While this piece is from California, I believe the same dynamic is taking place here in New Jersey. Buyers are holding out for better deals, while sellers hold out for high offers.
From the Monterey County Herald:
Buyers, sellers to blame for slump
By JEFF COLLINS
California’s housing slump resulted in part from conflicting expectations of buyers holding out for better deals and sellers still seeking a premium for their homes, a state Realtors group concluded.
Higher interest rates and low affordability are among the main reasons for the slowdown last year, the California Association of Realtors said in its 2006 “State of the California Housing Market” report, released Tuesday.
The report said the robust economy, a growing population and low interest rates by historic standards should have kept the housing market humming.
Instead, the statewide median price ended up just 2 percent higher last year than the year before, the report said.
Market psychology, rising interest rates and high home prices created “a perfect storm” that triggered a slowdown.
The report said a wedge developed between buyer and seller, caused by buyers waiting for prices to come down as sellers continued holding out for the same premiums that homes fetched in prior years.
Association President Colleen Badagliacco said the role of real estate agents during that period was to try to educate sellers that the market had changed. But it took from two to six months for that message to sink in.
“They remember that their neighbor sold their house, just to pick a number, for $800,000 four months ago,” Badagliacco said. “In their mind then, the house is worth $800,000. The agent has to be the voice of reason.”
Sign up for NJ RE Report Network first meeting February 16th 6:30 PM at,
http://www.evite.com/app/publicUrl/skgala@yahoo.com/njrereport
Chicago has mentioned to hold it at J R Cigar, in Whippany NJ. I am presuming the location should work well.
http://www.jrwhippany.com/index.cfm?page=lounge
A lamb market. That is what we have in NJ right now.
To say it another way: we have a old fashion Mexican standoff between sellers and buyers.
SAS
Housing starts cooling off
http://www.theglobeandmail.com/servlet/story/RTGAM.20070205.whousing0205/BNStory/Business/home
The report from toll is just dreadful
From Marketwatch:
Toll Brothers 1st-quarter revenue off 19%, backlog off 30%
Toll Brothers Inc., the Horsham, Pa., home builder, reported that fiscal 2007 first-quarter home-building revenue fell 19% to $1.09 billion from $1.34 billion in the year-earlier period. The company said the backlog at Jan. 31, the quarter’s end, was off 30% from a year earlier, at $4.15 billion. Toll’s net signed contracts were valued at $749 million, down 34%. Net of cancellations, first-quarter contracts fell 33% to 1,027 units from 1,544 units in the first quarter of fiscal 2006. And Toll estimated that write-downs for the quarter would range from $60 million to more than $160 million. Chairman and Chief Executive Robert I. Toll said in a statement that “it appears that the pace of cancellations is starting to abate.” The rate was 29.8% in the first quarter compared with 36.9% in the fiscal fourth quarter. But “we are still well above the Company’s historical average of about 7%,” he said. “A few markets,” such as Hoboken and Jersey City, N.J., Manhattan and Brooklyn, “are quite strong,” the executive said. “Some markets, such as Detroit, Minneapolis, Chicago, Reno, and parts of Florida, may not yet have stabilized.”
On Long Island, More Are Priced Out of the Housing Market
http://www.nytimes.com/2007/01/26/nyregion/26long.html?ex=1171083600&en=011530d90ba91893&ei=5070
Vacant homes for sale cloud hopes for housing recovery
http://www.thestamfordtimes.com/stamford_templates/stamford_story/300815618693227.php
Standardbred industry is pushing hard for slots in the Meadowlands. I still see AC North as a distinct possibility. Besides, Xanadu is a better name for a casino than a mall.
$1.1B horse industry may tank in N.J.
I can’t remember???
Is anything in the works for NJ to sell its lottery?
SAS
From Bloomberg:
HSBC to Change Management to Resolve Bad Mortgages
HSBC Holdings Plc Chief Executive Officer Michael Geoghegan will shake up management and change lending policies after the bank’s losses from bad home loans in the U.S. increased.
HSBC is setting aside $1.76 billion, 20 percent more than analysts estimated for bad-loan provisions in 2006, because the U.S. mortgage business is worsening, it said late yesterday. Shares of Europe’s biggest bank today dropped the most in eight months.
“The buck stops with me,” Geoghegan said today at a press conference in London. “We will resolve it.” He wouldn’t say whether HSBC will need to raise bad-debt provisions again in 2007.
Earnings growth at HSBC, the world’s third largest lender, has trailed global rivals including Bank of America Corp. and JPMorgan Chase & Co. HSBC spent $15.5 billion in 2003 to buy Household International Inc., which makes loans to U.S. consumers with poor credit records. Investors have criticized Chairman Stephen Green and Geoghegan for hurting HSBC’s stock with the Household takeover.
“I am responding, and more action will be taken,” Geoghegan said. “This is a problem, we have taken the severity on board.”
…
“The obvious question is: will there be more bad news to come,” said Mike Trippitt, a London-based analyst at Oriel Securities Ltd., who has a “buy” rating on HSBC.
U.S. foreclosures on higher-risk adjustable-rate mortgages, or ARMs, rose to a four-year high of 2.2 percent in the third quarter as borrowers struggled to pay mortgage bills, according to data compiled by Washington-based Mortgage Bankers Association. So called sub-prime mortgages, home loans with rates at least 2 or 3 percentage points above the safest, so-called prime loans, are for people with poor or limited credit histories, or high debt burdens relative to their incomes. Such loans made up about a fifth of all new U.S. mortgages last year.
Rising interest rates and falling house prices have made it harder for many Americans to repay their mortgages, leading to higher loan losses at HSBC and rivals including New Century Financial Corp. The U.S. Federal Reserve raised its benchmark rate to 5.25 percent last year from 1 percent in 2004.
The rise in U.S. bad loans is “a material negative surprise for HSBC” and could reduce full-year net income by 10 percent to $16.6 billion, said Merrill Lynch & Co. analyst John-Paul Crutchley in an e-mail today. He has a “sell” rating on the stock.
…
New Century, HSBC’s largest competitor for sub-prime mortgages, said yesterday that it expects a fourth-quarter loss in part because of a jump in defaults on new loans.
“The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market,” HSBC said in yesterday’s statement. “It is clear that the level of loan-impairment provisions” at the end of 2006 in the U.S. mortgage operation “will be higher than is reflected in current market estimates.”
The lottery is up for graps. Everything
is on the table here in NJ.
Lottery will require a vote of the taxpayers.
However: Who will buy it?
a.Koreans
b.Chinese
C.Mexicans
d.Spain
e.Nigeria
Lol this housing crush seems to gain steam latelly – it started with lower sales volume, now we see builders laying off their land options and discounting their homes, for3eclosure rates are going up…
The only ones not giving up – are the home owners… But they have no choice since teh Lelev of home equity is lowest in over 50 years.. for them it is either:
1. sell at the price they want to sell or
2. go through bankruptcy…
In big part because in the last few years people were able to buy homes within 1-2 years after going through one…
I suggest: make home loans like student loans – you just have to repay them, can not get rid of negative balance through a bankruptcy, and you can defer them if you are not making any money but the moment you have some assets or better paying job you have to start paying them back!!
If this ever implenmented I believe we will see a huge drop in house prices…. Too bad it will never be done.
“But it took from two to six months for that message to sink in.”
How about a least a year or longer?? However, not atypical. Pavlov’s dog was conditioned much faster than John Q.
Tar Heel,
Congrats!!
BC (12-13)-
Thanks. That game was much harder than it needed to be, though. Dook is not a good team this year, but our defense is full of holes & doesn’t challenge the 3 well (typical Carolina).
We get up & down the court in a blur, but I fear a mature, tough-D, rebounding, control-the-pace team can take us in the tourney.
Pavlov’s dog was a much faster learner. The “standoff”, to me, started several weeks before Katrina in 2005. The signals from buyers were clear, but sellers were convinced another magical wave of buyers was coming. Over a year later, they still haven’t come in waves…but there is a trickle now.
Sellers who don’t take advantage NOW can expect to be holding their homes for well into ’07…only to sell at even lower prices than today’s.
BC-
BTW, your team is better than billed & is flying under the radar. Scary.
From the WSJ:
In Home-Lending Push, Banks Misjudged Risk
When the U.S. housing market was booming, HSBC Holdings PLC raced to join the party. Sensing opportunity in the bottom end of the mortgage market, the giant British bank bet big on borrowers with sketchy credit records.
Such subprime customers have always been risky, but HSBC figured it could control that risk. In 2005 and 2006, it bought billions of dollars of subprime loans from other lenders, lured by the higher interest rates they carry.
Now, the party is over for HSBC — and for lots of other bankers who aimed to cash in on the housing boom of the first half of this decade. When interest rates ticked up and the market cooled, HSBC reached a disconcerting conclusion: Its systems for screening subprime borrowers and for assessing the default risk they posed were flawed.
Many of those loans have soured, sometimes quickly. The percentage of HSBC mortgages more than 60 days past due is climbing. Fraud by borrowers has been higher than expected. “We made some decisions that could have been better,” says Tom Detelich, the HSBC executive in the U.S. spearheading an effort to clean up the mortgage portfolio.
…
(It’s a long article, so I won’t post the whole thing)
http://online.wsj.com/article/SB117088245754201362.html?mod=home_whats_news_us
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EK26.69, 0.00, 0.0%) Thursday outlined further details of its digital business strategy, saying it now plans to cut a total of 28,000 to 30,000 jobs, up from a prior projection for the layoff of 25,000 to 27,000 employees. The company said it eliminated 1,200 jobs in the fourth quarter, bringing the total-to-date reductions to 23,400 positions. Kodak sees charges of between $3.6 billion and $3.8 billion related to the restructuring program, up from a previous view for charges totaling $3 billion to $3.4 billion. The company is looking to complete the restructuring program by the end of 2007. Kodak also said it expects earnings from operations to equal between 8% and 9% of revenue in 2009 with its target business model yielding gross profit margins of 28% to 29%. For 2007, the company expects net cash generation of $100 million to $200 million on a continuing operations basis following restructuring disbursements of about $600 million and an aggressive introduction plan for inkjet products. The stock closed Wednesday at $26.69.
“BTW, your team is better than billed & is flying under the radar. Scary.”
I like being under the radar. The problem is we lost our big man, [best shot blocker in the country] and a very good 6th man,suspensions. This will really hurt us. It shortens our bench and we lose 10 fouls. Also, we have the tough stretch of our schedule just ahead. However, we have the best player in the ACC, Jared Dudley [maybe I’m biased]. I was set to go to Beantown for BC-Carolina on Feb 17th. I am so p*ssed with the suspensions, I’ll probably do something much more drastic, like go to an open house.
This isn’t happening !!
I thought we are on the road to housing recovery !!
Hee Hee Hee (Evil Laugh)
There are many idiots who piled into housing in 2005/2006. Even bigger idiots piling into the *Spring 2007 Recovery*
From the AP:
Jobless claims increase to 311,000
The number of newly laid off workers filing for unemployment benefits edged up slightly last week but still remained at levels signaling a solid labor market.
The Labor Department reported Thursday that 311,000 newly jobless workers applied for benefits last week, an increase of 3,000 from the previous week.
The advance was in line with expectations as economists continue to believe that the labor market is holding up well. Even in the face of a six-month slowdown last year, layoffs did not increase in most industries although the troubled housing and auto sectors have suffered job losses.
…
The largest increase was in California, a rise of 5,514 which was attributed to higher layoffs in the contruction and service industries, followed by Texas, up 3,022, and New Jersey, up 1,451.
In addition to post # 4. Note the comments on “foot traffic” and cancellations. This tidal wave is getting bigger.
“Banc of America analyst Daniel Oppenheim said the 33% order decline was sharper than the 27% drop-off he had been projecting. “Higher traffic has not translated into orders,” he said in a note. He added that orders per community fell 50% to 2.8. This is down from 3.2 in the fiscal fourth quarter, and down 71% from the 9.8 orders per community reported in the fiscal first quarter of 2005.”
“Oppenheim doesn’t see the lower cancellation rate as a sign of a rebound. He said cancellations were lower because the backlog was smaller. “The decline was primarily due to having fewer homes in backlog,” he said. “Cancellations relative to backlog were unchanged at 8%.”
http://money.cnn.com/news/newsfeeds/articles/djf500/200702080850DOWJONESDJONLINE000751_FORTUNE5.htm
Is the subprime shakedown moving to a new level?
Subprimer New Century (NEW) down 26% in pre-market trading?
jb
Clot (#14) are you also a Tarheel Alumni?
Interviewer: “What’s your prediction for the NNJ housing market?”
Clubber Lang: “My prediction? Pain.”
… pain; not just for the sellers but buyers too. There are still enough buyers out there who are either ill-informed or simply don’t mind paying the asking prices. This serves to delay the slow-down. There is a distinct possibility that nominal prices won’t ever drop significantly and that inflation adjustments will just eat into real gains over the course of years.
Hey Clot or Rhyming, I know its not a Realtors job but does anyone ever try to explain the time value of money to sellers? I don’t think you need to be an expert user of Excel’s NPV function to know that a buck today beats a buck tomorrow.
It is very difficult for me to grasp how any seller has a home on the market, vacant, for over one year, and decides a 1% price reduction is what will bring buyers in.
Seller psychology requires more therapy than buyer psychology. As a buyer, I just increased (generously) what I am willing to pay by 5% because its been an entire year since I started tracking the market. Looks like I will finally buy in 2009.
#20 James Bednar Says:
“levels signaling a solid labor market.”
===========================
The Fed ‘smoke & mirrors’ numbers do not jibe with the industry reports filed individually.
Many gave up long ago, still unacounted for.
“Clot (#14) are you also a Tarheel Alumni?”
Isn’t one enough for this board???
njrebear Says:
SEC investigating Country Wide
http://www.nysun.com/article/48159?page_no=1
Apparently, the Securities and Exchange Commission is thinking along the same lines, having just kicked off an investigation, I’ve learned, into trading in the shares of Countrywide Financial, one of the nation’s largest independent mortgage lending firms.
The period in question centers on late 2006 trading, prior to a disclosure last month in the Financial Times that Countrywide and Bank of America have held discussions about a possible alliance.
Interestingly, though such speculation was quashed last week by Bank of America CE0 Ken Lewis at a financial services conference, the stock continues to trade around its peak, currently selling at $44.74, sharply above its 52-week low of $32.10.
Sapiens, #5, you clipped a key part:
When I was still in the newsroom this type of story came under the heading of a “Dog bites Man” story, i.e. it wasn’t particularly surprising or insightful, just sort of what you’d expect.
The story also contains the now-obligatory “a perfect storm” reference, although as is frequently the case, it is misapplied.
A storm is something that is comes from outside that people have no influence over, this was not a storm, but a mania.
Mania’s are like storms in that they too pass, but they do not spring from forces beyond human control.
“Is the subprime shakedown moving to a new level?”
New Century Plunges- Street.com;
New Century Financial (NEW – Cramer’s Take – Stockpickr – Rating) sank 24% early Thursday after warning of an unexpected fourth-quarter loss.
The Irvine, Calif., subprime lender cited “the increasing industry trend of early-payment defaults.” New Century expects to post a fourth-quarter loss, where Wall Street analysts were looking for a profit of $1.08 a share.
The company also “expects to record a fair value adjustment to its residual interests to reflect revised prepayment, loss and discount rate assumptions with respect to the loans underlying these residual interests, based on indicative market data.”
New Century will also restate earnings for previous 2006 periods to fix its accounting for allowance for loan repurchase losses. The restatements will cut earnings in previous periods, the company said.
Shares plummeted $7.36 to $22.80.
Sell the turnpike and the tolls go sky high and all we can do is grouse
Trenton got their money, and paid out all their friends
20 dollars for three exits is how the story ends
Sell new jersey for cheap, put it all on the table
Go all in on one hand, run from Jersy if your able.
We have much property tax, and a tax on sales too
If you cannot pay your tax we take the house from you
It goes ever ever up, see my granny eating alpo
of she cannot pay the bill, the sherrif comes and puts her out
( refrain )
Do you think your job is safe, you be making lots of the money
Do you think your kids will get to goto school, do you think I am being funny?
The middle class is dead, the rich got all of it
and those of us that left pay for the govmnt tit!
( refrain )
Count a third Tarheel alumna here. Although undergrad was a darker shade of blue…
Is the New Jersey Turnpike Authority profitable? If so, what happens to the profits right now? If we leased the turnpike away, what would we do to compensate TP profits?
Rachel (23)-
Yeah, was on the 6-yr program, with a concentration in beer.
Don’t the TP Toll workers have union? I bet we will be seeing more scanners and fewer personnel at exits.
Here is an unbelievable listing:
2373012 is a vacant lot that, according to the listing, must be sold with the house/lot 2373006.
The lot is listed for $350,000 with dimensions of 60 x irregular and no acreage listed with taxes of $6,563. The house is listed for $400,000 with taxes of $9,092.
Why are they listed separately if they must be sold together? All I can think of is that the realtor thinks they will get more interest listed separately since the total price is $750,000 with taxes of $15,655. The house itself needs lots of work and they are advertising it as a “contractor’s dream.”
It is an estate sale and the previous owner was really taken when the taxes were reassesed. It’s not on a very nice street although it is better since the prison two blocks down the road was closed.
http://new.gsmls.com/public/detailLst.do?mlsNum=2373006
Perhaps if both together had an asking price of $400,000 then it might be worth it.
Seneca (24)-
I don’t need any spreadsheet program to explain the time value of money…it’s been tattooed on my eyelids for about 8 years. It is my mantra to ANYONE getting into residential RE who’s truly concerned about the $$$ (and, no, not everybody buying a home is thinking about money first; I believe we can all agree on that one). Of course, agents and owners of commercial RE already understand this concept (or can grasp it quickly), as the financials underlying commercial RE often determine the profitability of the occupying business.
Lots of homeowners out there- especially the early ’06 “hangovers”- are just smashingly stupid. In about 6-8 weeks, the poleaxing will commence.
My focus now is on trying to get a gauge of: 1) exactly how much inventory is going to hit my local market this Spring, and 2) how educated the Spring sellers are going to be.
Of course, with New Century and HSBC falling out of bed this AM, I think the true picture of where the entire real estate “chain” (from financing thru employment stimulus in related industries) stands is now complete.
And the picture is not pretty.
BTW, I also think the commercial REIT run-up has reached a classic near-term “top”. VNO, BXP, CT, GGP, etc. all trading in the stratosphere. Sam Zell is out of the game…why should any sane person want in?
“Call for mortgage reform”
“Dodd, said he planned next to hold hearings with the federal agencies that oversee home lending, such as the Federal Reserve, to discuss whether they should impose restrictions on mortgage industry practices…”
Dodd has said that he will not impose a blanket ban on accepting political contributions from industries that the panel oversees.”
Rut ro. This is a fine pickle. Gotta get those contributions in over the next year, but gotta show the pre-foreclosured voting pool in all those swing states how concerned he is about this “problem”.
Hmmmm, what’s a politician to do? Timing this one just right is critical. I’d say nothing gets done on this one for months. Just a lot of “I don’t recall that” combined with expert after expert testimony. Or,maybe dump it on Justice. Yeah..that’s a matter for judicial, not legislative. Sign your check right here, MBA.
http://www.charlotte.com/mld/charlotte/business/16648990.htm?source=rss&channel=charlotte_business
dg (32)-
At least you saw the light.
Tell me, are you instilling your children a solid core of righteous and proper Dook hatred?
If not, you’re still one of them.
“Yeah, was on the 6-yr program, with a concentration in beer.”
Tar Heel,
If I had a team like that, I would have been on the 8 year program. Not to mention the Carolina beauties.
By the way, do you get the feeling that the market will speak today, not just HSBC nor New Century??
BC (40)-
Once you and a gang of drunken morons have picked up a car and carried it thru an intersection during a championship celebration, it gets old.
In truth, I realized in ’84 that if I didn’t get out of Chapel Hill, I was gonna be there the rest of my life. Not that it would’ve been bad, but let’s just say that at that point, it would’ve taken a Tony Robbins-like jolt of motivation for me to have risen to the point where I could’ve been deemed a “slacker”.
BC (41)-
Glad I don’t own any financials today. Market speaking. Loud.
Adding to the perfect storm…….
With rates on many homeowners’ adjustable-rate mortgages rising, some who would like to refinance into a new loan are finding they can’t.
In some cases, that is because their loan carries a prepayment penalty, which would force them to come up with thousands of dollars if they refinance in the first few years. Such penalties are common with so-called option adjustable-rate mortgages, which typically carry a low teaser rate that rises sharply after an introductory period.
Other borrowers are getting caught short by a changing housing market — one in which home prices have flattened and lenders are beginning to tighten their standards after a long period of making mortgages easier and easier to get. The challenges are greatest for homeowners whose credit has declined since they took out their last loan and for those who have little if any equity. Some of these borrowers are still able to refinance but are finding it more costly than they expected.
http://online.wsj.com/article/SB117090141629001793.html?mod=todays_us_personal_journal
Here’s the really sick thing…I talked my nephew into turning down Cornell to go to UNC! Pre-UNC, he was an A student at Pingry (very tough NJ private school), brimming with youthful academic curiosity. I even managed to dupe his Mom and Dad into buying into my “theory” that attending an Ivy would be bad for Junior, because he’d be prone to “academic burnout”.
Talk about burnout…he’s now a basketball-crazed, grain-punch-swilling droid who follows the Heels to March Madness rather than going on Spring break. He’s gone from wanting to be a doctor to a History major…and he looks more like an overcooked broccoli spear than a human being. His parents may never speak to me again. I wonder why?
Go Heels!
Unrelated but funny: 2006 Darwin Award Winner:
______________________________
The late, John Pernicky and his friend, the late Sal Hawkins, of the great state of Washington, decided to attend a local Metallica concert at the George Washington amphitheater.
Having no tickets (but having had 18 beers between them), they thought it would be easy to “hop” over the nine foot fence and sneak into the show. They pulled their pickup truck over to the fence and the plan was for Mr. Pernicky, who was 100 pounds heavier than Mr.Hawkins, to hop the fence and then assist his friend over.
Unfortunately for the late Mr. Pernicky, there was a 30-foot drop on the other side of the fence. Having heaved himself over, he found himself crashing through a tree. His fall was abruptly halted (and broken, along with his arm) by a large branch that snagged him by his shorts.
Dangling from the tree with a broken arm, he looked down and saw some bushes below him. Possibly figuring the bushes would break his fall, he removed his pocket knife and proceeded to cut away his shorts to free himself from the tree.
Finally free, Mr. Pernicky crashed into holly bushes. The sharp leaves scratched his ENTIRE body and now, without the protection of his shorts, a holly branch penetrated his rectum. To make matters worse, upon landing his pocket knife penetrated his thigh.
Hawkins, seeing his friend in considerable pain and agony, threw him a rope and tried to pull him to safety by tying the rope to the pickup truck and slowly driving away. However, in his drunken haste, he put the truck into reverse and crashed through the fence landing on his friend and killing him.
Police arrived to find the crashed pickup with its driver thrown 100 feet from the truck and dead at the scene from massive internal injuries. Upon moving the truck, they found John under it half-naked, scratches on his body, a holly stick in his rectum, a knife in his thigh, and his shorts dangling from a tree branch 25 feet in the air.
I did not see a link to this paper yet :
http://www.marketoracle.co.uk/Article320.html
nice reading material
http://www.darwinawards.com/
Any chance someone can pull the street address for MLS # 2373015?
Thanks in advance for any help.
Toll said in a statement that “it appears that the pace of cancellations is starting to abate.” The rate was 29.8% in the first quarter compared with 36.9% in the fiscal fourth quarter. But “we are still well above the Company’s historical average of about 7%,” he said.
Does this take into consideration the number of initial contracts? ie no new contracts (left to cancel) therefore, a *relative* decrease in cancellations.
lies, damned lies and *statistics!*
btw, clot: my last year at Rutgers Cook College, they turned it into a *dry!* campus!!
It was however…. “dry with a blind eye” though…. (hic)
sl
R Patrick
I can’t make up my mind if you’re a nerd or a geek…anyways you’re one of those ppl who think you’re funnier and more amusing than you really are.
“Once you and a gang of drunken morons have picked up a car and carried it thru an intersection during a championship celebration, it gets old.”
Clot,
Who’s worse, a drunken 18-22 year old, celebrating a championship or a 30-40 something bidding up the price of a pos, to the tune of 150k over asking???
I would love to see the actual numbers rather than just the percentages…
you can skip everything and read the last paragraph if you wish…..
effectively a rehash….but it’s always nice to shovel some gloom and doom for the LOD
WSJ
Things That Go Boom
By ROBERT J. SHILLER
February 8, 2007; Page A15
It seems that no one in the 1990s forecast the doubling of home prices since 2000 in cities in the U.S. and many other countries. Harry S. Dent published a book in 1998, “The Roaring 2000s: Building the Wealth and Lifestyle you Desire in the Greatest Boom in History,” which was a New York Times best seller. Wouldn’t you imagine from the title that it predicted a huge housing boom? It didn’t. It said of the suburbs that “there will be only a modest appreciation of home values, despite a booming economy.” The book concluded only that some “select real estate” should be part of one’s portfolio. Mr. Dent was really preoccupied with the stock market, which was booming when it was written.
Books really predicting the housing boom started to appear only after it was well underway, when their forecasts were simple extrapolations. David Lereah, chief economist for the National Association of Realtors, published “Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade — and How to Profit from Them” in 2005. In contrast, his book “The Rules for Growing Rich: Making Money in the New Information Economy,” written just before the very peak of the dot-com boom and published in June 2000, spoke first about the stock market and then added only that “real-estate investments have proven, over the years, to be worthy additions to anyone’s portfolio.”
We shouldn’t blame these people for not seeing the boom coming. Nobody did. But those economists who say today that the real estate boom has been justified by “fundamentals” have to explain why they weren’t able to forecast the high home prices we have today based on those fundamentals.
With the failure of anyone really to predict today’s high home prices, one may well conclude that no one can predict today whether a home-price bust is coming, or whether the housing market will land softly, or even is poised to resume its upward climb. That may be the right conclusion about our ability to forecast the markets.
On the other hand, there is another perspective on this colossal failure to predict. Maybe it doesn’t mean that no one can forecast, but instead that the high home prices today are just an enormous anomaly that will have to correct downward sometime, if not right away.
This has been the biggest housing boom in world history, and when one looks at a long-term chart of U.S. home prices, this boom stands out among the other price increases like the highest kite in the park. It certainly looks anomalous, and maybe it is. Moreover, home-price booms, and sometimes at least real estate busts, seem awfully persistent lately, so that it looks like we should be able to forecast them. The market for homes has become very different from the stock market, which is somewhat well approximated as a random walk.
Home prices have been going in the same direction for quite some time. According to the 10-city composite Standard & Poor’s/Case-Shiller Composite Home Price Index (which Karl Case and I, and now David Stiff from Fiserv, Inc. helped design, and is now traded on the Chicago Mercantile Exchange futures and options markets), the growth rate of home prices was negative (prices were actually falling) for four consecutive years: 1990, 1991, 1992 and 1993. Then, after a brief period of oscillation, home prices started accelerating. Prices increased every year from 1996 to 2004 and in six of the eight the rate of increase itself increased, to 19% in 2004. Home-price changes hardly look unforecastable.
The next thing that happened was home prices started decelerating, the rate of increase dropping to 14% in 2005 and then down to just 1% in 2006 (12-month change ending in November). The latest month-to-month data from S&P includes an even broader set of indices for 20 U.S. cities, and these show that prices are actually falling in 17 of the cities.
So, shall we conclude, since price changes appear to be so persistent, that we are in store for strongly negative growth in home prices for a number of years?
The trouble is, we haven’t seen really long and significant strings of price decreases in the U.S. since the first half of the 20th century. The consecutive-year home-price declines in the major U.S. cities from 1990-93 amounted to a total drop of only 8% from peak to trough. More recently, we have seen sharp reversals of sudden price drops. San Francisco home prices dropped 7% between 2001 and 2002, and then resumed a strong upward climb. London home prices dropped 5% between 2004 and 2005 and then resumed an upward climb.
A string of negative home-price changes has been underway in Japan for a long time. They came after a boom in major Japanese cities in the 1980s, culminating in home prices so high they were the talk of the world. Japan’s is the principal prior example we have of the aftermath of a spectacular home price boom, like the one we have just seen in the U.S. and other countries. After the peak in 1990, Japanese urban land prices in large city areas declined for 15 years, until prices ultimately fell by 65% by 2005. Japanese private residential investment as a share of gross domestic expenditure fell gradually with the urban land prices over the same 15-year period. In the early 1990s, construction remained at fairly respectable levels, feeding the supply of new homes and helping to bring down home prices further. But as home prices continued to fall, so too did construction, contributing to prolonged weakness in the Japanese economy.
Which post-boom scenario is more likely in coming years, that of the recent reversal stories in the U.S., U.K. and Australia, or that of Japan after 1990, or something in between? Do the recent declines in home prices in the U.S. mark a historic turning point?
Some short-run indicators have been interpreted as showing that the recent weakness in the housing market may be correcting upward. Notably, people took heart when the National Association of Realtors reported that, after declining for six consecutive months, seasonally adjusted existing home sales picked up slightly in October and November. But seasonally adjusted sales fell again in December.
The U.S. Census reports that the sales of new houses have been rising since October, and increased 5% between November and December. But the increase may be attributable in large part to unseasonably warm weather and sales incentives.
Although the CME housing-futures market is still relatively thinly traded, the prices there reflect the collective view of multiple investors, hedgers and speculators. The futures market still predicts home price declines in all traded cities over the next year, though modestly lower declines than in the recent past.
These are only short-run indicators, and they do not tell us a lot about the major correction in home prices that might be in store. The fact that home prices have risen so high relative to construction costs and other indicators suggests that home prices might fall back substantially in some markets — and maybe that is what is going on. But one can hardly be sure about whether and when it will happen. It could take many years for new construction to completely close the unusual builders’ profit opportunity created by high home prices, and many unpredictable things could happen over that time.
We are left with a deeply uncertain situation, but one in which it would seem that a sequence of price declines continuing for many years has some substantial probability of happening. Traditional finance theory has trouble reconciling even a semi-predictable sequence of price declines with basic notions of market efficiency. The situation we are facing is a reminder of the glaring inefficiencies and incompleteness of existing markets for residential real estate, and may be regarded as evidence that institutional changes will be coming in future years to fundamentally change the nature of these markets.
http://www.paperdinero.com/BNN.aspx?id=78
“The Most Trusted Name in Bubble News”
“The situation we are facing is a reminder of the glaring inefficiencies and incompleteness of existing markets for residential real estate, and may be regarded as evidence that institutional changes will be coming in future years to fundamentally change the nature of these markets.”
so if the RE market becomes more efficient, will this increase volitivity or decrease it?
skep (55)-
I think volatility will increase. Look at what more efficient trading systems and increased access to info have done in securities markets. The bid-ask spread has been greatly reduced, and what used to be minor moves in the past now roil normally-staid markets.
Mr. Shiller wonders why RE won’t behave like other markets. How can you chart- or predict- a market fueled by emotional and uninformed players?
Residential RE is sui generis. Maybe the eggheads can learn how to herd the cats, but they’ll never figure out how to lasso them.
What is the deal with HSBC???
Its chief economist has been warning of housing bubble and its induced recession since 2004.
They were the only financial firms (along with Economy.com) or any other media outlet pointing out that RE boom has no fundamental backing.
Now they are saying they have been purchasing sub prime portfolios since 2004???
They got into so much trouble with bad RE loan in 97 Asian financial crisis.
It doesn’t put its $ where its mouth is????
CC
“Count a third Tarheel alumna here. Although undergrad was a darker shade of blue…”
Isn’t this sacrilegious???? Dark blue to light blue??? I never heard anything so bizarre.
Clot,
Is this allowed?? Practiced often??
Clotpoll Says:
February 8th, 2007 at 12:08 pm
Mr. Shiller wonders why RE won’t behave like other markets. How can you chart- or predict- a market fueled by emotional and uninformed players?
Residential RE is sui generis. Maybe the eggheads can learn how to herd the cats, but they’ll never figure out how to lasso them.
I agree. Buying RE is packaged with marriage and having kids in our culture.
It is not buying a house, it is buying a home.
3 couples we know have been recently marriage or new parents have bought in 06. When I told them about the bust and fundamentals……
They responded, “we can’t live in a rental or apartment when we are married / have a kid.
I asked, “why?”. They say, “you just don’t.”
CC
I have a question related to HSBC.
You may have heard about the 6% savings offered by HSBC direct. I understand that this is FDIC insured. But what happens if the parent company gets into deep sh1t. What is the risk of opening a savings account with HSBC Direct?
Has anyone seen similar examples of companies going bust (although I dont think hsbc will file chapter 7)?
that should be chapter 11 ;-)
“We are left with a deeply uncertain situation, but one in which it would seem that a sequence of price declines continuing for many years has some substantial probability of happening.”
Chi, aka rocky mountain high.
Great article.
RentL0rd Says:
February 8th, 2007 at 12:25 pm
I have a question related to HSBC.
You may have heard about the 6% savings offered by HSBC direct. I understand that this is FDIC insured. But what happens if the parent company gets into deep sh1t. What is the risk of opening a savings account with HSBC Direct?
Has anyone seen similar examples of companies going bust (although I dont think hsbc will file chapter 7)?
RentL0rd,
It is FDIC insured. They gov’t will reimburst the first 100k only.
CC
Toll: Housing market taking bigger hit than feared
Thursday February 8, 11:13 am ET
High-end homebuilder Toll Brothers Inc. is estimating that it will take a fiscal first-quarter writedown of $60 million to $160 million amid a dampened housing market. It had earlier projected taking $60 million for the entire fiscal year.
The Horsham, Pa., company said it was hurt by cancellations and steep declines in revenues, backlog and signed contracts for the quarter that ended Jan. 31. Preliminary results show revenue of $1.09 billion, a 19 percent drop from the same period a year ago. Backlog is down 30 percent to $4.15 billion and contracts, at 1,027 units, are down 33 percent.
The company said it is monitoring several markets for potential write-downs.
The company also continues to cut its land holdings. Toll (NYSE:TOL – News) will announce final totals when it releases first-quarter earnings results on Feb. 22.
The company did offer some signs of encouragement that the housing bust has hit bottom. Robert I. Toll, chairman and chief executive officer, said in a statement that the pace of cancellations is starting to abate and that there was an uptick in demand in the first week of this month in some markets. However, Toll said, it was considered seasonal and expected.
http://biz.yahoo.com/bizj/070208/1414794.html?.v=1
Clot [42]
I was also referring to “the De Facto currency”.
In this area, even in this market renting does not always make more sense than than buying. Interesting to note that while the CA market is generally expensive to buy but rents are cheaper than NY. Any ideas why?
http://money.cnn.com/2007/02/07/real_estate/most_expensive_rental_markets/index.htm?postversion=2007020715
Most expensive rental markets
New York rents far surpass all other U.S. markets.
NEW YORK (CNNMoney.com) — New York City – and not just Manhattan – has by far the highest rents of any of the 52 major apartment rental markets around the nation, according to a report published Wednesday.
At year’s end, the average estimated monthly rent for all of New York’s five boroughs was $2,553, according to Marcus & Millichap, a real estate investment broker based in California. The average for the second most expensive city, San Francisco, was a comparative fire sale at $1,685.
New Yorkers – and everyone else – shouldn’t expect much better in 2007. Marcus & Millichap forecasts a 6.5 percent rise in the asking price of rents during the year in the New York and a 4.3 percent rise nationally.
Typical analyst?? Tell us now???
“Jefferies & Co. on Thursday lowered its rating on New Century Financial to hold on book-value concerns.
“While we acknowledge this has the hallmarks of a ‘downgrade at the bottom,’ we believe it is better to acknowledge our mistakes than compound a bad stock call with stubbornness,” analyst Richard Shane said in a note to clients.”
http://www.marketwatch.com/news/story/new-centurys-shares-punished-over/story.aspx?guid=%7B4C7297E3-B43C-43C0-BED7-C247367502FC%7D
btw, clot: my last year at Rutgers Cook College, they turned it into a *dry!* campus!!
When did that happen? How can you have a dry Ag Field Day?
The most interesting thing about Cook’s alcohol policy was a strict prohibition against beer balls. Kegs, can and bottles were all okay, but beer balls were strictly forbidden. I remember in the student handbook that the fine for getting caught with a beer ball was more severe than getting caught with a gun.
BC (66)-
LOL (I think). Meanwhile, Rome burns. Reds re-up Bronson Arroyo at 25M.
Speaking of re-up’s, here’s your chance for a KHOV, TOL, LEN “do-over”…heh, heh. Hey, if you liked ’em at early-January’s prices, they’re right back there today! On sale now!
Too bad that by July, none of them will actually employ anyone involved in the building of houses.
All disclaimers apply. Any strong recommendation to buy HB stocks must be coming from a person who should be adjudged as mentally ill and possibly dangerous to himself and others.
Renting (69)-
I could use a beer ball right about now.
Still lackadasical??? All the liquidity that has flowed into derivatives has provided a safeguard/protection, right???
“The perceived risk of owning corporate bonds rose from an all-time low after HSBC Holdings Plc, the world’s third-largest bank, said it had increased provisions for bad home loans.”
“The cost to protect against companies defaulting jumped the most in a month after London-based HSBC said it’s setting aside $1.76 billion to cover possible losses on U.S. mortgages, 20 percent more than analysts estimated in 2006. European stocks snapped five days of gains and U.S. equities fell for the first time in three days.”
“Credit-default swaps, contracts based on bonds or loans that are used to speculate on indebtedness, rose for the first time this month. The cost of the contracts had dropped 37 percent in the past six months as investor confidence soared.”
“Chief Executive Officer Michael Geoghegan said today he will shake up management and change lending policies.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPg8QsHwP0Uk&refer=home
What do the most expensive places to live all have in common? Come on…guess!
It is FDIC insured. They gov’t will reimburst the first 100k only.
I think it is 100K for every account holder. 200k on a joint account.
#Question on HSBC and FDIC?
Is the FDIC gurantee of 100K per account or per person? i.e. if a person has more than 100K in two different accounts. For example 100K in their name and 100K in the spouses name. Can they make two seperate FDIC claims if HSBC goes belly up?
As far as i know it is 100K per person. If the same person has two accounts with HSBC then only one is 100K insured.
http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html
Isn’t is ironic, we have gone from “there is no bubble” talk to discussions on fdic insurance??? I am not being sarcastic nor do I take this lightly. The s*it is starting to hit.
thanks pat.
If the same person has two accounts with HSBC then it is 100K insured across both accounts.
“Subprime has never been more levered — just as the housing cycle has peaked. Loan-to-value ratios have risen from about 78% in 2000 to 86% today.
Subprime has never been more dependent on the candor of borrowers. Low-documented loans have doubled to 42% of subprime loans over the last six years.
Creative loans — non-interest paying, option ARMs, etc. — represented nearly half of all loans made over the last 12 months. At the turn of the decade these loans represented less than 2% of total mortgage loans!”
http://www.thestreet.com/_googlen/newsanalysis/investing/10337747.html
I was told that HSBC was one of the world’s largest bank. They are not as well-known in the states, but they are hugh in Europe and Asia. I don’t think they will go bankrupt anytime soon, right?
Really appreciate input from anyone with more financial insight to this…
The FDIC and bankruptcy talk is premature at this point. If you are concerned about exposure, diversify your deposits across unrelated institutions. There are plenty of high-yield CD offerings in the market. However, don’t forget, high yields typically mean higher risk. Banks aren’t in business to pay you any more for your deposits than they need to. Personally, I don’t think it’s any coincidence that Countrywide, HSBC, Amboy Bank, or World Savings are trying to attract new deposits with high yield CDs and savings.
jb
Thanks for the voice of reason, Grim. Today’s news of the spread of subprime mortgage woes into “mainstream” banking is neither new (look at Washington Mutual’s last quarter), nor is it an indicator of 1929 redux. It’s just proof that bad banking is bad banking. Not every bank out there has exposed itself to massive and uncompensated mortgage risk.
We’re a long way away from utter financial collapse and the need to discuss FDIC policies and procedures.
Ok, so I have some savings in HSBC and some in ING. Most is HSBC though. I am trying not to be worried here but it’s tough…I cannot imagine that such a huge bank can collapse overnight…
Really good article. It directly implicates Greenspan !!!
Greenspans Cheap Money role in the US Housing Crash of 2007
http://www.marketoracle.co.uk/Article320.html
The crisis is entirely the work of Fed Chairman, Alan Greenspan, whose “cheap money” policy caused a speculative frenzy in the real estate market which sent home prices through the stratosphere. In fact, the bubble originated in 2001 when Greenspan lowered interest rates to a meager 1% and ignited a refinancing boom as well as a sudden up-tick in home sales. Now, after 17 straight interest rate increases, the bubble is quickly losing steam and the effects are being felt from sea to shining sea. Rest assured, the sudden downturn in the housing market is just the first gust from an impending tornado. By the end of 2007, America’s match-stick economy will look like the rubble strewn landscape of New Orleans 9th Ward.
The housing bubble has nothing to do with “market forces” or (Gawd help us) supply-and-demand. That’s all gibberish. Low interest rates provide a channel for pumping cheap money into the economy which inevitably creates equity bubbles. When Greenspan lowered rates to 1%, he knew that he was simply trading a technology bubble for a real estate bubble. Now, of course, he has retired before the wheels fall off the cartso he can avoid being blamed for the coming catastrophe.
NJGal (83)-
They won’t; remember, HSBC is reserving money against the anticipated defaults. Collapses occur when there’s no money to reserve.
no bank will fold. that was the old days
to much liquidity in the system to allow that
we’ve been down this road before.
stay calm, just fasten your seatbelt.
and this is an adult swiwm only.
While it’s unlikely we’re going to see bank failures (ala S&L), let’s not immediately rush to the opposite viewpoint and be so complacent that we disregard risk entirely.
Keep in mind we saw a bank failure earlier this month.
Pittsburgh Bank Closed; First Insured Closure Since ’04
A federally insured financial institution was closed down on Friday, the first such occurrence since 2004.
The Metropolitan Savings Bank of Pittsburgh was closed by the Pennsylvania Banking Department. The Federal Deposit Insurance Corp. was named receiver. The $12 million in insured deposits held by Metropolitan Savings will be taken over by Allegheny Valley Bank of Pittsburgh. About $1.2 million in deposits exceeded the FDIC’s insurance limit of $100,000.
Metropolitan’s office was expected to be open this morning as a branch of Allegheny Valley Bank.
This last bank to fail was Utah’s Bank of Ephraim in June 2004. The last major U.S. bank failure occurred in July 2001, when Superior Bank in Chicago was closed. Superior had about $1.8 billion in assets when it was shuttered.
If you are worried, simply withdraw some money and deposit it elsewhere. We live in NJ, there is a bank on every corner.
jb
That’s right…lay it all at Greenspan’s doorstep. Revisionism at its finest.
It’s not like Greenspan woke up one Spetember morning in 2001, took a hit of LSD and decided to sow the seeds of disaster.
What exactly would those here on the board have done in the face of shut-down financial markets, fear of another attack and the uncertainty that comes on the heels of a cataclysmic event that had no precedent? Maybe Greenspan can be blamed for not reining things in sooner once the economy was on firmer ground, but he cannot be blamed for his original impulse, which was absolutely correct.
Furthermore, 9/11 had its monetary policy predecessor in the “Asian flu” of 1998. In the space of hours, in a chain of events that threatened to spin out of control, world financial liquidity had been almost entirely choked off. Greenspan’s quick injection of liquidity into the breach (and the Fed’s quick reaction to Long-Term Capital Mgmt’s implosion) is widely credited with having staved off disaster. (BTW, Nouriel Roubini’s blog has a great recent post that describes the eerie parallels between 1998 and today…chilling stuff.).
Whatever one thinks of Uncle Al, pointing the finger of blame into the past doesn’t do a thing for anyone today. And it’s very unseemly to gang up on an old, defenseless man who- mostly- got things right.
“no bank will fold. that was the old days”
you’ve got to be kidding
we have a negative nat’l savings rate, a flat yield curve, and banks have been handing out loans to developers like there’s no tomorrow.
there is never a good reason to have over the FDIC limit in any account
“we have a negative nat’l savings rate, a flat yield curve, and banks have been handing out loans to developers like there’s no tomorrow.”
What (Really) Happened in 1995?
How the Greenspan Fed Screwed Up in the Mid-90s and set the stage for the Greatest Financial Bubble in the History of the World.
by Aaron Krowne
http://www.itulip.com/forums/showthread.php?t=292
I have a big problem with this in that We did upgrade the homes we lived in with better bathrooms, flooring, and kitchens as well as took care of any possible issues surrounding the house. We did manage to get slightly more than our neighbors with less hassle with the inspections when selling the last 2 homes in NJ however this did cause the neighbors to think their beaten down-un-improved house was worth just as much being they were next door to us. With people coming from outside the area looking at the proximity factor thinking the house next door is worth just as much. Im betting they did get a few dollars more because of proximity however the new owner would have to feel ripped off after seeing the differences internally of the homes if and when the neighbors see the inside.
Which goes to show another realtor scam when buying in a neighborhood that has been around for a while. They do thier comps based only upon house sizes, location, and property size. Forget the quality of the items that are in a home from one house to another.
I certainly understand why buyers are much pickier and its certainly because of the crap thats on the market which just got older and wasnt maintained or improved.
Thats weird how did my comments get insude someone elses info?
I have a big problem with this in that We did upgrade the homes we lived in with better bathrooms, flooring, and kitchens as well as took care of any possible issues surrounding the house. We did manage to get slightly more than our neighbors with less hassle with the inspections when selling the last 2 homes in NJ however this did cause the neighbors to think their beaten down-un-improved house was worth just as much being they were next door to us. With people coming from outside the area looking at the proximity factor thinking the house next door is worth just as much. Im betting they did get a few dollars more because of proximity however the new owner would have to feel ripped off after seeing the differences internally of the homes if and when the neighbors see the inside.
Which goes to show another realtor scam when buying in a neighborhood that has been around for a while. They do thier comps based only upon house sizes, location, and property size. Forget the quality of the items that are in a home from one house to another.
I certainly understand why buyers are much pickier and its certainly because of the crap thats on the market which just got older and wasnt maintained or improved.
Weird the guys comments ahead of mine must contain something causing the nesting.
as the regulars know i’ve been tracking about 100 properties since early Dec in the Chatham, Madison, Summit, Millburn, Maplewood and Westfield areas. About 12 have closed and sales prices are up. I’d say for the majority of them the last selling versus last asking prices ~5-7% less. it was a bigger gap than i thought to see lending credence to the fact that it really doesn’t matter what the buyer is asking it’s what a buyer is willing to pay and what it’s really worth. here’s a couple:
mls, last asking, sold price
2326401, $849k $800k
2330334, $599k, $540k
2336609, $735k, $670k
2333055, $585k, $500k
SG Says:
February 8th, 2007 at 1:59 pm
Really good article. It directly implicates Greenspan !!!
Greenspans Cheap Money role in the US Housing Crash of 2007
Post #46 …..
Also: Whatever one thinks of Uncle Al, pointing the finger of blame into the past doesn’t do a thing for anyone today. And it’s very unseemly to gang up on an old, defenseless man who- mostly- got things right.
It might have been a nessesity to inject some liquidity into the financial markets back then, but the spigot was left open for very long time – too many badly abused it.
On the side note: go to realtor.com, plug in Denver, and home price under 250K – see how many and what will turn up…. I was quite amazed with that #.
No wonder they are leading the nation in FK… Most of the houses under 200K are either in not soo good areas or outside in smaller towns, – but keep in mind – not soo good areas around Denver are NOTHING like not soo good areas around NJ….
They probably would be closer to towns like Somerville and Raritan.
But thousands of homes for sale is a bit too much….
Tick, what nesting? Your comments look fine to me.
I agree with home improvements adding value. In the old days, when someone added granite to their kitchens, it meant they really maintained/upgraded the rest of their house as well. Now, it means the owner has seen one of those ‘what-buyers-look-for-most’ shows/articles and just added the cheapest stone hiring the cheapest contractor (if at all).
I have seen some houses where only the center island was granite – just shows desperation on the sellers side.
I didn’t close the html tag.
Sapiens @ 90 you have dup left open quotes and the nesting.
oops, thanks
Don’t want to get in too deep, don’t have the time. Greenspan did the right thing back then. We were in the midst of a recession, a dot com bust and 9/11, all wrapped up in one. We were on the verge of a major liquidity[lack of] problem. Remember, big AL always said the fed is not there to prevent bubbles but react accordingly. He was never proactive rather reactive. There was nobody complaining when the ffr was lowered to 1%. As a matter of fact, Greenspan was praised for his actions. To this day, I believe he [the fed] did the right thing in lowering rates. Did they go too far??? Did they err in putting the brakes on too late??? That’s another debate.
More troublesome than this, is the yen carry trade. Do we blame Greenspan for the BOJ’s actions/inactions??? Are the hedge funds, yen carry, more to blame, [than the fed], for the excess/easy credit in the RE market??
Do we have any updates on the war between Ivy and Toll?
Crude oil prices spike $2 to near $60 a barrel. More soon.
cnn.com
From MarketWatch:
Freddie Mac CEO defends GSEs against critics who want them smaller
WASHINGTON (MarketWatch) — Freddie Mac (FRE) Chairman and Chief Executive Officer Richard Syron mounted one of the most vigorous defenses to date on Thursday of the role his company and rival Fannie Mae (FNM) play in the U.S. housing finance market.
Syron said the housing government-sponsored enterprises, or GSEs, will become even more important in the housing market as other sources of liquidity shy away because of rising foreclosure rates.
“If the extremists in this debate get what they want, the results will bleed the GSEs dry – death by a thousand restrictions,” Syron said in Orlando, Fla.
He predicted that 250,000 U.S. families could lose their homes this year to foreclosure
More at link above
no bank of any interest will fold.
I stand by those words.
Greenspan kept rates too low too long, and for that he is rightly blamed. He should havs started tightening in June of 2003, not 04.
By the way, if the overall market traded like New Century today[down over 30%], you’d be hearing CRASH!!
“Jim Cramer’s Stop Trading! Buy Countrywide”
“Jim Cramer would still be buying Countrywide (CFC – Cramer’s Take – Stockpickr – Rating) even as the subprime lending business goes sour, he said Thursday on CNBC’s “Stop Trading!” segment.”
http://www.thestreet.com/_yahoo/funds/stoptrading/10337828.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Funny, I was just driving down Washinton Ave, in Jersey City and there is a high-rise being constructed. Not sure if it is another gold coast condo or office building. A sign outside said “This project is finances by HSBC Bank. The worlds local bank”
Toll and Trump are building high rises within blocks of each other. There’s got to be atleast 5000 units coming on the market in and around excange place and pavonia newport in Jersey City. Good thing that Trump wears a wig, else he’d be pulling his hair out now.
the solution to this lending mess is not more gov’t. it is to let people reap what they’ve sown
#94 Richard, if you had waited you wouldn’t have to buy in Maplewood and deal with the oranges and irvington.
You will get a nicer property in union county and pay less taxes than you pay in Maplewood.
I dont think bob toll and don trump are
to worried.
thats what they have staff for.
and trumps busy in AC doin a deal
with Steve Wynn anyway.
Watch for that blockbuster
Mortgage debt hit by HSBC sub-prime default news
NEW YORK (MarketWatch) — News from HSBC Holdings and New Century Financial of an increase in sub-prime mortgage defaults sparked heavy selling of some types of mortgage-linked securities.
There were also reports of heavy selling of home-equity collateralized debt obligations, traders said. These are structured finance products, similar to a mutual fund, in which owners buy a stake in a pool of mortgages or home-equity loan products.
Rod Dubitsky, a fixed-income analyst at Credit Suisse, wrote in a research note that his agency is reviewing for possible downgrades 24 asset-backed securities that were created from sub-prime home-equity deals in 2006, a vintage year for such deals.
New York University economist Nouriel Roubini in his blog said the rate of sub-prime defaults and foreclosures is rapidly increasing.
“The number of sub-prime lenders going belly up increases every week and even those big ones that have not closed shop are showing increasing signs of losses, retrenchment and/or willingness to sell their operations,” he wrote.
“The political storm over ‘predatory lending’ is gaining strength,” according to Roubini. “The risk of serious litigation and class action lawsuits over predatory lending is increasing.”
http://tinyurl.com/2wco7r
“stay calm, just fasten your seatbelt.
and this is an adult swiwm only. ”
Well, that means I need to get my flowered bathing cap and one piece:) I so loved those days at the pool, watching the old ladies swim in those caps, never even putting their faces in the water…
I will remain calm for present!
tomorrow’s another day. perhaps
it will be all about oil
or lets see. how about the metals.
after all cnbc and cramer go with “the
trend is your friend”
watch the futures tonight .
Here is Nouriel Roubini’s blog site. Some pretty heavy discussions on today’s sub-prime HSBC news
http://www.rgemonitor.com/blog/roubini/
“watch the futures tonight”
It was a hell of a ride today.
Orleans joins fellow builder Toll in Thursday housing news blues
http://philadelphia.bizjournals.com/philadelphia/stories/2007/02/05/daily40.html
which montclair rest. is hosting the
event.
Re: HSBC going belly up
HSBC is the largest carporation in the world in terms of Assets ($1.74 trillion Vs Citigroup $1.63 trillion). It reported record $21 billion profit before taxes in 2005. I don’t think some losses in their mortgage side is going to to affect the bank.
Where is Richard eloped? I do’t see his comments now a days.
Correction:
Where is Richard vanished? I do’t see his comments now a days.
Homes: Stung by the slow market
Dave Corey has been flipping houses for years. But now he’s stuck holding.
By Les Christie, CNNMoney.com staff writer
February 8 2007: 3:41 PM EST
http://tinyurl.com/2ml2wp
I know you know better, but everyone chill out. No one is going bankrupt, and no one is losing their shirt. If this craters, you are going to know well in advance. Ignore the headlines – READ – look for substance – look for context.
If the economy was weak, these pieces of information would be a buzzsaw. However, we are still on target for 2008. Nothing in the last few days have changed that…….the clincher will be China, Japan or some other party pulling liquidity. The only evidence we have is the second {WaMu}, third {HSBC}, and lower tier banks were making mistakes —- and they knew it — nothing out of the ordinary.
Show patience….and monitor a series of events that reflect a pattern over months.
ChiFi as lurker. Anna Nicole buys the farm.
Two more signs of the apocalypse.
AntiTrump: just in downtown JC alone (in and around Exchange Place area), there are more than 25,000-30,000 units either under construction or on the books to be built near term. Hov, Toll, Pulte, Trump, Metro Homes, on and on.
Most are of questionable quality, high taxes, high-density complexes. It’s gonna get very ugly! I’ve already seen the ask prices on new construction in some cases drop from $650-700/sq ft down to $425-500sq/ft; and that’s without a lot of this supply even coming on-line yet.
I’ve also seen “incentives” of 1 year with no mortgage payments, no taxes for a year, 2 yr’s free maintenance, free parking spaces (previously going for $30-40k), etc.
Those who bought their condo at top dollar and need to re-sell into this market are going to be competing with brand new units, more amenities, at substantially less than their current mortgages, as these builders unload…
Steve
https://www.ldcc.com/ldccws5/Login.aspx
Lenders Direct Capital Corporation Announces Layoffs, Closure of Wholesale Lending Operations
Lake Forest, California based nonprime mortgage company Lenders Direct Capital announces the closure of wholesale lending operations.
CEO Michael McQuiggan cited the lack of investor demand for their loan products and the current state of the US nonprime lending industry as factors in reaching the decision to cease wholesale originations effective immediately.
Rent Vs Own calculator from
“Center for Economic and Policy Research”
http://www.cepr.net/calculators/hb/hcc.html
What people need to consider is that these mortgages are not diminishing like in europe and asia, in the sense that when you take a loan out they do not recalculate your interest everymonth based on the principal you pay instead they ammortize it to the life of the loan making more money, I really hope banks start thinking about it so people can take advantage of this and tax benefits, otherwise property taxes like in NNJ will pretty much kill the deal, wuts the point in me paying 12000 dollars in property taxes, 6000 dollars in maintenace and some other stuff that goes up in insurance and stuff while I can rent happily without worrying about repairs and let the interest pay for itself for rent.
Amid Slump, Real-Estate Agents
Hang Up Their Blazers
By James Hagerty and Anjali Athavaley
From The Wall Street Journal Online
Selling homes has turned into a dog-eat-dog business, so Patrick Logue decided to work with some friendlier canines.
Mr. Logue quit his job as a real-estate agent near Fort Myers, Fla., in December. Then he set up shop as a franchisee of the dog-training chain Bark Busters. So far, he says, “I have zero regrets.”
The long-awaited shakeout among real-estate agents is finally happening — much to the relief of those who are sticking with the business and prefer a bit less competition.
When David Lereah, chief economist of the National Association of Realtors, addressed the group’s convention in New Orleans in November, he got one of the biggest bursts of applause by predicting there would be fewer Realtors around in a year.
http://www.realestatejournal.com/buysell/agentsandbrokers/20070208-akst.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage
Subprime Time Bomb
With HSBC and New Century Financial suffering losses from subprime borrowers, which other mortgage lenders face an unpleasant reckoning?
by Maya Roney
http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070206_488329.htm?chan=top+news_top+news+index_top+story
NJ Home (131)-
That may be the longest run-on sentence in history.
“When David Lereah, chief economist of the National Association of Realtors, addressed the group’s convention in New Orleans in November, he got one of the biggest bursts of applause by predicting there would be fewer Realtors around in a year.”
Did they pass out the pom-poms in anticipation of this remark????