From the Motley Fool:
Quick Take: Realtors Under Fire
It’s nice to see the New York Times (NYSE: NYT) step up and give the National Association of Realtors, and its head optimist, David Lereah, a poke it so richly deserves. This article points out what the NAR, and homebuilders like Centex (NYSE: CTX), Beazer (NYSE: BZH), and Pulte (NYSE: PHM) or mortgage-hawkers like Washington Mutual (NYSE: WM) and Freddie Mac (NYSE: FRE), don’t want you to know.
Renting makes a lot more sense than buying. In a lot of places. A lot of the time. Do the numbers yourself.
It’s still a bit of New York Times naivete, brimming with statements like this one: “Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today …”
How is that striking? Home prices have gone through an unprecedented bubble. Rents have not. Unless housing prices tumble very quickly, it will be years before buying is smarter than renting, especially in a bizarre market like the one around Washington D.C., where a run-down, 700-square-foot, 1950s crackerbox goes for $450,000.
Just one more thing, Times. How about dropping the whole “American Dream” cliche? There’s nothing inherently better about owning. And while we’re on the topic of “owning,” maybe we should all do more to point out that homeowners buying with zilch down aren’t “owning” at all. They’re simply renting from the bank.
I’ve rented and owned, and it comes down to this. A home is a place to hang your hat. Pay too much for the peg, and you’re risking the real American Dream: the pursuit of happiness.
NEWS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Subprime woes take toll on GE results- wiping out $373m in profit ~~~~
http://housingpanic.blogspot.com/
Subprime woes take toll on GE results
By Francesco Guerrera in New York
Published: 13/4/2007 | Last Updated: 13/4/2007 17:25 London Time
The US subprime mortgage crisis hit General Electric on Friday, wiping $373m from the industrial conglomerate’s first quarter profits and prompting its executives to warn of an incipient “bubble” in global credit markets.
GE said it had replaced the senior management team at its mortgage unit, and would reduce its workforce by around 1,000 people, or 40 per cent.
GE will also cut by half the loans it makes to less than $15bn this year – a sign of its belief that the subprime market has yet to hit the bottom.
“We have got to get our house in order,” Keith Sherin, GE’s chief financial officer, told the Financial Times.
Mr Sherin said the problems in the subprime sector, which targets borrowers with weak credit histories, were being replicated in the market for “Alt-A” loans for borrowers with slightly better credit scores.
Mr Sherin sounded a broader warning on the health of the global credit markets.
He said he was concerned at the rise in the level of high-yield debt, which has fuelled the boom in leveraged buyouts by private equity groups, and the growing use of “no covenant” deals, which strip lenders of the right to force borrowers to repay the debt.
“The levels of debt assumed in LBO activities and the lack of covenants . . . to me those are sign of a bubble,” he said.
GE is in talks with a number of buyout groups over the $8bn-$10bn sale of its troubled plastics business, which it expects to clinch by June.
GE, whose WMC mortgage division is the fifth-largest US subprime lender, is the latest blue-chip company to be wrong-footed by the abrupt downturn in the industry, which has been hit by a sharp rise in defaults and delinquencies.
GE saw a reduction of $373m in the profits of its GE Money division in the first quarter of 2007 and took a $500m markdown to reflect the lower value of its assets.
Mark Begor, chief executive of GE Money, Americas, told Wall Street analysts the subprime woes would have smaller impact, about $50m, on second quarter results.
Despite problems in the subprime unit and the plastics business, GE reported net earnings from continuing operations of $4.5bn in the three months to March.
The 8 per cent increase over a year ago was in line with analysts’ forecasts.
Profits were driven by a strong performance in the infrastructure unit, which has been powered by strong orders in the Middle East and Asia. Revenues were up 6 per cent to $40.2bn.
Net earnings, including discontinued operations, were up 2 per cent at $4.5bn.
Subprime bailout? $120 billion
More than 1 million borrowers may be at risk of defaulting on their mortgages. Assisting them all wouldn’t come cheap.
By Stephen Gandel, Money Magazine senior writer
April 13 2007: 4:21 PM EDT
NEW YORK (Money) — Want to pick up the check for every homeowner who got saddled with a risky mortgage? It’s a big one – on the order of $120 billion.
Lawmakers and consumer groups in recent weeks have been calling for assistance for those at risk of defaulting on their mortgage.
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Quick Vote
Should subprime borrowers be bailed out?
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Comedian Kathleen Madigan has a reality check for subprime lenders hoping to get bailed out by the government.
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On Wednesday, Congressional Democrats led by Charles Schumer (D-N.Y.) advocated steering hundreds of millions of dollars into nonprofits to help the growing number of homeowners who are having trouble paying their mortgage.
But economists and industry experts say the cost of a bailout would be significantly more than that.
more: http://money.cnn.com/2007/04/13/real_estate/subprimebailout_cost.moneymag/index.htm?postversion=2007041314