From the Baltimore Sun:
First-time homebuyers are putting less down
Does anybody remember the old days when homebuyers actually made sizable down payments – often 20 percent or more – when they bought their first house?
New national survey research reveals just how dated and quaint that concept has become in today’s market, thanks to rocketing home prices that have far eclipsed buyers’ incomes and savings.
From mid-2005 to mid-2006, according to a statistical sampling of a representative group of 7,548 purchasers, nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. About 30 percent put down 10 percent or less, and 20 percent put down 5 percent or less.
The research was conducted by the National Association of Realtors, using information on home transactions supplied by Experian, a major credit and realty data firm. The median down payment of first-time purchasers, according to the study, was just 2 percent. In other words, the median-sized mortgage for first-timers represented 98 percent of the home purchase price.
The highest loan-to-value ratios for first-time buyers were in the South, where the median mortgage amount was 100 percent of the sale price. In the West, the median was 99 percent, in the Midwest 98 percent, and in the East, 96 percent.
…
Although all these minimal-down plans have been highly successful in pushing the homeownership rate in the United States to record heights – currently just under 69 percent – they’ve achieved this in an atmosphere of steadily appreciating home prices and values. The possibility of low or no appreciation hasn’t been a concern for buyers using minimal down payments in most parts of the country since the mid-1990s. That’s because if you could obtain a loan that got you into a house with almost no money down, there was no problem: Appreciation – sometimes at double-digit annual rates – would take care of you from then on.But that’s no longer the case. Buyers who made small down payments in 2005 and 2006 face a starkly different prospect: They started with minimal or no equity, and they might still be in the same position. Worse yet, they could be temporarily “upside down” on their mortgages, with a principal balance greater than their current home value.
The unknown about minimal down payment loans is how they perform in flat or depreciating market conditions. People who bought in hyper-appreciating markets could be vulnerable financially if they have to sell on short notice because of a job transfer or they can no longer handle the monthly payments.
Bottom line: Leverage in real estate slices both ways. A minimal investment can produce impressive returns if the appreciation tide is rising. But it can also expose you to a negative equity situation when the tide recedes.
Really, not many people ages 21 to 29 have 80k in the bank for a down payment. Not to mention closing costs and reserves. Actually, most people in that age group have chock full o’ debt. A friend of mine is 29 yrs old, lives and works in NYC, makes decent money. His rent which he splits with a roommate is 3200 a month. No savings, now going back to school to get a masters degree with the hopes of making more debt..uh I mean money…
Calm Before and During a Storm
http://www.nytimes.com/2007/02/09/business/09credit.html?_r=1&oref=slogin
High on Mr. Geithner’s to-do list is understanding and monitoring the $26 trillion credit derivatives market … the fastest-growing financial market there is. Its explosive growth has greased the wheels of the global economy, increasing liquidity, spreading risk and minting money for Wall Street along the way. But it has surged at a time when volatility has been low, debt has been historically cheap and defaults have been virtually absent. When this market gets tested, no one knows for certain how it may react.
“Even the heads of some of the world’s biggest banks seem overwhelmed by the size and complexity of credit derivatives. “It makes my head swim,” said Kenneth D. Lewis, the chief executive of Bank of America.”
Regulators struggle to imagine what the shock could be, but do know that the reaction will be far different from crises of the past. When Long-Term Capital Management tottered on the brink of collapse in 1998, the credit markets in the United States were controlled by such a small number of institutions that the New York Fed had to make calls to 14 Wall Street banks to try to resolve the crisis. Today, the number of institutions would be vastly higher.
Central to the report’s findings were shocking weaknesses in the way credit derivatives were being assigned and traded around without any sense of who owned what. The so-called “assignment issue” was simple: credit derivatives were negotiated by two parties, say JPMorgan and Goldman Sachs. But banks were “assigning” the contracts out to others — like hedge funds — without telling each other. It was a little bit like lending money to a friend who is really rich who in turn lends it to her deadbeat brother and fails to mention it.
bad news from london on this HSBC.
tough going
Anyone up for helping to create/manage a NJ real estate wiki?
jb
– Ventana Grande!
But think about the pay increase of getting the masters example ( Im 27 )
ASN/BSN 60K
MSN 100-120K
One of these I can afford a house once of these I cannot, still cannot afford Fort Lee house either way but that is because I am not an MD.
Some HSBC humor from Mr. Ritholtz.
http://bigpicture.typepad.com/comments/2007/02/mortgage_tart_w.html
I’m finally understanding who’s buying the sloppy seconds. Took me 8 months, because was never good with musical chairs.
Now I realize they’ve been parked in those places least likely to think they own them. A lot of security-conscious folks who think a reliable Camry is parked in their driveways actually have a 1999 Ford Focus instead…and none of the recalls were taken care of.
HBSC isn’t the only company that needs to do some revaluing. If I were the FSA signing off some of these pension valuations over the next 8 months, I’d be taking a hard, long look at those trust statements and providing detailed notes to the auditors.
BTW here is my comment to a friend about NY and NJ markets
My parents both worked, one had a masters, and they lived in E Npt and bought a house. Now look at all the new neighbors they all have masters degrees
So North shore of LI has gone from Masters prefered to 2 masters required. Well back to school for me
And the ABX continues to slide..
From the FT via MSNBC:
http://www.msnbc.msn.com/id/17056671/
Investors in mortgage bonds reacted bearishly on Thursday to news that HSBC and New Century Financial faced bigger-than-expected difficulties with their portfolios of loans to US borrowers with weak credit.
They pushed a key credit derivatives index tracking credit risk on sub-prime mortgage bonds sharply higher, indicative of a fall in the value of underlying mortgage-backed securities. The ABX index for bonds rated BBB- widened more than 100 basis points to a record above 750bp.
“We are sharply lower on the back of HSBC [and] New Century,” said Alex Pritchartt, an ABX trader at UBS.
From Bloomberg:
Subprime Mortgage Bond Risks Surge, Index Suggests
The perceived risk of owning low-rated subprime mortgage bonds surged today after the two largest U.S. lenders reported growing problems stemming from the loans, an index of credit-default swaps suggests.
An index used to create swaps based on 20 BBB- rated bonds sold in the second half of 2006 and consisting of home loans to the riskiest borrowers fell 1.7 percent to about 89.05 today, the lowest since it was created Jan. 18. Before today, the so-called ABX index was down 10 percent since its introduction.
…
The ABX index’s level means that investors must pay about $728,000 per year to protect $10 million of bonds against default when using the contracts, according to Deutsche Bank AG. Dealers set premiums at $389,000 when launching it last month. They’ve increased 13 out of the 15 days the contracts have traded.
You can’t make up some of the amazing true stories of this subprime collapse. Here’s the story on MLNA’s spectacular crash-and-burn, which was actually precipitated by MISPRICING “A” PAPER (of course, the A-loans were a sop to MLNA’s sales force, whose activities were crimped when the company had to tighten qualifying standards on their subprime paper):
http://www.mlnusa.com/news_detail.asp?article=62
So, what’s a little $600,000,000 math error among friends?
The guys who made the math mistake must be a product of NJ high schools.
“That’s because if you could obtain a loan that got you into a house with almost no money down, there was no problem: Appreciation – sometimes at double-digit annual rates – would take care of you from then on.”
Bull markets turn idiots into geniuses. Leverage is great when its working. When its not, go blame someone else; the dot com analysts, the NAR,the lending institution, etc…, even plead for a bailout. Botttom line, you played the game and it worked for awhile. However, there was one major problem with this game, it was not your ball. Now the ball is taken away. What to do?? Just suck it up and start to take control of your situation.
Clot [11],
……but derivatives will protect us.
BC (13)-
Yeah, Goldman Sachs has got my back.
I’m beginning to think that a more reliable- and properly disclosed- loan can be obtained from “Johnny Kneecaps” down the corner.
With regard to the headline of this post. Please see some of my earlier post with my anecdotal observations, I am finding buyers with 100% financing are the only buyers we have.
KL
Jim,
((Anyone up for helping to create/manage a NJ real estate wiki?)))
Can you explain a little?
“((Anyone up for helping to create/manage a NJ real estate wiki?)))”
KL,
I was wondering the same.
Weird, but true:
Last night, I go to my gym. Big, modern place with a wall of TVs… all tuned to different channels.
A mob of forty people- three deep- around CNN, watching Wolf Blitzer talk about Anna Nicole…like he even knew who she was three hours earlier.
Next to Bloomberg, just me and some 70+ geezer, watching the subprime trainwreck.
Sign o’the times.
I think Grim is trying to lure us into a drug deal.
From The Record
Towns to Corzine: Appeal housing case
The League of Municipalities attempted to put pressure on Governor Corzine on Thursday, asking him to appeal a court decision that voided the formula towns use to calculate the amount of affordable housing they need to build.
…
The ruling could require 120 towns statewide to revise their plans and possibly build more housing. About 40 municipalities in Bergen County, eight in Passaic County, and others in Morris and Hudson counties would be immediately affected by the court ruling. To complete the formula, each town has spent thousands of dollars on planners and attorneys.
More at link above
Rich
Clotpoll: your post about only you and the 70+ geezer watching subprime fiasco and the majority more interested in Anna Nicole simply reassures me that most of the population just follows what everyone else does with money.
Re post #1
Thatbigwindow,
Keep in mind that lots of purchasers don’t need to come up with $80K because they don’t live in NJ. Off the coasts it’s down payments of $25K-$40K people aren’t coming up with.
At the same time, of course, they aren’t defaulting on $300K loans, but $100K to $150K ones.
Yes, there are people who can’t come up with $1K a month to put a roof over their heads.
Lindsey: You don’t say?
From Marketwatch:
Poole sees 3% growth in ’07, but housing ‘not out of woods’
The economy should expand at a moderate pace around 3% over the four quarters of 2007, said William Poole, the president of the St. Louis Fed bank on Friday. “As I step back and survey the economic landscape, I see an economy that appears to be transitioning quite nicely from last year’s slow patch, to more sustainable growth,” Poole said in a speech prepared for delivery to the AAIM Management Association in St. Louis. Poole seemed upbeat on inflation, saying it was headed in the right direction and should fall into a “reasonable range” this year. But Poole said he would fight for higher rates if core inflation “seems to be settling at a rate above 2%. Poole also said more rate hikes may be needed if growth in 2007 comes in stronger than expected.
“Really, not many people ages 21 to 29 have 80k in the bank for a down payment.”
Ha – as if 80K is even a 20% downpayment around here anymore!
“The median down payment of first-time purchasers, according to the study, was just 2 percent.”
well, looks like we have several million homeowners underwater on their mortgages
right now, this is manifesting itself as a subprime problem, but if we enter recession, who knows how bad it could get
Has anyone else noticed the lack of trolls lately?
jb
This will surely have an effect on the RE market as there is anywhere between $700 billion and $1 trillion in ARMs scheduled to reset this year. If you have to refinance your loan and you a marginal borrower…its going to be tough getting a new loan with terms you like.
HSBC Holdings PLC’s decision to change course in the U.S. subprime market has made life even more difficult for small and midsize originators, a segment that has already been under considerable stress….The pullback by a player of HSBC’s size has brought those constraints to a new level of intensity…All told, he has “never seen such rapid tightening,” Mr. Thaw said. “It’s reminiscent of the mid-1980s” when Resolution Trust Corp. was liquidating thrifts…..”Where they used to allow 100% stated financings with a 580 FICO score, they are now requiring a 620 score for 100% LTV,” he said. “With a 580 now, you can only get 90% LTV.”
http://www.americanbanker.com/article.html?id=20070208RB02B8N9&from=home
“Has anyone else noticed the lack of trolls lately?”
repo guy came for their computers
I had to re-read this to make sure I got it right:
“nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. About 30 percent put down 10 percent or less, and 20 percent put down 5 percent or less.”
Another way to say this is “about” 0% put down 10% or more. So maybe a handful of people out of the 7,548 sample.
Some of this could be due to lack of savings while some (I believe very few)are due to an actual investment decision; ie do I pull my $ out of something that’s earning 8% or do I take out an adj 4% mortgage whose interest is tax deductible.
James Bednar Says:
February 9th, 2007 at 8:51 am
“Has anyone else noticed the lack of trolls lately?”
Chicago still shows up from time to time.
I keed
Rich
“Has anyone else noticed the lack of trolls lately?”
Where is BIA??? Off to chart study class???
Jb,
Please check your email.
Isn’t it tought to evict a deadbeat renter; you have to give them like 6 months notice before you can actually force them out?
What’s the timeframe for deadbeat homeowners? I wonder how many people are just going to give up and stop paying their mortgage, just say screw it, I can’t make the pmts after adj rate went up so I just won’t pay anything and after a few months of free living I’ll move on and deal with future credit problems later on, pass it on to my kids… the gov’t does it, why not me.
“Some of this could be due to lack of savings”
Yeah, like all of it. I remember buying my first house in NJ when I was 24. The house cost 154k (a fortune then to me and my husband) and we couldn’t come up with 20% to put down. We coughed up $15k for the down payment and my father gave us 5k of that. Not like we were slackers or anything. Both working in our first jobs out of school making a whopping 24k (me) and 38k (him). Anyway I remember getting financing was tough even with perfect credit. No talk of 100% financing and we were stuck with PMI for a while.
Isn’t it thought to evict a deadbeat renter; you have to give them like 6 months notice before you can actually force them out?
Actually for renters it is as fast as 60 days – after you are one month late you are officially in the breach of lease contract and apartment owner can apply for eviction – just happened to one of my neighbors….
Home owners – I think the fastest they can get you out is 6 month…. because Foreclosure is the fastest way, and homeowners usually initiate bankruptcy – which protects them from eviction – so sometimes they get up to a year or more free ride – they still end up in foreclosure:
Usually after bankruptcy you hardly can get better job than before, so the problem is not solved in the first place.
As I said – it is time to make home loans like Student loans – can never be eliminated through FK or bankruptcy. Even if you are evicted and house sold at FK auction if it was sold for less than loan value – you still forever responsible for remaining balance…. That will take care of bubbles fast.
Of course it will kill small business in US – according to http://www.census.gov 90% of small businesses were started with Home Equity Loan in the last 15 years.
If you remove get out free card, people would be a lot less risk adverse and therefore small businesses will decline.
So it will never be done.
“Actually for renters it is as fast as 60 days – after you are one month late you are officially in the breach of lease contract and apartment owner can apply for eviction -”
Al,
This may have been the case in your example. However, try evicting a family in the middle of the winter. It could take over 6 months.
“As I said – it is time to make home loans like Student loans – can never be eliminated through FK or bankruptcy.”
while it’s frustrating to see profligate spenders use bankruptcy to their advantage, for every 1 of these people there are 10 who end up in bankruptcy due to illness, layoff, etc.
our bankruptcy system encourages much more beneficial risk taking than moral hazard, and forgives the debts of many more sympathetic debtors than scam artists
if anything, the recent tendency to expand the scope of debt that can’t be forgiven in bankruptcy is alarming, because it pushes us toward the less dynamic insolvency systems prevalent in Europe
Norhern NJ has the highest rate of autism in country. Ratio is 1 in 101.
Source NPR
You can get a tenant out in one day, via the “Oklahoma eviction”. All you need is a 2-3 big guys, baseball bats and a police truncheon to break down the front door.
After gaining entry, all the tenant’s items are thrown out windows, doors, etc. Then the home is sealed shut with padlocks. Very tidy.
This is the common eviction technique where I come from.
#27 James Bednar Says:
I noticed the lack of trolls too. Pity, since I was warming up to whatishisface.
Anyway, there’s only as much hype you can try to generate when the facts are staring you in the face. I think the general buying public is more aware of the Real Estate situtation to be buying snake oil from these guys. That’s not to say there are still people oblivious to any economic data.
Clotpoll Says:
February 9th, 2007 at 9:39 am
You can get a tenant out in one day, via the “Oklahoma eviction”. All you need is a 2-3 big guys, baseball bats and a police truncheon to break down the front door.
After gaining entry, all the tenant’s items are thrown out windows, doors, etc. Then the home is sealed shut with padlocks. Very tidy.
This is the common eviction technique where I come from
After that the “evicted” tenant would have lawyers line up and offering him money for the right to represent him/her……
#41 And with Richard slowling moving both his feet to one boat, we are lacking debate here.
Richard can you go over to the other side of the fence till a few trolls show up?
This may have been the case in your example. However, try evicting a family in the middle of the winter. It could take over 6 months.
Friend of mind owned an apt in Fort Lee during the last boom. He had a deadbeat renter, single mom and teenage son. The renter told the judge that if they get evicted, they have to go to a homeless shelter. And the judge gave them 6 months to move. They basically stayed rent free for 6 months.
I think it is diffcult to evict tenants with school age children in Jersey.
CC
“HSBC Holdings Plc and New Century Financial Corp. may end up giving stock and bond investors a renewed appreciation for risk.”
“In the credit-default swap market, an index based on 20 bonds rated BBB- and backed by subprime loans fell 2.3 percent, according to Deutsche Bank AG. The decline made swaps linked to the ABX index, created on Jan. 18, more expensive.”
“Loan defaults may weigh on more financial companies. Units of H&R Block Inc., Countrywide Financial Corp., Merrill Lynch & Co., Washington Mutual Inc. and Wells Fargo & Co. are among the biggest subprime lenders, as ranked by National Mortgage News.”
“U.S. homebuilders ought to be on the mend by now, based on the industry’s stock-market performance. The latest results at Toll Brothers Inc. tell a different story. Orders at the Horsham, Pennsylvania-based company sank 33 percent in the first quarter, which ended in January. Revenue from home construction dropped 19 percent.”
“Toll, the largest U.S. builder of luxury homes, isn’t an isolated example. Orders at D.R. Horton Inc., the country’s biggest homebuilder, fell 23 percent during the three months ended in December. At Pulte Homes Inc., they sank 34 percent.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3ybthdCPbCw
JB, about NJ RE wiki –
How about we just add a RE section to the mother wiki:
http://en.wikipedia.org/wiki/New_Jersey
Although of course the NJ RE spin machine can reach it too
Getting out whild the getting is good:
Susan Schmidt Bies submits her resignation as a member of the Board of Governors, effective March 30, 2007
http://www.federalreserve.gov/BoardDocs/Press/other/2007/20070209/default.htm
NJrebear: Our autism spectrum epidemic is frightening. The spread potential and true cost over the next century is completely shoved under the rug.
Re #1
No wonder why your friend can’t save money. His problem is where he made his choice to live. He rents in NYC. If he wants to start saving money for a downpayment on a house, tell him to move out and share an apartment in the suburbs of NJ for 1/2 of what he’s paying.
I wonder what the homedebtor response is gonna be (maybe digging their heels in a little more):
“Anand Ramanathan was approaching the gas station where he normally fills up when he saw them, people dressed as dollar bills holding signs that said ‘Free Gas.’ ‘It’s a great thing, really,’ said Ramanathan, who chuckled at his good fortune as gas streamed into his car’s tank.”
“The gas giveaway, it turns out, was Beazer’s kickoff to markdowns of another variety. Starting today and continuing through Sunday, the Atlanta-based company will give people who buy a Beazer home in New Jersey the opportunity to buy an upgrade such as a home theater, gourmet kitchen, finished basement or sun room for $1.”
I was surprised by the autism report when I heard on NPR. Considering that NJ has a lot more diversity than the rest of the country – the gene pool is more varied, I presumed NJ should have less occurence of autism.
But then my thinking is based on the unproven theory that Genetics is the main explanation of autism.
If anyone takes offense to my assumptions – I apologize!
From The Record
New Jersey has highest rate ever documented in U.S.
One in every 94 children in New Jersey has autism — the highest rate ever documented in the United States. For boys, the rate is one in every 60.
…
The studies published on Thursday include the entire spectrum of autism disorders. They were based on a review of health and educational records for 8-year-olds in 2000 and 2002. In New Jersey, the records of nearly 30,000 children — all the 8-year-olds — in Hudson, Essex, Union and Ocean counties were culled, yielding 295 children with autism in 2000 and 316 in 2002. These counties are “very likely to be representative of the entire New Jersey-New York metropolitan region,” Zahorodny said.
The New Jersey Autism Study found a rate of one in 101 in 2000, and one in 94 in 2002 — a difference that was not statistically significant, he said. The rate for boys went from one in 68 in 2000, to one in 60 two years later, while for girls it went from one in 233 in 2000, to one in 250.
A new study, funded by the New Jersey Council on Autism, is to examine the rate in 2006.
The high rate of autism in New Jersey was not caused by families moving to the state, Zahorodny said. Researchers checked birth certificates and found that 84 percent of the children with autism were born here, a higher rate than in other states.
The higher rate among boys — found in all states studied — confirmed previous studies. The difference in the rates among whites, blacks and Hispanics was not significant, Zahorodny said.
…
New Jersey’s rate is the highest among 14 states studied. Researchers don’t think that necessarily means more children here are born with autism. Rather, there is more awareness, better identification and better record keeping.
More at the link above
Rich
I wonder how many [homeowners] are just going to give up and stop paying their mortgage, just say screw it
During the oil patch meltdown in Texas, many people with negative equity simply mailed in their keys to the bank. If the monthly rent payment for a comparable home is less than the mortgage payment, what is the point in making a bigger payment if you have negative equity? Since most recent buyers didn’t make a down payment, they really don’t have much skin in the game anyway.
Anyway, what happens if you walk away from a non-recourse loan? Of course your credit will take a hit, but do you need to declare bankruptcy? Does the lender just take the house and that’s it?
RentLord, if genetics were the cause, would the rate of incidence itself be increasing so rapidly?
From an economic perspective, I was reading a detailed paper out there by a professional in Philly, who was studying the effects of mass lead poisoning of children. It studied the correlation to adult self-medication (drug abuse) after childhood lead poisoning, as well as crime rates in areas of continued lead poisoning. Schools in inner cities with extreme lead in the water fountains remain open. The children test way high, and it goes on. HUD allocated some tiny amount to a paltry little number of towns recently for some remediation.
There is no incentive to help or fix the kids, because the problem can be easily passed on to society at large. Classic case of public goods.
So even when we know the cause, we don’t always fix the problem. What really helps focus us is when the long-term cost is quantified and pre-funding of long-term cost is forced. You’d better believe representatives would start looking for a solution. For example, if it would cost the state of New Jersey $X billion dollars annually by 2020 to deliver special education, services and long-term care to those thousands of children with autism, then Y portion of tax revenues would need to be allocated now to fund the infrastructure required 10 years from now.
Unfortunately, it doesn’t work this way.
Yeah, that’s kind of weird RentLord…I just looked it up and there was an article saying that while genetics was likley involved, other environmental factors probably contribute – anything from food allergies to vaccines. They just don’t know.
Don’t these things seem more prominent now? I didn’t know anyone with an autistic kid growing up. Is it that we are better at diagnosing or are we really somehow causing all this stuff?
I was surprised by the autism report when I heard on NPR
I was surprised by the autism report when I heard on NPR it?
Rentl0rd,
My theory, which could be totally wrong, is that it has more to do with better health care in Northern NJ, which means better diagnosis. A child in the rural south might just be considered “slow” or a “little off”, but in NJ is diagnosed as having autism
Have the Hedge Fund vultures begun to circle?
“Three New Hedge Funds Banking On Housing Bubble Burst
February 8, 2007
A California firm has launched a trio of hedge funds poised to cash in on the burst of the real-estate bubble.
Lahde Capital, based in Santa Monica, has recently unveiled U.S. Residential Real Estate Hedge I, II and V. All three funds utilize the same strategy—shorting the riskiest tranches of sub-prime mortgage securitizations—but with differing levels of leverage, topping out at five times leverage.
“The conditions that led to the mass proliferation of sub-prime mortgage underwriting have all reversed,” explains fund manager Andrew Lahde. “We are now in an environment where it is virtually impossible to profitably underwrite sub-prime mortgages.”
Increased delinquencies and foreclosures will negatively impact the lowest-rated tranches of mortgage-backed securities. “The riskiest pieces of these securitizations can be wiped out entirely in a situation that is even moderately different from the goldilocks environment we have lived in for the past six years,” Lahde said.
The funds charge a 1% management and 20% performance fee, with a $250,000 minimum investment requirement.
“
Take your home equity and run
http://biz.yahoo.com/brn/070208/21029.html?.v=1&.pf=real-estate
RentL0rd Says:
February 9th, 2007 at 10:24 am
I was surprised by the autism report when I heard on NPR. Considering that NJ has a lot more diversity than the rest of the country – the gene pool is more varied, I presumed NJ should have less occurence of autism.
But then my thinking is based on the unproven theory that Genetics is the main explanation of autism.
If anyone takes offense to my assumptions – I apologize
No Need to apologize – genetics are always blames for everything.
how about otehr causes fr autism: Starting with non-balanced diet of the pregnant mothers, using drugs/alcohol??
Than states with poor people and people who tends to eat not soo good, or less disciplined while pregnant, will be hit.
How about Enviromental issues??? Such as pollutants coming from factories/refineries?? NJ would be amongst leaders there.
And last – what if some of it is behavioral and developmental issue having nothing to do with actual medical reasons:
e.g. – parents do not spend enough time/attention with kids, while kids are very Young 0-4 years old???
NJ would be leader in this area, I am sure with, with second longest commute in the country and costs of living???
How about Stress levels of the mother while pregnant?? How about stress levels of the father?
In reality, as you said, it is not known what can cause autism, and more importantly there are just so many levels of it – from very mild to severe – so it can be caused by different factors as well.
It’s getting bo be that nobody is normal, everybody have some desease….. Just because we are alive.
“.. I didn’t know anyone with an autistic kid growing up.”
Did you ever know a really smart, geeky person who was never picked for gym sports…who would cover their head instead of catch a ball?
This is thought to be on the sensory seeking / autism spectrum. Milder cases, especially those in which the child can still reap the benefit of increased or “super” intelligence, were never even identified back then.
Autism (sensory-seeking disorders) can range anywhere from my “mild” child, who hates turtlenecks, hums when she chews, always runs down hills flapping her feet, has poor balance, and can’t sit still (but is sensitive/loving, can add, subtract, do logic, etc. at Age 5).. all the way to children who spin and cannot function.
Many of new *RE Investors* have no idea of the true issues in dealing with dead-beat renters and following all the legal steps needed when you rent a place out. There is some mundane paperwork that your town may require you to file. Ignoring these things comeback to bite you when you try to evict a tenant. The judges in NJ have a lot of leway to let a tenant stay if it causes hardship for them to be evicted.
A friend of mine who has been in this business for a long time has some interesting stores. I can recall of the lady who sued him in fall saying she tripped on a branch in the yard as the yard work wasn’t done soon after a heavy storm/wind broke some branches in the trees in the year. Another once sued him saying her kid licked lead paint of the walls.
Actually, Pat, I knew lots of geeks but none with symptoms like that. I knew more who couldn’t sit still or concentrate – guess my town ran more to the ADD side of things.
I sometimes wonder though…classifying someone who runs funny and hates turtlenecks as autistic? All of those things you listed seem to me to be pretty normal, like anyone could have one or all of those qualities and have nothing wrong with them. Why do they classify that as autistic?
Have a quick question about the multiple listing sight on the computer (gardens state multiple listings). do most realtors leave the house on the sight until they are through with attorney review.
Also how long is attorney review 3-5 days or weeks. I know sounds like a dumb question but still learning? any info would be greatful.
Sorry one last question..Can anyone tell me if MLS#2369662 in berkeley heights is still available or does it show “under contract”….any info is thankful….
Me
JB,
I noticed the lack of trolls and was wondering if you had done something to screen them out (?)
…it’s much nicer when there aren’t the same repetitious postings breaking up the threads …
I think the problem still exists where everyone still thinks they can get rich of real estate. Put nothing down or the minumum because they figure they will make thier money in a year or two because they have been duped into thinking house values will increase or they are getting a bargain on loan rates.
Either way the days of being a Real Estate agent are limited the best buisness model would be someone who buys foreclosures and sells them. Even then with the current inventory its risky.
“what happens if you walk away from a non-recourse loan?”
the lender forecloses and that’s it. Worst that will happen is that you might incur tax liability if IRS determines there was no economic substance to the deal (unusual)
however, home mortgages are almost never non-recourse. there are a couple of states that may allow homeowner to mail in the keys, but in most places these people will be liable for a deficiency judgment on the loan after the bank forecloses, or, if they are lucky enough to have the bank forgive the debt, they will owe taxes on the amount of forgiveness as income
I have question for experts here.
What would be characteristics or leading indicators of Bottom in Housing? Is it worth trying to time exact bottom?
As now we all know that Summer 2005 was Peak, but it would have not been evident by any known stats such as Inventory, Median Price, Month of Sales etc… All these seems to be lagging indicators. We could conclusively confirm this only after about 6 months. Same thing could happen with Bottom as well. By the time, we predict that market had bottomed, it may be 6 months already, and market may have picked up again. Points to ponder upon !!!
From MarketWatch:
Poole: Fraud in subprime loans ‘coming home to roost’
Fraud and sloppy lending practices are likely to be at the heart of recent news of rising defaults in the sub-prime mortgage lending sector and subsequent difficulties at banks that rushed into that market while the U.S. housing market was booming, said William Poole, the president of the St. Louis Fed, on Friday. “Some of this lending probably involved actual fraudulence where people misstated their income and qualifications to take out loans,” Poole said in answer to a question after a speech. Poole said many of the sub-prime loans did not even require that borrowers document the income listed on their loan application with a pay stub. “Many companies made too many loans that were poorly documented and now those are coming home to roost as the mortgage interest rates went up,” Poole said. HSBC Holdings , the world’s third-largest bank and one of the most aggressive players in the U.S. market for low-quality mortgages, sent a chill through the financial world on Thursday with news that its bad-debt charges will be 20% higher than forecast. Poole defended the development of the sub-prime mortgage market in general, saying it “was a healthy thing” to give access to loans to people who could not get home loans.
#66
deficiency judgment is available if the foreclosure sale doesn’t cover the balance of the loan and the lender’s costs in foreclosing. as you can imagine, foreclosure sales rarely cover these costs. Thus, there’s usually a deficiency. Best case scenario is that it’s small enough to not be worth suing over
Characteristics of a bottom in housing:
1) No more “Flip this house”-style shows on television. Bob Vila and Norm will reclaim their rightful thrones as the Kings of Carpentry. HGTV will return to slipcovers and gardening.
2) When Joe Sixpack tells you real estate is the worst investment you’ll ever make. Talking about real estate becomes a taboo topic at the dinner table.
3) No more teaser rate mortgage billboards on the highway. Very few mortgage advertisements on television.
4) David Lereah fired.
jb
What I’m trying to say is that the bottom in housing won’t be marked by leading or trailing indicators, statistics, metrics, or market analysis. You won’t find the bottom in numbers, you’ll find the bottom in sentiment and psychology.
jb
I recently saw a paper ad by a Realtor – asking homeowners to call him if they are moving. It read something like –
“there are more options than having your house sit on the market vacant.. like renting..”
And this is a quite popular realtor in the neighborhood.
Looks like he is diversifying into property management.
Now, when this guy smiles on a billboard asking folks to consider renting out to selling.. I think we hit the bottom.
I’m sorry SG – I just realised you asked the experts on this blog – I’m anything but ;-)
Calling the botom – RE is local. While there might not a any bottom at all in South Carolina, in NJ bottom will depend on many factors main of which is local state economy.
At what point NJ will not be abole to borrow anymore money to cover for it’s debt?? 30 billions is a large number.
Once this will happen, either taxes will shoot up – forcing people to flee the state even more, or state goverment will default on it’s retirement/pensions/debt obligations.
and then we will hit the bottom – in either of these two cases
“What I’m trying to say is that the bottom in housing won’t be marked by leading or trailing indicators, statistics, metrics, or market analysis. You won’t find the bottom in numbers, you’ll find the bottom in sentiment and psychology.”
http://www.itulip.com/forums/showpost.php?p=6992&postcount=16
JB-
Re: Wiki
If you could give some kind of rough outline/plan, I’d be interested in learning more.
JM
I don’t think anyone here made the connection from autism to property taxes… About 1 in 5 students are classified as special education in NJ. They costs about 4 times as much to the taxpayer than a non-special ed. student. They require a lower student to teacher ratio plus their parents are much more likely to bring lawsuits against the school. I think the increase in their numbers are the result mostly of three things: 1) better identification of the symptons 2) women waiting longer to have children which causes Downs Syndrome etc. 3) parents pushing to have their children classified as special ed. so they get more time on standardized tests etc.
The article from the Baltimore Sun did not mention first-time buyers’ loans from parents. That has to be much more common, and I hear parents are delaying retirement in order to help their kids buy a home. I’m sure what many buyers claimed was a “gift” on the mortgage application is actually a loan from their parents which they may or may not pay back.
Currently there is a builder in River Edge who is in the process of building 4 McMansions. Will be interesting to see how he does when the overpriced boxes he is building go on the market
anyone watching the NEW chart? big move down in the last hour– down 14% for the day now
I’ve been watching since it dropped through 18. Quite a bit of volume traded..
jb
Regarding NEW; It didn’t take long!!
“Roy Jacobs & Associates announces that it has filed a class action lawsuit in the United States District Court for the Central District of California on behalf of purchasers of the common stock and other securities of New Century Financial Corp. (“New Century” or the “Company”) (NYSE:NEW – News) who purchased during the period from May 4, 2006 through February 7, 2007, inclusive (the “Class Period”
http://biz.yahoo.com/pz/070209/113477.html
#82 tbw I think that is the property on 5th ave, that had one house. He purchased that last Spring/Summer, and I belived he paid over 600k for it.
He just cleared it recently, but has not yet started construction.
I believe he is going to get hammered. All these one truck builders are going to get slammed.
In fact the Star ledger had an article a few weeks ago, and they quoted a builder/renovator located in River Edge who said business had dried up, and that he would probably have to lay off his 10 employees this year.
And yet there are still some clueless people out there. Sad River Ede used to be such a savvy town.
The real estate hangover in that town is going to be extremely painful, while the taxes continue
up,up, and away.
#1tbw Not many people 41 to 49 that have 80k either, scary but true.
#81tbw The 4 he is building can join the 10 already on the market, and the other 7 in various stages of construction. Its getting uglier every day.
California is one of those states where you can simply mail in the keys to the property.
In NJ…it can be very difficult trying to evict a borrower. Promise to pay for a few months but don’t. Allow the mortgage company to begin foreclosure after 3 or 4 months. Let it sit with the courts for a month or so. In the mean time, send in a payment to stop the foreclosure process and reset the clock. Start again with making broken promises. Next thing you know..its been a year and you have lived in the house on one payment.
#77 Sapiens: When you purchased a house end of 2005 for 500K, and now begining of 07, little more than a year later, and the same house has an asking price of 450K, remember asking price not closed price, people will get the message pretty quick, just like the last real estate crash.
#84 BC Bob Says:
“Roy Jacobs & Associates”
The vultures are circling. Hope NAR has a better defense attorney than chief economists.
Clot #18: That is a perfect example of what is wrong with our society.
Don’t be so quick to dig a grave for that builder.
“Quite a bit of volume traded..”
JB,
NEW- avg volume past 3 months, approx 1.8M/day
Yesterday- 25M
Today- Approx 14M
#81
“Currently there is a builder in River Edge who is in the process of building 4 McMansions. Will be interesting to see how he does when the overpriced boxes he is building go on the market”
Just saw an ad in the paper for 3 houses being built by Hovnanian on the old Essex County Prison grounds. I’ve been watching them go up and wondered if they were being built on spec or if he had deposits. Looks like he’s building on spec.
They are huge monstrosities for an astronomical price. One is 6,000 sq ft for $1,025,000. If it sells for around asking, the taxes will be over $21,000 (used 2006 tax rate). These houses are on a busy county road.
People who have $1,000,000 to spend on a house don’t usually buy in Caldwell but rather in Essex Fells or elsewhere. Let’s see how long they sit.
Don’t forget about LEND and NFI.. (edit: AHM too!)
jb
“Hope NAR has a better defense attorney than chief economists. ”
IMO, at the first sign of trouble, NAR will disown Mr Liereah and probably even sue him.
I can see how this saga is going to play out.
Year 1999. No one really including Lereah cares about Real Estate. Just another asset class you would buy with spare change, if you had any after loading up on dot.com stocks.
Year 2000/2001. Dot.com implosion and events that cause a minor recession and Greenspan opens the spigot, and false asleep at the controls.
Year 2001~2006. People look around and see plenty of money lying around and start buying up assets including houses, cars, commodites, bonds, basically anything money can buy. They also claim that oil’s move from $30 to $70 a barrel is driven by fundamentals. 100% home price appreciation in 5 years is driven by fundaments. Fundamentals that didn’t exist until year 2001.
Year 2007 and forward.
The mess starts to unravel starting with housing. *Investors* look for a scapegoat. Lawyers have already spend the money from the class action law-suits against wall street and look for a new target. Can’t find any manufacturers as most manufacturing jobs have already left the country.
Wait a minute, what about the Real Estate Industry. They told people to buy saying that prices will never come down. If you don’t want to live in that Gold Cost Condo, you can always rent it out and pocket the cap gains, etc, etc.
The saga continues…
The NAR isn’t going to be sued.
They didn’t cause the run up in prices and they won’t be the cause of any decline in prices.
gold 672!
JB #92 Why? The builder has not even started construction yet, there are 10 already on the market, not selling and asking prices dropping, and an additional 7 still to come.
I think it is time to dig the grave, at least have the shovel ready.
“gold 672!”
Bear,
Mum’s the word.
From MarketWatch
Builder-sector M&A on hold
ORLANDO, Fla. (MarketWatch) — Merger-and-acquisition activity in the home-building industry has ground to a standstill, but companies continue to eye deals and will likely kick off a “frenzy” of transactions late this year or early in 2008, an M&A expert said Friday at the International Builders Show.
Home-building firms have been cutting back their land positions, limiting exposure to overheated markets and adding cash to balance sheets since the housing market went into decline last year, positioning themselves for recovery, said Jody Kahn, who works with Michael P. Kahn & Associates in Ponte Vedra Beach, Fla. The firm has been involved in 86 home-building M&A deals.
“It’s a question of when and not if M&A will return,” Kahn said. “Markets are going to be recovering at different times, and you can expect Wall Street will be pressuring public builders to grow once they do.”
Publicly held home-building companies continue to research deals, mostly for private builders, Kahn said, adding that they’re delaying any decisions into the fourth quarter of 2007 or the first quarter of 2008. “They are largely focused right now making sure fires are put out [with land inventories and slumping sales]. But they know they have to have their eyes on M&A for later in the year.”
…
The top 14 home builders in the U.S. by number of closings are all publicly traded, but there is only one other public company among the top 30 builders. There are 20 private home builders that close at least 2,000 homes a year, meaning there’s the potential for numerous big deals.
…
“It has to do with egos. A lot of the big public builders are now run by people with big egos and that makes merger talks difficult,” he said.
More at link above
Rich
Oh come on, this is getting silly.
Electricity rates to jump as much as 14%
Utility customers will see their electric bills jump by as much 14 percent this summer.
That is the result of an annual auction where the state’s four electrical companies purchased a portion of the power they will need to supply their customers.
Rates will increase 10.5 percent for customers of Atlantic City Electric; 14.2 percent for Jersey Central Power and Light; 11.7 percent for Public Service Electric & Gas; and 12.2 percent for Rockland Electric.
The higher rates continue a recent trend that has seen a rise in energy costs contribute to escalating electric bills in New Jersey and the rest of the region, particularly in states where deregulation has occurred.
Al (42)-
Nix to that in my part of the South. People handle this kind of thing by themselves very efficiently.
No lawyer will get near a deadbeat tenant…even after the “Oklahoma” procedure.
Tick (66)-
Au contraire…the best days to be a Realtor are at hand! When the public (especially the sell side) doesn’t see doing RE as a slam-dunk sure thing, they tend to look very hard for experienced help.
If you are a subliterate goofball, RE is pretty stinky right now. If you have some experience, integrity and mental acutity, the party is just getting started.
True story..
Friend of mine had a terrible experience dealing with a deadbeat tenant.
Tenants had stopped paying rent, always making excuses, etc. The tenants were there for a while so he gave them some lee-way. Weeks turned into months, decided that it was time to throw them out. One day the tenant was out, so they decided to go up into the apartment and assess the damage.
They go up into the apartment, the second story of a two family, and they notice that the attic stairs are pulled down. Odd they think, so they go up to see why the tenant was using the attic. They climb up, lights already on. Turns out the tenants were using half the attic as a warehouse, and the other half as a photo studio. Now, this is where it gets good. Turns out the tenants were running an (censored) website and store out of the house.
Anyway, I run into him a few days later and he tells me the story (leaves out the (censored) part). I ask him why they don’t just padlock the door (just as a joke). He replies with “I think they’d enjoy that too much.” and tells me the rest of the story.
I think they finally disappeared on New Years Eve of that same year. They must have known everyone was going to be out of the house. They took anything of value and trashed the house getting the furniture out in a hurry.
They didn’t bother to try to collect.
jb
9o09998lllll;olp0ipploloolpp-yuu
sorry guys…y 2 yr old wanted to type and see it on the screen.
2008 Buyer (88)-
California is a trust deed state, so the deed is already held by the lender or an intermediary (unless a home is owned mortgage-free). Mailing back the keys does not necessarily trigger a completed surrender of deed in lieu of foreclosure.
Here’s a little of the ultra-violence from everyone’s favorite permabear, Doug Kass, of Seabreeze Partners. Look at the MBS he describes as being marked to par with a 23% problem loan ratio:
http://www.thestreet.com/_dm/newsanalysis/investing/10337987.html
Since we are on funny tenant stories.
A friend used to live in Fla.. He had a 2 bdrm condo. When he moved back to Jersey, he decided to rent the condo furnished. He received more rental $ and got a better tenant,at least he thought, corp relo. The tenants were great, always paid the first of the month, no problems at all. One month, it was around the 5th, he did not receive the rent. He thought it was odd but figured he would wait a few more days. Well now its the 15th and the tenants are not returning repeated calls. Finally, he decides to go to Fla towards the end of the month. He gets to the condo and the place is empty. He ask the neighbors if they saw the tenant. The neighbor says, the last time I saw them was about a month ago. They had a huge garage sale, sold all his goods and fled. The positive side of the story, he had enough, sold the condo for a killing, 2 years before the beginning of the bust.
Man, this is quite a thread today.
Here’s my favorite quote from the HSBC president that appeared in the Independent in the UK:
“We are not considering selling so that is not a question it is worth responding to. We are feeling the house price impact in certain areas but 90 per cent of our customers are still paying us.”
Uhhh, 90% paying means 10% late/default. Where I’m from that’s sky high. I hope for the bank’s sake he was just speaking off the top of his head.
Here’s the link:
http://news.independent.co.uk/business/news/article2251430.ece
Thanks jb – for the mod..
Regarding landlords – I am an accidental landlord myself. I picked my own tenants and also have a property manager who takes care of all the stuff – for 10% a month (plus 1/2 of 1st month)
I think if you are in a different town, its imperative that you have a property manager.
So far it’s working out.. I hope I dont have any surprises.
When we lived in a 4 family house, the tenants who lived downstairs from us rarely paid the rent. They smoked like crazy (we had to buy the foam insulation to block anyplace the smoke could come up) and the husband beat the wife. We called the police a few times, especially when she was pregnant. Everytime our landlady would go to court to start eviction proceedings, it would cost her $1,000, they would get time to come up with the rent because by this time they had a baby and the court was very sympathetic. They would then stop paying the rent again and she would have to come up with the $1,000 again. This went on for over a year until they were finally evicted (we had moved by this time).
Another Tenant Story from a friend who used to own an apartment building in Staten Island.
He had a tenant who didn’t pay him rent for a couple of months and then disappeared without a forwarding address. My friend recalled a conversation he had with this chap a year before he went AWOL about this chap wanting to start some web-business and remembered the web-address that he was planning to register. So he looked up the internet registry and the deadbeat tenant has registered this web address and given his new florida address for the domain name registration. My friend had to then have the court noticed served to the ex-tenant in his Florida condo. I heard he was pretty shocked to be tracked down there.
My friend wasn’t expecting to get any money, but he wanted to put it on this guys credit and background record. Any smart landlord who does a background check will see have this information available.
On the autism,
StephenS noted in post 79 that NJ schools classify kids at a very high rate (I hope he’s wrong about 1 in 5, but 1 in 10 wouldn’t shock me), and puts the cost for their schooling at 4x typical.
That’s not quite right. as noted elsewhere, there is a wide spectrum in the level of “special needs” (school system terminology) and it is only the most severe kids that cost 4x. The additional cost is nothing to sneeze at, but it’s not automatically 4x. Also, there is specific aid tied to classified students (which likely encourages district to classify as many students as possible) so it is not the automatic drain on property taxes that you might suppose.
One more thing…
I know the manufacturers of vaccines have managed to shut down debate on the issue, but the relationship of vaccines to autism was in the air not that long ago.
Those numbers are surprising, does anyone know the numbers from the rest of the developed world?
Re: classifying students. There are some districts who try to have as many students as possible classified so they have modifications for taking standardized tests. This ensures that the district has a very high success rate for proficiency on the standardized tests.
Sorry to ask again…. can someone please let me know if MLS#2369662 is under contract. Also how many days are typical attorney reviews
Need to know thanks anyone!!
Me
#116
I seem to remember reading that since mercury has been removed from children’s vaccines, there has been a decrease in cases of autism.
http://www.medicalnewstoday.com/medicalnews.php?newsid=38784
One thing to be aware of is that flu vaccines still contain mercury – even the ones given to children. You can ask for vaccines without mercury if you want the flu vaccine.
Referring all the way back to Clot’s post #18
References to Anna Nicole and Iraq on Cable Networks After 3PM ET:
NETWORK ANNA NICOLE IRAQ
CNN 141 27
FOX NEWS 112 33
MSNBC 170 24
This is from the leftwing blog Thinkprogress. They aren’t spening too much time thinking about the banking trainwreck, but at least their thinking about something.
More bad news for housing:
Stocks fall amid oil spike, Fed comments.
Fed officials: Economic growth could lead to an interest rate hike
http://www.msnbc.msn.com/id/3683270/
NEW YORK – Wall Street extended its losses Thursday, as investors glumly absorbed a spike in oil prices and comments from two Federal Reserve officials that unexpected economic growth could prompt an interest rate hike
However, investors began to sell after St. Louis Fed President William Poole and Dallas Fed President Richard Fisher both warned rates will go higher if inflation doesn’t ebb.
I guess we might have to wait to see Dow at 15000 – till next year maybe? :)
Fed officials are just jawboning. They don’t have the cohones to raise rates with the primaries looming and the dems in control of congress. Dow 13000 is just around the corner. 15k w/in 12-18 mos. You can bank on it.
Trouble seen in piggyback second mortgages
Mortgage market commentary
Friday, February 09, 2007
By Lou Barnes
Inman News
Mortgage rates have enjoyed a modest rally, the 10-year T-note’s decline from 4.88 percent to 4.77 percent leading mortgages from 6.375 percent to 6.25 percent.
Do not expect more improvement, not with an economy as strong as this, and zero chance of a rate cut from the Fed. On the other hand, don’t expect the blow-up in rates that would normally follow dashed bond-market hopes for a recession, long yields soaring above the Fed’s 5.25 percent cost of money.
This unnaturally “inverted yield curve” is just one of several effects of the recycling of the American trade deficit, now in the previously inconceivable range of $750 billion per year, some 6 percent of GDP. For exporters to us to continue to export, they must keep the dollar strong enough to buy their junk (and oil), and the only way to do that is to re-invest their dollar winnings here.
There has never been anything like this before, neither magnitude nor duration, but the effects are coming clear: there is a constant bid in every financial market (commercial real estate, too), which has caused prices to rise, limited downside damage, suppressed volatility in general, compressed spreads for risk in time and credit, held long-term interest rates artificially low, and stimulated the economy.
Another effect: all of this money sloshing in makes it hard to figure out what the economy is really doing. The best economic signals used to come from financial markets, but this cash fog has everyone driving blind.
I am NOT expecting a currency crisis or other unpleasant near-term end to the recycling machine. The basic deal is too good: Asia needs jobs, and has no markets for investment comparable to ours. So long as our trade deficit is in reasonable balance with growth of asset values here, things should be OK. I am nervous that the recycling is bubbling American assets, but I’m more nervous about driving in cash fog.
Bubbling in traditional assets — stocks, bonds, office buildings — is easy to detect, and prices tend to reach common-sense limits or to correct (the one-time-only tech bubble proves the rule). However, Wall Street has filled the gap between the shortage of traditional assets and a desperate hunger for return with New Age stuff, and we have neither historical valuation guideposts nor a regulatory fabric.
Of all of the New Age stuff rolled out in the last half-dozen years, the nouveau mortgage is tops for potential investment error. It may be that the Street has done a better job of pricing and distributing risk than I think, but this week’s events moved another notch up on the bubble-risk meter.
HSBC, a British bank dating to the age of Ebenezer Scrooge, began to discover its losses — began — from playing on the American subprime freeway. This is the first indication of trouble in piggyback second mortgages. Until now, the Street has confessed only to trouble with subprime loans, and only those made in 2006, saying terms offered then had become too easy.
Nice try. 2006 was just the first year with flattening home prices. Loans made in earlier years had no tougher underwriting; they were merely protected by rising home prices. Not for long.
Appearing soon: gradual but horrifying knowledge that “A”-quality first mortgages were infected by the illusion of the Street’s risk distribution. If in 1999 we sent to any human FHA underwriter a loan application with no borrower savings, a gift of down payment, $10,000 in credit-card debt, stable employment, decent credit, rent history at $800, and a proposed new payment of $1,500, that loan would have been declined every time. “Payment shock” would have killed it. Since 2001, that loan and all of its Fannie and Freddie and private MBS cousins have been approved by Street-calibrated software. Approved every time. Not subprime — “A” paper.
Just wait, out there in the cash fog.
http://www.inman.com/inmannews.aspx?ID=62150
re: autism (in NJ)
Researchers feel that the rate of autism has increased so rapidly recently in the USA that there is an environmental cause or component to the increased rates of autism, specifically chemicals in the environment or heavy metals.
Research is going on in NJ exploring those causes.
Think about NJ – we are heavily polluted – the air (the factories, all the vehicles, the incinerators, etc.put tons and tons of chemicals into the air every year),the water (well water is frequently contaminated as well as surface/drinking water), and the soil. ]
Think about everyone’s obsession with perfect lawns – well all those applied pesticides are contaminating people various ways.
And all these many chemicals affect developing fetuses and children (yes, they do find chemicals in the placenta and in the blood whenever researchers look).
And they also believe:
“Researchers don’t think that necessarily means more children here are born with autism. Rather, there is more awareness, better identification and better record keeping.”
#109
article makes a good point that there’s little indication that mortgage defaults will be isolated to subprime.
lenders have relied on credit scores alone and have made thousands upon thousands of no doc loans to people with prime credit ratings
Americans are continuing to treat their homes as cash cows according to a report released this week by Freddie Mac.
During the fourth quarter of 2006, 84 percent of new mortgages that were the result of refinancing were “cash out” loans. Cash out is defined as a new mortgage that has a contract amount at least five percent higher than the balance of the mortgage it replaced.
While the rate of “cash out” refinancings was down slightly from the 87 percent level reported in revised figures for the third quarter it still resulted in $70.7 billion in equity pulled out of American homes in a three month period. In the third quarter, refinancing “liberated” $80.2 billion in cash.
http://www.mortgagenewsdaily.com/292007_Cash_Out_Equity.asp
JerseyGirl (118)-
GSMLS #2369662 is through attorney review and is pending (under contract) as of today.
Oh come on, this is getting silly.
Electricity rates to jump as much as 14%
This is directly related to high natural gas prices. Much of NJ’s enewrgy comes from natural gas.
Jay (124)-
Nice article from Mr. Barnes. Thanks.
However, I think Mr. Barnes is being a little disingenuous about the “cash fog” and his inabiity to quantify it.
It seems as though when money is so plentiful- and moves with the same velocity as confetti in a parade- it would be reasonable to assume that: a) nobody knows how much of it there is moving at any one time, and b) because nobody knows how much of it there is (M3 anyone?), that- in itself- is prima facie evidence that the money flying around is essentially worthless.
Whatever happened to the gold standard?
I seem to remember Econ courses in school that addressed velocity of money flows, relative to supply (though much of this info entered my brain through a filter of beer and wiki). Does this concept even get taught anymore?
Or, worse…does it even matter anymore?
Hey Clotpoll,
I just noticed this house today on the MLS but I don’t have full access, has it been on the markey long? Are they ripe for a cash lowball ?
MLS 10099880, in Freehold. Thanks.
Zac (143)-
No access to that MLS.
thanks man
“(M3 anyone?)”
Clot,
How old school of you.
Look at the repos and eurodollars[was used to calculate M3]. Hard to quantify, but many have it[M3]at 9-12%. No inflation??
Gold Standard??? By the way, compare one dollar and one ounce of gold since 1929. Ouch.
Does “abx-HE-A” represent borderline prime? If so, it is in a free fall as well.
http://www.eurobondonline.com/abx-HE-A-06-2.Htm
Clotpoll thanks so much for the info….greatly appreciated
me.
Maybe there is no infaltion.
Beazer is offering dream home dollar days, this weekend. You can get a gourmet kitchen an estate room or a plethora of other options for less than a cup of coffee [$1]. Out of the goodness of their hearts, their marketing suggests that this is what the 2007 consumer wants/demands. I guess the consumer was not interested in the same circa 2002-2006.
That’s inflation.
re #138
The A-rated index is based on higher-rated MBS tranches of the same collateral.
Look at the constituients of the index. For the BBB-rated index, you have this security with a 1/20 weight:
Long Beach Mortgage Loan Trust 2006-6 LBMLT06-6 2006-6 M-8 USD BBB 5.000%
For the A-rated index, you have this security from the same structure with a 1/20 weight
Long Beach Mortgage Loan Trust 2006-6 LBMLT06-6 2006-6 M-5 USD A 5.000%
So the collateral (a pool of HE receivables) is the same, but it is a more senior position. The BBB has more leverage to the credit risk of the underlying pool, and that is why it has been getting so much action.
The A-rated market is relatively illiquid, so it is more risky to trade.
thanks #142,
So the credit quality leveraged by a BBB need not be subprime?
$10 bill. meltdown at HSBC (… so far)
Methinks we’re just getting started.
BBB is just the tranch. The prime/subprime is the underlying portfolio of securities held by the structure.
Think of it this way, you have a bankruptcy-remote vehicle that buys second mortgages from originators. Once they get a portfolio large enough, then they slice up the risk and sell it in different pieces. The first loss is the equity tranche, which is sold to hedge funds. This might fund 8 percent of the portfolio. The next tranche is the mezz, lets call that BBB. It might be 7 percent wide. Put 10 percent of A on top, and the rest (the last investors in line to lose) are the AAA.
It is likely that the underlying portfolio of securities is a mix of prime/sub-prime loans, but I have not looked closely at the doc. These are 144a securities, which means not for the retail investor to buy.
Doctor Bam (145)-
That there’s a cake what’s got more layers than a Moon Pie. Dang!
Wash down that tasty little millefeuille of debt with some ’71 Yquem, some ’63 Sandeman’s and a little Nonino UE as a digestif. Maybe smoke a delightful Padron Anniversario on the veranda afterwards.
Oh, yeah…it’s -27 degrees out.
Who’s gonna do the JR thing next Friday?
#146
The problem is that everyone wants a corner piece. Instead lowering the price so supply equals demand, the investment banks keep cooking more, selling the corner pieces (i.e. the BBB mezz tranche), and stashing the rest in the pantry. They get a nice cash flow every quarter, and hope that they can hedge the risk of what they are hiding.
We saw with the GM downgrade last May that they are vulnerable to declines in credit quality. Time will only tell if they learned their lesson.
#145
Thanks for inducing a quantum leap in my understanding of tranches.
Which is crazier? You decide:
1. The 60-year-old, inbred, fallen-royalty husband of a 97-year old, demented former Hungarian B-movie queen claims to be the father of the child of a dead, 39-year-old, talentless, pill-popping, publicity-hounding Marilyn wannabe. The dashing inbred prince is the latest in a line of Gomers who actually think that it would be an HONOR to be the progenitor of such an ill-conceived child (who is almost biologically-guaranteed to have an IQ of exactly HALF that of Lisa-Marie Presley). Meanwhile, most of America awaits the next turn in the story with bated breath.
Or…
2. Very quietly, the underpinnings of the financial system that funds homeownership for millions of Americans is unraveling. The consequences of this unraveling threaten the shelter and future financial security of millions more. A credit crunch of draconian proportions looms for all but the wealthiest and liquid of Americans. Despite the gravity of the situation, virtually no one notices or seems to care.
Clot-
I notice. I care. I wonder who’s asleep at the wheel of the Fed, state bank regulator groups, bank management, etc.
It feels like the the Internet party. No one wanted to be the wet blanket and point out the obvious. Now, there will be pain, how much and how many will be affected? I expect it will be deeper and broader than people anticipate.
JM
http://www.youtube.com/watch?v=7yVk_qOIi4w&mode=related&search=
twice shy Says:
February 9th, 2007 at 4:18 pm
Fed officials are just jawboning. They don’t have the cohones to raise rates with the primaries looming and the dems in control of congress. Dow 13000 is just around the corner. 15k w/in 12-18 mos. You can bank on it
they kind of have to – right now goverment does not collect enough taxes to cover interest on the US national debt….
So it is either keep borrowing more money or defaulting…..
And if reates are not raised there will be no money from china, India, and europe.
http://calculatedrisk.blogspot.com/2007/02/florida-tax-shortfalls-crimp-budget.html
State taxes and fees collected were $108-million short of projections for January. That’s on top of a revenue snapshot in November that was $466-million below the expected figure.
For state officials, that is ample evidence of a tamped-down economy that could mean fewer new programs and services. It’s still too soon to tell.
…
Most of the projected revenue shortfall is in sales taxes, the largest source of state revenue. Another area of sluggishness is in taxes on real estate transactions, known as documentary stamps — further evidence of a slowdown in the once-sizzling Florida real estate market.
…
“It’s all related to housing,” said Randy Miller, executive vice president of the Florida Retail Federation. “But after years of double-digit increases in tax collections, we’re not that concerned.”
JB,
My post is up for moderation.
florida –
http://www.sptimes.com/2007/02/09/State/Tax_shortfalls_crimp_.shtml
Most of the projected revenue shortfall is in sales taxes, the largest source of state revenue. Another area of sluggishness is in taxes on real estate transactions, known as documentary stamps — further evidence of a slowdown in the once-sizzling Florida real estate market.
Al (152)-
You would think so…but, we may actually be headed for a wrenching worldwide liquidity crunch that will require a massive, lifesaving injection of cash. Nouriel Roubini’s blog features an excellent recent post in which he neatly explains how the world financial situation is EXACTLY the same right now as it was pre-Asian flu in 1998.
However, when the yen carry trade melts down THIS time, it will blow up more than 17 or 18 hedge funds. There are countless funds now loaded up on this thing, and nobody knows how much money is at stake or the risk exposure of various currencies vs the yen (or even how much money is at stake). All we know is that creditor nations have some vague self-interest at stake in propping up the dollar enough to keep us buying the crap that their rigged economies keep throwing at us.
And there’s the anomaly: an economy on steroids will be counted upon to exhaust its false strength to save the butts of the people who sold us the steroids that turned us all into girly-men to begin with.
http://www.youtube.com/watch?v=nsTzWBSDRas
Clotting Factor: yes
also….imagine this…..hedge fund brainiacs using the just cratered BBB MBO tranches as de facto cash, then levering the $hit out of it. The figured they were getting easy extra yield on collateral, but instead of their trades turning sour, their collateral did. Now they have to start unwinding. Heaven forbid they made some bad trades too!
You saw the spreads blow-out 100 bps on the MBOs. Imagine the amount of urine and feces soaking those Calvin Klein tightie-whities…..
#154
Classic Pat, classic.
don’t worry… it’s just a ride.
http://www.youtube.com/watch?v=BTzNLhxPzjo
now, imagine this:
http://video.google.com/videoplay?docid=-1847778207986315796
btw… autism =
http://www.youtube.com/watch?v=s62CiM-emNg
#148
Happy to be of service. Finance is just big words and common sense. Once you get get past the vocabulary, it’s a pretty straightforward: buy low, sell high.
#153
I would hesitate to blame the government for this mess. It’s like trying to blame crack cocaine because society don’t put enough effort into the war on drugs. It people want it, they will have it.
The recent financial innovations that allow individuals to borrow more are just like a new drug. Used in moderation, they are a good thing. But just like when you abuse a drug, when you abuse credit, bad things will happen.
The last few years have just been one big trip. Some of us knew all along how to use responsiblity. Others will only learn the hard way. In the end, these innovations will make all us better of, but in the short run some lives will be ruined.
It is human nature. It has happened before, and will happen again.
good thing we can agree the war on drugs is a ponzi scheme, no?
Just as I hope we can agree the drugs fighting cancer/autism/etc. are doing damage?
p.s. did you know dinosaurs had cancer too?
http://www.livescience.com/humanbiology/060403_dino_med.html
Cash rules everything around me!
Dolla-dolla-ignorance-ya’ll!
http://www.youtube.com/watch?v=BTzNLhxPzjo
credit = cancer; let ’em smoke, maybe I can afford a house!
I don’t know if the links will work, but here goes:
The data on the autism/thimerosal connection is spotty. Danish research seems to refute any connection [sorry Clot :( ]
http://pediatrics.aappublications.org/cgi/content/full/112/3/604
British Medical Journal also seems to refute it.
http://www.bmj.com/cgi/content/abstract/322/7284/460?ijkey=4f3631daa31882f3ab630d7b38a27b77bec8d115&keytype2=tf_ipsecsha
Conclusions: Because the incidence of autism among 2 to 5 year olds increased markedly among boys born in each year separately from 1988 to 1993 while MMR vaccine coverage was over 95% for successive annual birth cohorts, the data provide evidence that no correlation exists between the prevalence of MMR vaccination and the rapid increase in the risk of autism over time. The explanation for the marked increase in risk of the diagnosis of autism in the past decade remains uncertain.
Also: recent research indicates that genetic mutations of genes that control on/off of developing neurons may be a clue to (one of) the causes of autism — FYI Rett syndrome is a disease in females that is considered a severe form of autism (patients are profoundly retarded etc etc)
Scientists Reverse Rett Syndrome in Mice
By resorting the function of a gene, U.K. scientists were able to reverse the symptoms of Rett syndrome in mice, says a study published Thursday in Science.
The childhood neurological disease, which primarily affects females, can cause a number of severe symptoms, including loss of speech, abnormal movements, tremors and seizures, along with breathing, chewing and swallowing problems.
In this University of Edinburgh study, researchers fully restored the function of a gene (MECP2) associated with Rett syndrome. This resulted in a reversal of symptoms in mice, even those that were on the verge of death.
The findings suggest that it may be possible to reverse Rett syndrome and related disorders in humans, even in the late stages of the disease, the researchers said in a prepared statement.
Sorry for the long post. I am willing to make book that the cause and cure of autism is many many years away (unfortunately.)
I think it is fairly safe to say it is unlikely related to the MMR vaccine or thimerosal.
Just my $.02 IMH(medical)0
sl
sheeesh. I think I broke the ‘no more than one link per post…’ I am in moderation
Longish post on autism.
sl
maybe if I slice and dice it…. (1 0f 2)
still_looking Says: Your comment is awaiting moderation.
February 10th, 2007 at 2:59 am
I don’t know if the links will work, but here goes:
The data on the autism/thimerosal connection is spotty. Danish research seems to refute any connection [sorry Clot :( ]
http://pediatrics.aappublications.org/cgi/content/full/112/3/604
Part 2 0f 2
British Medical Journal also seems to refute it.
http://www.bmj.com/cgi/content/abstract/322/7284/460?ijkey=4f3631daa31882f3ab630d7b38a27b77bec8d115&keytype2=tf_ipsecsha
Conclusions: Because the incidence of autism among 2 to 5 year olds increased markedly among boys born in each year separately from 1988 to 1993 while MMR vaccine coverage was over 95% for successive annual birth cohorts, the data provide evidence that no correlation exists between the prevalence of MMR vaccination and the rapid increase in the risk of autism over time. The explanation for the marked increase in risk of the diagnosis of autism in the past decade remains uncertain.
Also: recent research indicates that genetic mutations of genes that control on/off of developing neurons may be a clue to (one of) the causes of autism — FYI Rett syndrome is a disease in females that is considered a severe form of autism (patients are profoundly retarded etc etc)
Scientists Reverse Rett Syndrome in Mice
By resorting the function of a gene, U.K. scientists were able to reverse the symptoms of Rett syndrome in mice, says a study published Thursday in Science.
The childhood neurological disease, which primarily affects females, can cause a number of severe symptoms, including loss of speech, abnormal movements, tremors and seizures, along with breathing, chewing and swallowing problems.
In this University of Edinburgh study, researchers fully restored the function of a gene (MECP2) associated with Rett syndrome. This resulted in a reversal of symptoms in mice, even those that were on the verge of death.
The findings suggest that it may be possible to reverse Rett syndrome and related disorders in humans, even in the late stages of the disease, the researchers said in a prepared statement.
Sorry for the long post. I am willing to make book that the cause and cure of autism is many many years away (unfortunately.)
I think it is fairly safe to say it is unlikely related to the MMR vaccine or thimerosal.
Just my $.02 IMH(medical)0
sl
Mortgage lenders plunge amid missed payments, depreciating home loans
Posted 2/8/2007 3:34 PM ET
NEW YORK (AP) — The mortgage industry plunged deeper into distress this week as two lenders said sagging home prices and higher interest rates are pushing many borrowers into delinquency.
HSBC Holdings (HBC), Europe’s biggest bank and a major player in the U.S. mortgage industry, said the market for “subprime” mortgages, or home loans to people with blemished or limited credit histories, is in trouble.
CONGRESS INVOLVED: Predatory mortgages lending labeled ‘crisis’
Analysts’ estimate for how much HSBC needs to sock away for problem loans is shy by a fifth, HSBC said. The London-based bank estimates it needs to set aside almost $10.6 billion to cover loans it won’t be able to collect.
Shares of mortgage providers fell across the board on Thursday, but none were hit as hard as New Century Financial (NEW), a subprime mortgage lender based in Irvine, Calif. The company said late Wednesday accounting errors caused it to lose track of how drastically some of its mortgage loans are losing value.
Three Wall Street analysts downgraded New Century, and the company’s stock plummeted $9.58, or 32%, to $20.58 in afternoon trading, crashing through its previous 52-week low of $29.07, set last month.
During the housing boom, many mortgage banks devised crafty loans allowing people to borrow money with no down payment and pay low interest rates for the first few years on adjustable mortgages. Now, as interest rates reset higher, more borrowers are missing payments and many lenders are going out of business or putting themselves up for sale.
Subprime loans were once very attractive to some banks because of their higher interest rates.
But HSBC said the weak housing market exacerbates credit problems in the subprime mortgage space. Until a little more than a year ago, stretched borrowers who needed to raise cash could take out a second mortgage on their houses and use that money to pay off loans. With housing prices stagnant — and in some markets falling — consumers’ best source of financing has shriveled.
The problem for these types of lenders may not go away quickly.
http://www.usatoday.com/money/industries/banking/2007-02-08-subprime-lenders_x.htm
ChiFi (155)-
I think the only question is how many funds are hedged like your nightmare scenario. That sounds exactly like something some preppy Thurston Howell of a manager who didn’t learn how to balance his checkbook until he was 25 would think to be a relly cool play.
Dr. Bam (158)-
Haven’t seen you here before. Welcome! Good stuff…much more fun & informative to read than WAAAAAAAHHHHH…and BOOOOYAAAAAHHHH!
I don’t blame the gov’t for the meltdown. However, I think the Fed may eventually be forced into some quick action to right the ship. A bad news week of, say, an Ecuadorean credit default, more subprime bloodletting and a bump in the yen could trigger something very ugly.
Sheesh…and I’m the BULL here!
“Sheesh…and I’m the BULL here!”
Clot,
You are an outward bull. Deep down we all know that you are as bearish, if not more so, than many on this board. Clot a bull is askin to saying you are also a Christian Laettner[spell??] fan.
You are right about the potential blow up. Back in 1998, it was Long Term and the major banks. Today, nobody really knows. Tranches are collatarized and may extend to hundreds/thousands of different parties. Do the derivatives really protect the system or are they so levered that the potential risk is enormous??? What occurs if these are levered into a losing position???
That’s akin, need to wake up.
Bernanke in 2005 before he took the job at the Fed was on Bloomberg for 1/2 hour, and he said point blank that hedge funds using MBS as collateral instead of cash was the biggest risk in that sector. Well, ummm…..blamo. We just dropped the egg carton, but we are not allowed to look inside…let’s see if some egg white or yolk starts to seep out of the package.
If we see some egg shell, then we are really screwed?!?!
#171
Derivatives are just a repackaging of credit risk. This stuff used to sit on the balance sheets of FDIC-insured commercial banks, and which are the most leveraged financial institution out there.
Now it likely sits in your pension and 401k fund. So instead of having to bail out the banks with higher taxes, you’re going to take a hit on your retirement investments BTW, have you checked your allocations lately?
Zac #135
Re: MLS #10099880
175 Topaz Dr, it’s a 4 bed, 3 fb, 2812 sq ft Colonial on 1.14 Acres. Built in 1989, taxes $9328 per year. It’s been on the market since Sept 06 with OLP of $819K and reduced to $775K in Dec 06.
Since it’s right on the border of Colts Neck, they are trying to capitalize on high-end Colts Neck prices. Similar homes in Freehold have recently sold in the high $5’s to low $6’s.
Right across the street is The Grande at Colts Neck (McMansion alert – 75 x 100 lots).
I think the subject is going to sit for a while, even at it’s current price.
Thankyou Grace.
Zac-
Do you know that section of Freehold/Colts Neck?
Mind sharing your thoughts on that property?
I have no vested interest in it.
I don’t know the area Grace and have never been to the house. I just like Tudors and the area that I’ve been looking in is losing some of it’s initial appeal so I started surfing the MLS for Tudors in others counties and towns. That one just seems very nice. Just a preliminary observation.
Re: 103 The higher rates continue a recent trend that has seen a rise in energy costs contribute to escalating electric bills in New Jersey and the rest of the region, particularly in states where deregulation has occurred.
I thought deregulation was supposed to (in theory at least) result in lower bills for the consumer. At least that’s how the concept seems to be consistently sold to the consumer.
Actually, I find it to be more than “silly”. How about “rotten”, “underhanded”, or “criminal” as descriptors?