Thats only 10% of total inventory. The 10% houses on market can not drag the whole market down. Remember, owners are willing to wait to get better price.
That makes me think that, the only reason that affects RE market is Psycology. The Psycology has turned otherway now, tough to change it in few quarters.
“The meltdown in the subprime mortgage sector is making it harder for first-time and other home buyers with little down payment money to get even conventional loans, adding more troubles to a slumping real estate market.”
http://www.boston.com/business/personalfinance/articles/2007/05/10/subprime_woes_hit_buyers/
I wonder what the his rating of Hoboken was when they were “killing em”
Correct me if I’m wrong but isn’t there $1,000,000,000,000 in ARMs slated to reset somewhere in the next 12 – 18 months? Is that correct? And if so, what does that possibly say for inventory numbers and price pressure?
tracking close to last year’s sales which is very healthy. it’s unfair to compare to 2003-2005. those were anomolies.
I mean, in the New York suburbs, a B-plus and in New Jersey, same proximity to the same metropolis, you’ve got an F. It may be due to the tax situation in New Jersey
Impossible…I thought by voting to pass all those school budgets I as really voting to keep up property values…Everyone kept telling me, “you better pass the budget or your proprty values will go down”…Are you telling me that’s not true?[/sarcasm off]
gary,
https://njrereport.com/images/armresets.gif
First time ARM resets are set to peak in November of 2007.
jb
“it’s unfair to compare to 2003-2005. those were anomolies.”
As were the prices.
tracking close to last year’s sales which is very healthy. it’s unfair to compare to 2003-2005. those were anomolies.
First, the fact that sales went down in a month where they are supposed to rise is not a good sign.
Second, markets are a function of supply and demand. Due to higher supply, we would need to see more demand to characterize the market as “healthy”. There are many more homes on the market versus this time last year.
JB,
Thank you, that graph is awesome!
“National builders have said they are facing a glut of unsold homes. At the conference Tuesday, an executive with the National Association of Home Builders said there are 1 million to 1.5 million vacant new homes. The official, senior staff member David Crowe, said the statistic is ‘troubling.’”
=======================
Attention rational buyers:
Greedy grubbers and starving bunch starting to get the message. Panic is starting.
Don’t be a fool and just rush in.
It is not a buyers market.
Prices need to drop 25-30% off of peak 2005 prices. This is NO bargain but at least fair pricing is in the proximity.
JB,
ARM resets data…exactly what I was looking for this morning. Thanks.
Just an FYI, I put the date labels on that image.
jb
Prices in 2003-2005 were artificial PHONEY prices caused by foolish lending and speculators/dopey home buyers.
How’s the ramen taste….starving bunch?
tracking close to last year’s sales which is very healthy. it’s unfair to compare to 2003-2005. those were anomolies.
I show last years sales for April in Bergen County to be the lowest since 1995.
Correction, 1996.
I’ve noticed another thing (dare I say trend?) in Craigslist rental listings: aside from reductions in rents, there are more and more “rent to own” units out there. I assume these are properties by smaller spec-builders.
Re: all those ARM resets. The gummint is going to put a gun to the lender’s heads to make them play nice with people facing foreclosure. Unfortunately for the imminent foreclosees, rates have already moved too far for many of these borrowers. Even if the bank uses kid gloves and gives them more time there will not be a product available that lets them continue to “afford” the house they live in.
“it’s unfair to compare to 2003-2005. those were (sic)anomolies.”
Do you make these up yourself? Or do you have a writing team? Too rich…
“Even if the bank uses kid gloves and gives them more time there will not be a product available that lets them continue to “afford” the house they live in.”
Rob [44],
Excellent point. They can only afford their I/O teaser rate. Why not take advantage of historic, low long term rates? It’s simple, they can’t afford it.
From the Herald News:
New law would boost regulation
If New Jersey had already beefed up its requirements for loan officers, Manuel Maldonado might have avoided the fight to keep his Passaic home.
Last year, Maldonado refinanced his house with a state lender catering to those with poor credit. The loan officer assured him that the mortgage would drive down his monthly payments and repair his credit by consolidating debts.
Instead, Maldonado now pays $2,330 — more than his monthly income.
“He’s been late on several payments. We can’t afford insurance on the house,” said Wanda Perez, Maldonado’s daughter. “Every month is a struggle.”
The professional helping potential homeowners make the biggest purchase of their lives — often for hundreds of thousands of dollars — needs little more than $100 to assume that role in New Jersey. Some lawmakers think that’s a lopsided equation.
Two state senators will introduce legislation today that would require training, licensing exams and criminal background checks for loan officers. While mortgage-company owners must follow certain regulations, few of their employees do.
…
Many experts think the profitable commissions and low-education requirements for loan officers help contribute to skyrocketing foreclosure rates — as homeowners are pushed into mortgages they can’t afford.
“There is income potential here,” said Matthew Gratalo, a 20-year mortgage banker from Paramus who welcomes the requirements. “Some people don’t have any intention to be in the business for the long term. They don’t even care about the people they are working with.”
Housing advocates stress that licensing requirements aren’t a magic bullet. Pending legislation in Congress and some state legislatures could do more to clean up the mortgage industry, they say, by holding lenders responsible for a borrower’s best interest.
But officials and advocates agree that New Jersey’s proposal constitutes a step forward. As the housing market boomed over the last several years, the ranks of unregulated loan officers (also called mortgage solicitors) swelled. They especially flocked to the subprime market, as the high fees with such loans translate into big commissions.
In the past five years, the number of New Jersey mortgage solicitors nearly tripled — from 14,476 in 2002 to 42,433 as of earlier this year — according to the state Department of Banking and Insurance. Average salaries for state loan officers exceeded $63,000 in 2005, Bureau of Labor Statistics show.
From MSNBC: “Gas prices, housing market hurt retail sales”
http://www.msnbc.msn.com/id/18588788/
* Rising gasoline prices and the slumping housing market kept consumers out of stores last month, leaving many of the nation’s merchants with disappointing sales results.
* Wal-Mart Stores Inc. recorded a rare drop in business. Wal-Mart reported a 3.5 percent decline in same-store sales, or sales at stores open at least a year. Analysts surveyed by Thomson Financial had expected a 1.1 percent decrease.
* Wal-Mart said the slowing economy was a big factor in its sluggish performance.
Well few basic questions:
What is jump in mortgage rate after ARM reset? Does it keep increasing every year? Does it use Prime or LIBOR interest rate?
Isn’t there normally limit to how many percent it can jump?
James Bednar Says:
May 10th, 2007 at 9:12 am
gary,
https://njrereport.com/images/armresets.gif
First time ARM resets are set to peak in November of 2007.
jb
JB- I think this chart may overemphasize your point… I dont remember which WSJ article explained it, but it was on your site, that over 40+% of these resets have already refinanced into fixed rate… so the coming ‘surprise’ is a ever-smaller portion of the total home owners.
Retailers post weak April sales. From Associated Press.
http://tinyurl.com/2jcq6r
Ofcourse the Weather to blame again. When will people pull their heads out of the and and recognize two key facts:
Consumer spending makes up 70% of the consumption.
Consumer spending in the last 4 to 5 years was financed by Home Bank ATM Inc !!!.
Not anymore. It wasn’t like the weather was sunny all the time for the last four years !
I am just awed that these highly paid CEO’s are SURPRISED by this???
#48 Depends on the product.
Richard Says:
it’s unfair to compare to 2003-2005. those were anomolies.
EXACTLY! Those years were so far beyond the historical norm and there was no fundamental reason why the prices and sales should have gone to that level.
Richard, now that you say we experienced irrational buying behavior, you must agree that a correction of equal proportion will occur.
I’m glad you’ve finally come to your senses and admitted your failure to see the obvious.
JB- I think this chart may overemphasize your point… I dont remember which WSJ article explained it, but it was on your site, that over 40+% of these resets have already refinanced into fixed rate… so the coming ’surprise’ is a ever-smaller portion of the total home owners.
The chart is based on LoanPerformance data as of January 2007. Also keep in mind it is a graph of first time requests only, not subsequent. I can’t believe that 40% of ARMs have refinanced into fixed rate mortgages in the past 3 months.
jb
#27 SG
Your analysis doesn’t take into account the multiplier effect of those 2000 sales (the whole plankton theory thing)
Reading more about ARMs
The popularity of hybrid ARMs has significantly increased in recent years. In 1998, the percentage of hybrids relative to 30-year fixed rate mortgages was less than 2%; within 6 years, this increased to 27.5%.
from
http://en.wikipedia.org/wiki/Adjustable_rate_mortgage
#53 JB 40% of ARMS refinancing into fixed rates sounds very high.
How many of those would be refinanciers cannot, becasue they put no money down, and values may have dropped since they purchased.
Plus so mny of those loans had a pre-payment penalty.
Why would they not have gone fixed rate in the first place, when fixed rate money had a 5 handle a couple of years ago.
#10: I’d be curious to see the average time a home is one the market for this data as well.
a disproportionate number of entry level buyers were/are subprime, so the subprime shakeout has a much broader effect than suboprime as a percentage of all mortgages would seem to indicate.
subprime created homebuyers that otherwise would not have existed, allowed more traditional first time buyers to buy homes more expensive than they could otherwise afford, and carried buyers forward by allowing younger people with poor credit and no savings to buy.
Sales are now trending below 2002 levels. We are not simply coming off 2005 highs
Like everyone else who noticed, my favorite is sales/inventory.
That’s like a wide open jaw!
Sellers beware of the Shark!!!
“First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey.”
Everyone interested in the Southern part of NJ; here is some inventory info I found online.
“Southern New Jersey Real Estate News” is a good little site even though it’s run by a Realtor :-)
Burlington County
Current Inventory: 3926 (homes available for sale)
Last Year: 2096
12 Full Month Average of homes sold:475 per month
Last Year: 567 per month
Inventory Accumulation: 8 months
Last Year: 5 months
Camden County
Current Inventory: 3965
Last Year: 2977
Current 12 Full Month Average of homes sold: 507 per month
Last Year: 611 per month
Current Inventory Accumulation: 7 months
Last Year: 4 months
Gloucester County
Current Inventory: 2584
Last Year: 1772
Current 12 Full Month Average of homes sold: 277
Last Year: 313 per month
Current Inventory Accumulation: 8 months
Last Year: 5 months
http://www.realestaterox.info/archives/2007/05/03/house-inventory-up-or-down#more-83
The ARM Reset chart is an eye opener. There are some questions though.
1. Subprime seems to have larger share of reset till Dec 08. Not sure why Subprime reset would dwindle down after that? Is it due to the fact that since about last 1 year or so, Subprime folks are not buying that many homes?
2. Option ARM seem to pick really up after Dec 08 till Dec 11. Why is that? To my understanding Subprime, Alt-A & Prime refer to credit quality of borrower Vs Option Arm refers to payment options and not credit quality. Why is it plotted in the same manner and why does it increast after 08?
3. What is unsecuritized ARMs?
>>Richard, now that you say we experienced irrational buying behavior, you must agree that a correction of equal proportion will occur.
the market doesn’t work that way. it will stagnate or drift down but i still don’t see it reverting to early decade ratios. if you inflation adjust you’ll get more alignment but what does that really mean to the average joe? the cpi lies, raises are measly, health care, food, energy all on the up and up. if you can lock yourself into the largest expense (mortgage) most people will ever have and stay put a while, i think you’ll make out better over the long haul. just think no more $100-$150 a month increases every year.
SG,
That graph is charting loans made prior to the period in question. The reason loans taper off is because it is not attempting to make any kind of forecast about new mortgages, only the behavior of those already existing. You also need to take into account the initial reset periods of these products. The bulk of subprime arms are of the shorter term 1 year or 2/28 varieties. Many of the Alt-A ARMS (or Prime) were of the longer-term 3/5/7yr varieties.
jb
# 63
>> just think no more $100-$150 a month increases every year.
A 4%(atleast) mandatory tax increase comes to $400/year increase on taxes for a $500K POS
assuming a 10k /yr in current taxes
#7 I noticed that too. I started watching the count less than a month ago and I think the # was less than 30k. Now it’s over 33,500. It’s going up about 100 per day with more around weekends.
Good resouse to understand ARMs
http://www.federalreserve.gov/pubs/arms/arms_english.htm
SG, it’s funny, they also have a spanish version:
http://www.federalreserve.gov/pubs/arms/arms_spanish.htm
No-one-left-behind
From MarketWatch:
U.S. import prices up 1.3% on petroleum
Prices of goods imported into the U.S. rose 1.3% in April, driven higher for the second month in a row by a big increase in the price of imported petroleum.
The data show inflation will remain a “thorn in the side” of the Federal Reserve, said economists at Action Economics.
Petroleum prices climbed 6.5% last month, following a revised gain of 8.1% in March, the Labor Department reported Thursday.
Overall, the increase in import prices beat analysts’ expectations. Economists surveyed by MarketWatch had been expecting import prices to rise by 0.9%.
…
“The weakening in the dollar is putting upward pressure on import prices,” said the economic team at Bear Stearns in a note to clients.
“With imported consumer goods prices rising at the fastest rate in over 11 years, we expect that goods prices will begin to put upward pressure on the core CPI,” Bear Stearns said.
JB, I agree resets are an issue…just not cataclysmic (agreeing also with SGs point on prepayment and negative equity). from fannie mae…
…but in 2005 and 2006 an average of 39% of loans bakcing alt-a MBS with a scheduled payment reset refinanced in each year.
similarly, an average of 56% of loans backing subprime ABS facing a payment reset refinanced (compared with 39% of all loans backing these securities).
…given that a larger amount of mortgages are scheduled to reset this year than in 2006, it is reasonable to infer that the amount of refinance activity driven by resetting loans would increase in 2007.
lastly… almost half of the dollar volume of these loans has a basic risk promile that looks relatievely healthy (FICO above 620 and LTV
Thx JB. That explains the chart much better.
I don’t see any significant analysis done on this aspect at all. NAR goes to the length keeping track of Home Sales, Median prices, DOM etc… That make sense as NAR is concerned with how many TXNs happen each year.
Shouldn’t the Banking Regulators producing similar report as you gave here for general public? Also the main theme in all ARMs is transfer of Risk to Borrowers. In my opinion, since most Borrowers are not Bankers, the Banking Regulator should provide some projections. In my opinion the Regulators were really asleep while driving.
continued from 71…
Interesting National Law Journal Headline:
Cravath adds a bankruptcy practice
Cravath, Swaine & Moore apparently sees what a lot of firms see: growth in restructuring work. The firm is starting a bankruptcy practice that will be headed up by Richard Levin, who will join from Skadden, Arps, Slate, Meagher & Flom, where he was a partner. Cravath’s announcement comes at a time when major firms like Skadden Arps, Kirkland & Ellis and Cadwalader Wickersham have been aggressively hiring bankruptcy lawyers to handle what they expect to be a lot of work in the coming months.
The Boston Globe reports from Massachusetts. “The meltdown in the subprime mortgage sector is making it harder for first-time and other home buyers with little down payment money to get even conventional loans, adding more troubles to a slumping real estate market. These are typically buyers who once easily got 90 to 100 percent financing for a home, but now either have trouble getting loans or are paying more for them.”
“‘It’s a knee jerk reaction to what happened with the subprime market,’ said Rosella Campion, loan officer in Boston.”
“Ryan Mulvoy is shopping for a new condo, but may not have much money left over from the sale of his current Quincy one-bedroom unit after he pays off a few bills. He was able to buy that first condo with just 5 percent down; now, anticipating he might need 100 percent financing, his agent, Joe Clancy Jr. in Weymouth, said Mulvoy might have a harder time getting a loan.”
“The Warren Group estimated that roughly 30 percent of Massachusetts home buyers last year bought houses with little or no down payment. ‘A deferral of home purchases by even 10 percent’ of buyers, said Warren chief executive Timothy Warren, ‘would mean fewer sales and further pressure on prices.’”
******30% of buyers wiped out overnight by credit tightening. Hard to imagine that the scenario is too different in the NYC region
You know, we tend to focus almost exclusively on purchase mortgages in our discussions here. We only ever touch on home equity loans with respect to consumer spending. However, we’ve never really discussed the impact of deteriorating equity loans on the market. It’s almost as if we’ve made an assumption that the borrower can afford the HELOC or HELO. But what about buyers that can not?
A surprising number of the lower tranches of home equity securitizations have been getting downgraded by Fitch and Moodys, and most have been of a very recent vintage.
Take this most recent downgrade/watch for example:
Fitch Affirms 30, Downgrades 2 and Places 4 classes on RWN from 3 ACE Transactions
Downgrades on the two lowest tranches of a 2005 home equity securitization. Rating watches placed on a number of tranches in both 2005 and 2006.
It’s a bit worrying to see the 60+ day delinquency rates on 2006 equity loans rising so rapidly.
After 12 months of seasoning, the 60+ DQ (including loans in bankruptcy, FC, and REO) is 17.22% of the current collateral balance, which is notably higher than the age-adjusted 2006 vintage industry average of 12.07%.
Perhaps we should direct more focus to these deteriorating equity loans and their potential impact on the market. We’ve all participated in the argument that a fall off in HELO and HELOC lending can cut into consumer spending, nothing new there. But just as lending standards fell on purchase and refi mortgages, they also fell on equity lending loans. How much home eq. cash was put into hands of borrowers who wouldn’t be able to afford to pay it back? How will these foreclosures/sales affect inventory?
jb
I was driving through Pennsylvania yesterday and I saw a whole bunch of little signs on the side of the road (in a few different towns) advertising new homes for rent. I just thought it was interesting, though not directly applicable to the discussion.
>>A 4%(atleast) mandatory tax increase comes to $400/year increase on taxes for a $500K POS
at 10k it’s $400 a year. figure a tax rate of 25% and your actual cost is $300 or $25 a month. add in paying off principal over time and in 15-20-25 years down the road you win. the point is you have to get into the game at some point to get down the road. i’d choose a lessor house if it means i could purchase it versus more house via rent.
Reech: too bad you also chose the lesser brain option as well
Richard,
you may have missed the question that I posed the other day. Since you have residential investment properties. what is the current house price to rent ratio on your property and what is the ratio you would consider buying again for investment purposes?
Interesting coincidence.. From the SF Gate:
Ignoring equity line could hurt
Daniel Y. of San Francisco has a question that’s on the mind of many homeowners these days. Daniel wants to sell his condo and move into a bigger one in a nicer neighborhood. He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.
Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.
Daniel probably won’t be able to sell his condo unless he comes to some sort of agreement with the home-equity lender, says bankruptcy attorney Steve Elias. If the lender agrees to accept less than the full amount Daniel owes, he will probably owe tax on what’s known as cancellation of debt income.
From MarketWatch:
Easter egged April sales; most retailers miss
April was largely a sales disaster for most of the nation’s biggest retail chain operators as consumers pulled in their purse strings after March’s spending spree and as they faced rising prices at the gas pump as well as a slumping housing market.
4% tax increase is without the exclusions, exemptions, and extraordinary needs. It does not incluse pensions nor energy costs. It’s 4% in your dreams. After taxes? If you are not familiar with AMT, you should. It will affect many more next year.
Rich in NNJ: egads… sorry! f/u (in my world) means **follow** up!! [sorry for any confusion] :-) and thanks for the info….
rmb: yes! It is a wetlands are with a large (protected) stream going through it.
jb, sales over inventory is sooooo sobering. You can practically hear the gears grinding down on that machine.
but, my most favorite reality-check quote of all??? (paraphrased)
“I am telling all of my selling clients to expect a 1 to 1.5 percent decrease for every month on the market after June 1st.”
Now THAT is scary! That Horror (for sellers) is courtesy of Clotpoll!
sl
Look away, nothing to see here. From Bloomberg:
U.S. Retailer Sales Declined Most Ever in April as Cold Deterred Shoppers
U.S. retailers posted the biggest sales decline on record, trailing already-reduced estimates, as an earlier Easter shifted gift purchases into March and the coldest April in a decade curbed sales of lightweight clothing.
…
“Consumer spending has slowed, and these numbers very much confirm it,” said Michael Niemira, the International Council of Shopping Center’s chief economist.
Sales at 51 U.S. retail chains fell a combined 2.3 percent, the ICSC said. The decline was “ugly,” the largest since the New York-based trade group started keeping records in 1970, said Niemira.
The ICSC had forecast a “small dip” in April. Same-store sales are an industry benchmark used to measure the health of older stores. The ICSC, a New York-based trade group, tracks sales at about 60 chains.
Cold?
Did they personally ask shoppers if they were too cold to go shopping?
Perhaps more people are trying to save?!
Who the hell gets/gives gifts for easter?!
“Who the hell gets/gives gifts for easter?!”
Richie,
The chocolate bunny rabbit. John Q needs something to eat while he channel surfs on his new plasma.
I take it you are a little upset over not getting an Easter gift this year?
Nothing but rotten eggs under your Easter tree and in your Easter stocking. If you improve your behavior, maybe the Easter bunny will be more generous next year. You know what they say about keeping a list and checking it twice…
jb
BC,
John Q. sure as heck hasn’t been buying Hersey’s bunnies..
Candymaker Hershey cuts earnings outlook, day after saying its 2 Canadian plants to close
Hershey, the largest U.S. candymaker, said Thursday it will earn less in 2007 than it had originally forecast, a day after disclosing plans to close its last two plants in Canada and cut jobs from another plant in Pennsylvania.
The Hershey Co. blamed a sluggish domestic business …
Makes sense why the Chocolate Manufacturers Association (of which Hersey’s is part) asked the FDA to revise the definition of “Chocolate” to allow low-cost vegetable fat substitutes to be used instead of cocoa butter.
Talk about stealth inflation.
jb
I’m telling you something. These April sales numbers are amazingly bad. The fact that the stock markets are not getting it full throttle speaks volumes. There is only so much more of this kind of crap that can be foist out there before investors really start to digest this stuff.
“….sell in May and go away…”? Looks tempting eh? Stay fully invested boyeeeeeeee….
From the Star Ledger:
Corzine signs property tax bill
Gov. Jon Corzine this morning signed the last piece of legislation to emerge from the Legislature’s special session on property taxes.
The measure, which was criticized as “watered down” by some of its original sponsors, removes newly elected and appointed officials from the state public employees pension system, as well as professional service contractors. The bill also sets up a 401K style retirement plan and limits sick leave payments for elected and appointed officials at $15,000.
Many of the original 41 recommendations from a special joint legislative committee this fall were deleted from the bill (S17) in December, when Corzine insisted that those provisions should be negotiated in contract talks with state workers rather than legislated.
Among the provisions stripped from the bill was a ban on holding two elected offices out of the measure.
Cold shoppers? Yeah. I recall a snow/ice storm this past winter, had to drive past Garden State Plaza on the ride home from shoveling out my mother and the parking lot was FULL.
Am trying to understand how this whole notion of 70% of the US economy is driven by spending goes. I read somewhere that the top 5% earners account for 20% of the retail spending and bottom 20% earners account for around 5% of the retail spending. So the middle/higher income folks spending affect the sales figures quite a bit.
This negative savings rate cannot carry on indefinitely. The auto industry is definitely in a slowdown. Just look at the states that have been hit the hardest by declining house prices, and auto sales have taken the biggest hit there. The average term for a new car loan is 5 years. Consumers brought forward their house and car purchases due to cheap financing. There is a bit of lull in demand for houses and cars, and the next trigger will be another round of creative financing to continue this spending. Where will the next ‘creative’ source of cheap credit be?
I want a new Hummer and will pay the financier 2% of my earnings each month for the next 30 years…any takers?!
Also, his ‘weather’ excuse is being used to sugar-coat a lot of data coming out.
From PoliticsNJ:
TWO-BILL PACKAGE CRAFTED TO PROTECT CONSUMERS FROM FALLOUT OF SUBPRIME MORTGAGE MELTDOWN
Two legislative measures poised for introduction today would give consumers new levels of protection from foreclosure rescue scams and exploitative mortgage rate-setting practices that are on the rise in the wake of the meltdown in the nation’s subprime mortgage market.
One bill sponsored by Assembly Majority Leader Bonnie Watson Coleman (D-Mercer) would better protect consumers who might be tempted to sign onto mortgages with tantalizingly low initial interest rates – “teaser rates” – that balloon to unaffordable levels in a few short years, forcing bankruptcies for borrowers.
A second bill sponsored by Assemblymen Gary Schaer (D-Passaic), Neil Cohen (D-Union) and John Burzichelli (D-Gloucester) would counteract “foreclosure rescue” scams that have been on the rise across the country as property foreclosures and mortgage delinquencies skyrocket in the wake of the unraveling subprime mortgage market.
“The subprime mortgage market has gone amok and too many consumers are finding themselves in a no-win situation,” said Watson Coleman. “Government needs to get fully engaged with this issue at all levels so the cherished value of homeownership in this country does not devolve into a nightmare of bad credit and bankruptcy for borrowers.”
…
The Watson Coleman teaser rate bill has the following provisions:
Creditors must verify and document the borrower’s ability to repay the loan.
For adjustable-rate, zero-rate, or teaser-rate mortgages, the reasonable ability to pay must be determined based on a fully indexed rate and a repayment schedule that achieves full amortization over the life of the loan.
Creditors must establish escrow accounts to ensure the payment of taxes and insurance premiums for high-cost home loans.
Prohibit the financing of points and fees in connection with a high-cost home loan.
The Schaer/Cohen/Burzichelli bill – the Foreclosure Rescue Fraud Prevention Act – has the following provisions:
Require foreclosure consultants to post a bond with the state Division of Consumer Affairs prior to conducting any business in New Jersey.
Provides contract rights for owners of a financially distressed residential property – contracts for foreclosure consulting services would need to be in writing with major disclosure and notice requirements in 14-point boldface type and the borrower would maintain the right to cancel the foreclosure consulting contract at any time until every contracted service has been performed.
Prohibit foreclosure consultants from collecting fees prior to the completion of all agreed upon services, unless compensation for partial performance is expressly agreed upon in a contract.
Imposes added protections for cases when an owner transfers property to a property purchaser, occupies the property, and retains an option to purchase the property back from the purchaser.
Creditors must verify and document the borrower’s ability to repay the loan.
For adjustable-rate, zero-rate, or teaser-rate mortgages, the reasonable ability to pay must be determined based on a fully indexed rate and a repayment schedule that achieves full amortization over the life of the loan.
Ouch..
NNJJeFF…
My parents and I have some rentals here in florida and i will try and answer your question.
As a rule of thumb everything we bought we put 20% down on. Our goal is 15-20% ROI after all expenses. Now as a fyi,I do all the repairs/cleaning/evictions/yardwork myself. The last couple of years we averaged 23%. Quite honestly if you cant make a minimum of 15% it is not worth the headache.
As of right now we have not added any rentals in 3 plus years. There is nothing i have found lately that will positive cash flow. So screw it. We continue to add cash to savings and hopefully in a few years we will be in a position to double our number of rentals…
Any questions…I will try and help.
Chris
Great post Chris Howver the numberx do not work out anymore in NNJ.
15 years ago it worked out beautifully.
Just a quick note: FEAR IS RISING AMONG SELLERS, BUT BUT BUT IT HAS REALLY ONLY STARTED. WAIT ‘TIL SEPT OR JAN 2008.
IT IS GOING TO BE FRIGID!
BOOOOOOOOOOOOOOOOOOYAAAAAAAAAAAAAA
Bob
“We continue to add cash to savings and hopefully in a few years we will be in a position to double our number of rentals…”
[97],
Good for you. By the way, a few months back, I was called arrogant, on this site, for holding/adding to cash.
Things are heating up in the toy market.
lots of expensive toys and motivated sellers. They just do not know it yet that they will accept a much lower price.
Going to bleed a few toys from these “Show & Tellers”.
Patience cost money. their money.
Make sure you are compensated for your patience time and sacrifice.
It’s payback time.
Hehehehehehehehe
“Creditors must verify and document the borrower’s ability to repay the loan.”
This is preposterous. Everyone should be entitled to 10% YOY appreciation real estate offers regardless of their financial and social status. :o
Does anyone with MLS access want to avoid productive work??? Tempting….
Any info on MLS # 2384851 ??
Particularly looking for DOM and address. Thanks in advance.
Any bitter homeowners around?
Starving bunch?
How does it feel to be on the other side now?
“sssssssssssssss”
BOOOYAAAA,
I need a condo shack fix.
allisonline,
462 conklintown, 58 DOM.
jb
… a recent survey showed that only 1 in 7 Americans believe that house prices will go down.
JB –
There are 3 busy roads in Ringwoood (by Ringwood standards). That’s one of them. Ugh.
Thanks anyways. Love the site. Started lurking here recently, and I’m hooked.
Lowball:
Count me as the one. I think we’re going to wait this one out. I’m sick of looking for properties to lowball.
What survey is this?
Who sponsored it?
The Public at the low end of the feeder chain is becoming aware of the housing collapse.
#106 Not surprising most Americans ar clueless on most topics;this is just another example. It will have to hit them square in teh facw before many wake up;and for many it will.
#93 tbw: In case your interested the penthouse on the new condo castle development is available for rent, as it has nto sold.
It looks like 2 others sold, as their are now curtains.shades on the windows.
As far as the other development, as I said a couple of weeks ago the 2 beds are 659K, the 3 beds 714.
The “historic” house is also being sold as a seperate stand alone town house, also for 714K.
Oh I forgot the rent on the penthouse is a mere $6000 a month, not a lot when you consider that it is prestigious River Edge, and it does offer panoramic NYC views.
BC Bob
re#99…
With regards to holding cash, i wouldn’t sweat it. My uncle recently sold a 35 year old business in Ohio. He had bought a condo in Florida 7 years ago. So he drags me around off and on for 9 months looking for commercial property to buy. He finally bought a place 2 months ago. It is going to return him about 7% to start, with rent increases/lease conditions both parties are happy with. Why do i say this…He invested about 1/10 of the cash he had. The rest he bought a crapload of short term cd’s with…So there are people sitting on cash,but wayyyyyyyy more dumb asses mortgaged to the hilt…
Chris
Chris,
Follow the path your uncle has paved.
The only reason I mentioned it,holding cash, was your post reminded me of what a brain-dead individual posted. That’s OK. I know who is squirming now.
OT but shows the ‘liquidity’ in the system:
Yesterday, for the first time ever, China’s benchmark index climbed over 4,000. Not only that, but almost $50 billion worth of shares traded hands on China’s two exchanges – one in Shanghai, the other in Shenzhen. That’s more than all the rest of Asia combined, twice the level of Japan, and TEN TIMES trading volume just six months ago. In China, in the next 24 hours, approximately 300,000 new stock market accounts will be opened.
This is nucking futs…..
From Reuters:
Credit-score panacea failed to stop mortgage crisis
The crisis that has swept the U.S. subprime mortgage industry may come down to a simple, three-digit number, multiplied by millions.
Lenders in the midst of an unprecedented U.S. housing boom pared borrowing requirements to a minimum — a single number, known as a “FICO score,” that was supposed to reflect the borrower’s ability to repay a mortgage.
Traditional down-payment demands were dropped. Borrowers were taken at their word because checking a salary took too long. Proof of savings, housing history, a job — sometimes these, too, fell by the wayside.
Critics of the system argue scores are full of errors and dangerous to use alone. They also are easy to manipulate. A cottage industry has thrived helping prospective borrowers raise their scores without changing their underlying ability to repay a mortgage.
“There are fundamental flaws in the system because people can manipulate characteristics to get the FICO score they would like to see,” said Kevin Jackson, a strategist who follows mortgages at RBC Capital Markets in New York. The system can be played “to come up with the kind of mortgage for people who really couldn’t afford a house.”
Yanni – for you
China Within Limits
NOTE: JUNIOR [MR. DFA], NOT SENIOR
http://www.financial-planning.com/pubs/fp/20070501029.html
This is sucha great quote:
“The prudent investor’s response to those big numbers should be, “And…?” “
They continue to clean up the garbage….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDL9OtMp_2MQ&refer=home
Ugh Oh…
Lets say i work for a large multinational that I am going to say just about everyone has seen/used at one time.
I just got off the phone with the Boss. He called to b.s. with me and we started talking real estate. He knows i am pretty bearish/he is also. He says “Let me shut the office door”.
1st quarter earnings for our corp were up ~2% YOY. Not great,but not bad.
Now he tells me…”We are having a emergency meeting the first week of June. Our business nationwide is already off 4-5% and we are only how far into the second qtr?”.
I have this strange feeling it is going to be a long rest of the year.
Chris
P.S.- I have been with my company 14 years and this is only the second time i have seen this…can you say tech crash ??
Cobradriver,
Um…. tech crash? Care to expand?
I posted in another thread that I bought my new construction townhouse last year for 340k and the same type of unit across the street just sold for 375k. Some people think I’m not using the GSMLS agent version of the site. Well, I AM! My friend is an agent and I use his login. The reason I’ve only researched 1 property other then mine is because that is the only unit that is the same sq ft and style as mine that has sold since the development was built. As for the person who said they need a backyard and a garage. Guess what.. I have grass behind and in front of my unit. Enough to setup a BBQ and have about 10-15 people over. I also have access to a swimming pool and clubhouse and other things. That costs me $180 a month and I don’t have to mow my lawn or shovel my snow. So… do you still think it was a bad idea for me to buy last year?? I don’t.
Oh, and the proof is in the pudding:
MLS# 2346115
SP: $375,000 ANT CD: 05/30/2007
SA2: SAN2: OLP: $399,000 DOM: 101
Why do you feel you need to justify your purchase to anyone?
jb
gary Says:
May 10th, 2007 at 4:24 pm
Cobradriver,
Um…. tech crash? Care to expand?
g: let’s not go there – I’m serious – I know you are half-kidding too
When the NASDAQ imploded we had been negative YOY for 3 qtrs before. Our company usually leads the major economy by 6-9 months.
Chris
#121 I fell sorry for the poor person who bought it, they are going to be ther for a looooong time, and a town house no less.
#120 Not a bad idea if you are happy there, but for the future,well that looks cloudy.
Bought Last Year,
What about this one?
MLS# 2334184 – 808 DeLuca
OLP: $476,335
SP: $356,000
CD: 01/03/2007
The unit you listed above is only 1294 square feet, this unit is the largest style unit available in the complex, listed at 2020 square feet.
If you live in a Montclair unit, you paid $262 a square to do so, this unit, the Granville, sold for $176 a square foot.
jb
The consensus is that the mortgage/credit risk has been passed on to hedge funds, the ib is free and clear. The ib’s infer that risk has been sold off. Hah. Doesn’t the ib provide financing, leverage, custodial arrangements and clearing? When a hedge fund fails who accepts the failed fund’s losing positions? You saw it last week with UBS, Dillon Read. UBS was hit with a $300 million contagion loss. The ib’s capital is not separated from the tentacle of the hedge fund. How many hedge funds have popped up over the last few years?
As well as this:
MLS# 2334184 – 812 DeLuca
OLP: $443,540
SP: $403,000
Also the Granville, 2020 sq. ft model, this one prices out at a few cents under $200 a square.
The developer web site lists the price for the Granville units as starting at $446k. Did they actually sell for that, if so, those buyers are down more than 10% already..
Bought [120],
You continue to post regarding your buy. Congrats! However, nobody gives a rat’s *ss. I asked before and will again;
How much down and what type of financing/rate?
BC Bob…
I am wondering that also. Or do ya think the bad crap will just try to be made to go away ??? I still am amazed at the number of people who have no idea about hedge funds and the previous failure of LTCM or how the problem just “disappeared”.
Christ,or even how big a problem it was. I am gonna guess UBS at 300 mil is peanuts…
Chris
i don’t wanna share walls with strangers. just sayin.
Dow down triple digits on retails implosion…..from top to bottom end Americans are tightening the purse strings….look for sky high retails prices to once again be slashed. Same song only different.
“I am gonna guess UBS at 300 mil is peanuts…”
Chris,
Maybe just the peanut shell.
Perhaps we should direct more focus to these deteriorating equity loans and their potential impact on the market. …How much home eq. cash was put into hands of borrowers who wouldn’t be able to afford to pay it back? How will these foreclosures/sales affect inventory?
JB,
Good point. One area I’d like to get your thought on is use of home equity loans to fuel speculative purchases that are now turning sour.
NJ didn’t have the same speculative building frenzy like Florida or Nevada had, where people were lining up to buy multiple condos to flip and flip again before they were even built (maybe the shore areas to some extent).
What NJ does have though is expensive houses and lots of paper equity created by the bubble. This provided a big opportunity for home equity withdrawals.
How much NJ home equity money was withdrawn to play real estate speculator in places like Florida? What happens when these investments go south? Will people attempt to sell NJ homes to cover their bad investments?
Wow, $340,000 for a condo.
That’s a lot of coin for an apartment.
And what’s with the term “townhouse” anyway? It’s a condo.
“Guess what.. I have grass behind and in front of my unit.”
[120],
Major selling feature.
How much down and what type of financing?
Quick question from an occasional reader: The quips yesterday about Westfield prices “always going up” — even in a downturn — were in jest when made here yesterday, right? I’m assuming they’re making fun of some realtor who said it in earnest… Am I correct?
Signed — a renter who sold a house in Jersey in July 2005 but might buy in Westfield in the next year or three
From the Star Ledger:
A .C. casinos see revenue decline
Severe thunderstorms, stepped up competition, one less Saturday, a partial smoking ban and bad luck at the tables all helped to hurt Atlantic City last month.
The 11 casinos reported a nearly 10 drop in casino revenue, to $396.8 million, in April. Slot machine revenue fell 12.3 percent and table game revenue dropped 3.1 percent.
Five casinos — Bally’s, Tropicana and the three Trump casinos — reported double-digit declines. Only Harrah’s and Caesars reported gains.
Caesars was helped by something the others didn’t have — luck. The casino’s table revenue soared 52.5 percent, helping overall revenue to climb 15.3 percent.
Industry observers have said 2007 could be the first year Atlantic City revenue declines in the resort’s 29-year history, largely due to competition from slot parlors in Pennsylvania and New York. But the 10 percent decline in April was far more than many analysts expected.
For the first four months of the year, casino revenue is down 4.1 percent.
jeffdime,
Just some good-natured ribbing.
jb
“State OKs teachers contract
Newark educators to get 12.5% raise over 3 years”
“There are no changes in health benefits and union members still won’t have to contribute to their health-care costs.”
“It takes a certain caliber of teacher to come to Newark and stay in Newark, and the governor’s office is cognizant of that,” he said.”
http://www.nj.com/starledger/stories/index.ssf?/base/news-3/1178771464234960.xml&coll=1
JB,
That comes out to over 100k more. That has got to be some grass.
re # 127
“State OKs teachers contract
Newark educators to get 12.5% raise over 3 years”
Check this out on Newark teachers. There is a big billboard with htis websitte on Rt. 21 in Newark.
http://www.protectingbadteachers.com/
…Westfield Memorial Library. … Classic movie week: “Brigadoon” with Gene Kelly, Van Johnson, …
http://www.wmlnj.org/newsletter/
I recently moved to the tri state area from the UK and see parallels in the real estate markets. What is happening in the US is not unique to the country. UK property prices have tripled in the last 15 years and most of the population lives with an exorbitant amount of debt. Saying this, even third world countries have participated in the consumption/property speculating extravaganza – South Africa is a good example. Property prices have increased 20% annually over the last 3 years and guess what…. most live with an exorbitant amount of debt in all shapes and form. Whatever the trigger (and there are plenty of scenarios) the fall out will be a lot worse than most of us imagine. Lets just hope the hangover from this global expansion will be fixable in someway or else it is going to be a long slog for all.
Seriously, sometimes you gotta wonder if somebody is actually holding a 9 mm to someone’s head.
http://homes.realtor.com/search/searchresults.aspx?mlslid=2404993&typ=7
#146 Pat: You see, Westfield, Brigadoon, magical mythical. Something we should all aspire to.
New construction. Monmouth County.
these are 2 different models but look at the price difference. Same street.
7/06 sq ft 4952 950k
11/06 sq ft 4973 728k
7/06 re-sale
9/06 from builder
i mean 11/06 from builder
and they aren’t done selling yet…
#148 – but gary, it has “crawl” space and grass!
RentL0rd,
Unreal. I swear, these people are delusional.
NOT GOOD –
Shanghai Index Is on a Tear, But New Risk to Rally Looms
Remember the plunge in Chinese stocks in February that also played a role in the recent global stock selloff?
Look again. The Shanghai Composite Index crossed 4000 for the first time this week, putting it up 45% since its Feb. 27 fall. China’s regulators tried halting speculation by curbing bank loans. But it has met little success.
What could end the run now? And how will the rest of the world be affected when China’s latest boomlet runs out of breath?
A weak U.S. economy is one threat to China’s economy and markets, though its impact hasn’t been felt yet.
Another risk might be a coming Chinese market overhaul. Later this year, the China Financial Futures Exchange is expected to roll out stock-index futures tied to the CSI 300 Index, which represents about 60% of the value of the country’s Shanghai and Shenzhen markets.
The futures will give investors the ability to bet on a decline in China’s stock indexes, which could nudge it in that direction. Right now, domestic investors in China can’t make such “short” bets against either stocks or stock indexes.
When the contracts become tradable, large investors could short the market. It might also spur them to sell the shares they’ve bought during the upturn.
Investors learned in February they need to mind China’s markets. After the latest run, it might make sense to buckle up.
Lindsey,
I think somewhere you wrote you had been prescribed oxycontin recently.
http://news.yahoo.com/s/ap/20070511/ap_on_bi_ge/oxycontin_plea_21
Gary #148, not that is the quintessential crapbox.
120 Bought Last Year
Who Cares?
GSMLS at 33,632.
I call crash at 37,000.
#148
They call it a “custom” home – it’s just an expanded cape that is so ugly.
Oops, typo in #158:
Gary #148, now that is the quintessential crapbox.
BBB: #106 Not surprising most Americans ar clueless on most topics;this is just another example. It will have to hit them square in teh facw before many wake up;and for many it will.
I think it’s just human nature to extrapolate the past into the future. Real estate prices have never fallen nationwide since the Great Depression. Therefore, they won’t do so again short of an equivalent economic collapse. Or so the reasoning goes.
It’s not uniquely American to think real estate only goes up. The Japanese and the Hong Kongers thought that real estate only goes up – until they went through their respective 90% and 60% declines. And all without a Great Depression – just a long period of slow economic growth.
#163 Zhang: Well in this aprt of the country they fell before, the most recent period being in the early to mid 1990’s, not that long ago.
Not only did they fall, but they fell hard, I lived through it,a nd will nevr forget it.
once can argue that soem people today were too young to remember or care about that time. But, sadly many of the epople that were taking part in the frenzy this time around, know full well what happened last time, they are the crowd that says it was different then, well its not.
These people should have known better.
Sadly, many people never learn, time and time again.