This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing bubble, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.
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Shepherdson Predicts No Growth in Q1
http://calculatedrisk.blogspot.com/2007/02/shepherdson-predicts-no-growth-in-q1.html
From MarketWatch: Shepherdson watches weather, wins contest
Shepherdson has the most bearish forecast for first-quarter growth among the 41 economists we survey; while the median forecast is for 2.3% growth, Shepherdson is predicting no growth at all.
And people thought I was bearish!
He sees consumer spending rising at about half the pace as in the fourth quarter, with capital spending falling. Trade will be a modest positive, balancing out the drag from inventories. And housing investment will fall another 20%.
“Add it all up and you get not very much,” Shepherdson said.
Of course the big drag is housing, but
…there’s a second trend that most people aren’t talking about yet, he said: A slowdown in manufacturing.
Capital spending fell in the fourth quarter and the year-over-year trend is the slowest in more than three years. Shepherdson figures that the slump in capital spending has barely begun.
And as we all know, non-residential investment typically trails residential investment by 3 to 5 quarters. So looking for a capital spending slump this quarter makes sense from an historical perspective
Battles over Asian currency dominate G7
With yen trading near record lows against the euro, Japan comes under pressure from euro zone countries worried about their exporters
http://money.cnn.com/2007/02/09/news/economy/france_g7.reut/index.htm?postversion=2007020918
Here’s a little less dire assessment of the HSBC meltdown from Louis Navellier (“Marketmail”, Friday, February, 20, 2007), one of the more level-headed money managers around:
“This week, though, the media bombarded people with a warning from HSBC Holdings, the third largest bank in the world. HSBC said it now expects bad-debt charges to exceed forecasts by about $1.76 billion, or 20%. These charges are generated from people who are unable to pay their mortgages.
The media tried to portray this warning as a precursor to a much more widespread problem. In other words, the media are again force-feeding us “the housing market is going to wreck the stock market” headlines.
Where’s the analysis to support such a claim? We haven’t seen any solid evidence. Instead, it appears that the bad-debt charges for HSBC could be related to a flaw in HSBC’s credit-scoring process.
One Marketwatch article said, “CEO Michael Geoghegan agreed the analytics used to predict the performance of its mortgage book could have been stronger, though he added those predictions need to be based on the historical performance of the market.”
Geoghegan added, “But there wasn’t any history for adjustable-rate mortgages after something like seventeen interest rate rises.”
So, is HSBC the tip of the iceberg, or the whole thing? One clue might be that HSBC purchased most of its portfolio of sub-prime mortgages in 2005 and 2006 – essentially the top of the real estate market. As such, its portfolio could have a much higher concentration of bad-debt at the peak of the market than its competitors.”
“debt charges to exceed forecasts by about $1.76 billion, or 20%”
Do you know what HSBC’s default rate is?
Center For Responsible Lending predict 20-25% default rate a few months back. At that point all ‘experts’ went berserk pointing out flaws in the report.
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
On Track to Becoming a Transit Village
Former J&J campus would house a bustling community under plans on the drawing board
Evelyn Lee – NJBIZ Staff
http://www.njbiz.com/enews_article.asp?lID=68&sID=69&m1=70&m2=&cID=8&aID=54574552.4274203.907335.760872.2179754.911&aID2=69786
The developer of the property, North Brunswick TOD Associates, is in the early stages of a process to turn the 212-acre campus into a mixed-use transit village that would include a new station. The project would include anywhere from 2,000 to 5,100 loft-style condominiums and rental apartments and from 610,000 square feet to 1.5 million square feet of office space. Also in the plans are 350,000 square feet of retail space, a 200-room hotel and a 100,000-square-foot civic building.
Johnson Controls shutting down NJ plant.
Plant closing squeezes workers
When Johnson Controls Inc. took the keys to the Delphi Corp. battery plant on Jersey Avenue last year, hundreds of employees opted for buyouts from the old company and left their jobs. But the 102 workers who stayed on thought they’d be in it for the long haul.
“They are closing the plant because they don’t make enough money here,” said Ofori Aning, president of International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers-Communications Workers of America Local 416, which represents unionized workers at the 60-year-old plant. “We thought we were going to have a job.”
But now Milwaukee, Wis.-based JCI is set to close down the plant as early as March 4.
In the summer, about 250 workers took the packages offered by Delphi, with employees with 10 or more years getting incentives of $140,000, workers with three-nine years $70,000, and one- to three-year employees $40,000, according to IUE-CWA Local 416. Aning said employees who put in another six months of labor for the new owners could be faced with packages worth less than those offered by Delphi.
“This means we worked for JCI for free,” Aning said. “We could have taken the buyout and put the money in the bank and looked for a new job.”
Did the date change on the RE blog block party?
For some reason, I thought it was in 2 weeks?
or, am I just being forgetful?
SAS
“N.J. consumers face big electric rate hikes for the second year
Auction process to trigger double-digit increases”
http://tinyurl.com/37gddk
SAS
SAS,
I believe the date was changed to a Friday since a few people said they couldn’t make it on a weeknight.
Looks like an interesting venue, the JR Cigar lounge on Rt. 10 in Whippany.
jb
This piece was interesting. I really don’t see how anything but tax hikes for many years.
“State worker contract talks heat up as budget address nears”
http://tinyurl.com/2vh25f
SAS
SG,
Interesting post on the North Brunswick transit village. Everyone and their mother seems to have plans for a ‘transit village’ these days, it will be interesting to see how many of these actually pan out.
Ugh. I like JR Cigar, but you come home smelling like an ashtray. When you have a wife and baby, it’s not something you want to expose them to.
What about the Sheraton Tara hotel bar in Parsippany? We go there after work a lot (I work across the street) and it’s a cool place.
-Richie
SG,
I believe it was you who asked a question yesterday about how to recognize a bottom in RE.
The eventual bottom will be set in motion exactly how the last leg of this absurd run up was, greed and fear.
Extreme tops/bottoms are all about psychology and sentiment.This market top was only about greed/fear, simple economics was an afterthought. Markets are a reflection of mass thinking. The bottom will not be measured in inventory, sales, foot traffic or mortgage applications, just plain old psychology. Extreme market tops/bottoms are probably 90 % psychological/emotional.The same market psychology that has been in existence since tulip bulbs will be prevalent here. When the time comes, there will be bargains. However, the fear and uncertainty will cloud most individuals judgement. The herd won’t believe that it’s time to buy. Why the hell would they?? They’ll be too busy licking their wounds. Fear begets fear. It will become self perpetuating. When we continually hear extreme pessimism, [I’m not talking about this blog] it may be time to be a contrarian. Don’t worry about buying the absolute low. You can’t. If you do, it’s extreme luck. At the end of any big decline the last bulls throw in the towel and sell with a vengeance, again it will not pertain to simple economics.
Knowing this, in the final legs of any extreme move, [capitulation], whether its a melt up or down,usually 40-50% of the entire move is made in the last 10-20% of the the total duration of the move, totally emotional. This is when everybody becomes convinced that they were sold a bill of goods, you’ll hear people saying that real estate is the worst investment you can make. At cocktail parties, all the dead beat flippers will be on to something else. The media talk will be that this is/was one of the biggest frauds ever perpetuated upon John Q.
When the smoke clears this market will not turn from the depths of anguish to euphoria overnight. Why?? History proves that investors repeatedly extrapolate from the past rather than vision the future. There may be years and years of base building, maybe appreciate at or lower than the inflation rate. My point is don’t worry about picking a bottom, rather worry about buying too soon. IMO,there will be much more at stake/risk if you buy 12-18 months too early as compared to buying 2-3 years after the eventual bottom. As opposed to worrying about buying a bottom, keep in mind that protection of your capital is your prime consideration.
I have several friends from India who are seriously considering going back to get in on the boom over there. Also I’ve seen tons of listings on craigslist for property and furniture for sale by people who are leaving the country. I’m willing to bet that part of the property bubble in Central NJ was due to large numbers of Indians moving in to work in high-tech industries. Since they’ve stopped coming and since they’re going back in some cases, it’ll be interesting to see how the Indian boom changes the NJ real estate situation.
James Bednar Says:
February 10th, 2007 at 8:21 am
SAS,
Looks like an interesting venue, the JR Cigar lounge on Rt. 10 in Whippany.
jb
What is with this gathering? Oil Shail Gala is pumping this one hard.
I put JR Cigar down as a lark. Um, you BETTER like cigars and hard liquor (or the odor of such on your clothes). I don’t think it is the most inclusive place for LOD-types.
I noticed two things recently that further strengthens my outlook in RE.
1. I periodically glance through the Auction section of the newspapers/internet (Not Real-Estate auctions, but industrial equipment). I have noticed that there is an unusually large number of construction equipment that is hitting the auction block. Back Hoe’s, Loaders, concrete mixers, etc.
2. I also see a lot of land in and around NJ come on the market with “Approved plans to build”. This leads me to believe that many of the independent builders are canceling their plans and are trying to sell the land with the approved plans.
#15,
Are they chasing previous years returns???
“Property stock valuations are approaching bubble territory,” said Parameswara Krishnan, who manages $150 million at DNB Nor Asset Management in Chennai, India. “We should see some correction.” He said he is avoiding real-estate shares.
Housing Development Finance Corp., the country’s second- largest mortgage lender, raised its rates four times over the past year to 9.5 percent.
“The continued high credit growth in the real estate sector, is a matter of concern,” the central bank said.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aBaEvTQjrrEg&refer=home
“I put JR Cigar down as a lark.”
Chi,
Be careful what you ask for. It may be granted.
For those saying that prices aren’t falling.
Take a look at this guy, a condo in Livingston:
MLS #2314047
He has been listing on and off for 18 months.
Last year spring he was asking $599,000 (when the spring comps were $535,000). The comps are now $475,000, which is what he is asking now. With two other units (including the builder’s model) priced below him, he will be lucky to get $400,000.
We’re at 2004 asking prices in the condo market, and close to 2003 in closing prices.
JB, I have a comment (February 10th, 2007 at 10:58 am) stuck in moderation.
From Today’s WSJ:
Profiting on Foreclosures
How Bargain-Hunting Investors Avoid Pitfalls of Hidden Liens, Evictions and Lemon Houses
By JEFF D. OPDYKE
February 10, 2007; Page B1
___________________________________
As interest rates rise, more homeowners are falling into foreclosure. That is what is prompting the wave of bargain-hunting investors now descending on courthouse auctions across the country.
“It’s just crazy. We have 100 houses [at auction] each week, when we used to have 10 or so,” says Elaine Began, a deed clerk in Macomb County, Mich. Three years ago, the Montgomery County (Ohio) Sheriff’s Office was “lucky to get 50 people to an auction,” says Laura Wright, a foreclosure clerk there. Today, 120 often show up.
Some may be sorry they did. Novices face a host of risks. Foreclosed homes can come with hidden debts. Homeowners generally won’t let you inspect the home before you try to buy it out from under them. Not knowing the local rules, which vary from state to state, can also cost you big.
The notion that $250,000 homes can be had for a few thousand dollars “is largely a myth,” says Peter O’Connell, a former banker who has invested in foreclosures for years, including near his home in the Florida Keys. “If there is any equity in a house, you’re generally not going to get it cheaply.”
Plainfield wants transit village status too!
The North Avenue Redevelopment tract, a three-acre parcel in the city’s North Avenue Historic District at the intersection of Watchung Avenue and East Second Street…
[…]
The redevelopment area is … across from the city’s downtown train station. The city administration … has made a strong push for transit-oriented development around the city’s two existing train stations.
… the city is in the process of applying to the state to get transit-village status, which would make the city eligible to receive funding for transit-oriented development.
http://www.c-n.com/apps/pbcs.dll/article?AID=/20070210/NEWS/702100304
Today’s weekend issue also has an article on putting a solar power unit in your home. This is something I want to do as the cost of utilities in NJ is getting outrageous. If you have a 3000+ square feet home, it will pay of in a few years once you add the fed and state incentives.
And Elizabeth….
ELIZABETH, NJ-This city of 125,000 people is set for a new round of redevelopment in the wake of its designation by the state, this morning, as a transit village.
[…]
According to a spokesman for the department of planning and community development, general plans being drawn up include more than 700 new residential units and 70,000 sf of commercial space around the train station, which serves as a hub for both NJ Transit and Amtrak service. The spokesman also says that the city will most likely tap into the private developer community for additional ideas for the redevelopment.
http://www.globest.com/news/840_840/newjersey/152817-1.html?type=pf
“We’re at 2004 asking prices in the condo market, and close to 2003 in closing prices.”
abamitphd,
………..and on our way to 2001 and possibly 1998 prices.
ChiFi (15)-
JR is a great pick! Only the hard-c@re need show up. If you can’t stink of tobacco and liquor, what else is there?
Who else is coming? When will it be confirmed? SG, you there?
banks are just taking allowances for bad debt and building into the cost structure….they don’t really care about competitive risk pricing….don’t read too much into this issue…..it’s just calculated risk-taking. If done correctly, it is fine. However, there are always hacks, cheaters, and short-cut artists. When they make a mess, it all depends how wide a swath gets nuked with them.
WSJ
CREDIT MARKETS
Does High-Yield Debt Face a Comeuppance?
Some Analysts See Troubling Signs Of Increasing Risk
By MICHAEL ANEIRO
February 10, 2007; Page B4
Even as banks suffer a bad housing-boom hangover — brought on by risky loans to some customers who are suddenly unable to pay them back — the lending bender continues in a similarly precarious market: corporate high-yield debt.
Emboldened by default rates that keep moving improbably lower and a credit cycle that seemingly refuses to turn south, investors keep lending their money to highly speculative companies that appear to exist solely at the mercy of the next refinancing.
“The assumption is that the broader underlying fundamentals remain strong,” said John Olert, an analyst with Fitch Ratings. “But typically, assumptions are made about the broad market that may or may not hold water in a worse market.”
Banks are finding out exactly how wrong some of their assumptions can be. In recent weeks, subprime lenders have been hit hard by mortgage defaults at levels that seemed like a distant possibility just a year ago.
In retrospect, it may seem like it should have been obvious: The scorching housing market was bound to cool off, while rock-bottom interest rates had nowhere to go but up, and when that happened the riskiest subprime loans that appeared safe during the boom times would start to default.
Yet an eerily similar scenario is still playing out in the high-yield debt market, particularly in the riskiest sectors of that market, and many investors seem disinclined to believe that a day of reckoning is inevitable.
“I don’t think it’s happening yet [in high yield] because liquidity is robust enough to delay any type of effect,” Mr. Olert said.
Indeed, many cite the influx of money into credit derivatives, which has helped investors to spread out their risk and provided ballast for the high-yield market as a whole. Some have even suggested that derivatives such as collateralized debt obligations have permanently altered the historical rhythms of the credit cycle.
But Mr. Olert said the signs of increasing risk are apparent by the amount of companies shifting toward the riskiest end of the ratings spectrum. Bonds assigned a CCC rating by the three major rating agencies currently constitute 15.9% of all junk bonds, according to the Merrill Lynch High-Yield Master II Index. Since 1996, the percentage of CCCs has ranged between 5.9% and 17.5%.
Investor confidence has been bolstered not only by low default rates, but by historically high recovery rates of 65% for bonds and nearly 90% for leveraged loans when these companies do default, according to Edward Altman, a finance professor at New York University’s Stern School of Business.
“It’s not only the low default rate, it’s also the high recovery rate. We’ve never seen that before. This is an indication to me that the situation will not persist,” he said.
With many predicting an economic slowdown and a rising default rate in 2007, some analysts say investors in the riskiest junk bonds will be exposed to potentially severe losses when the companies that issue these bonds run into trouble. But many market participants were sounding similar alarms a year ago, and instead investors rode a booming junk-bond market to double-digit returns in 2006.
The comeuppance has clearly begun for some dabbling in derivatives linked to subprime home loans. On Friday, the riskiest BBB-minus slice of the benchmark ABX derivative index widened by 1.5 percentage points to 8.75 percentage points over the London interbank offered rate, or Libor. Less than a month ago, that figure stood at 4.62 percentage points.
The ABX index, which was created about a year ago to help investors hedge their exposure to the housing market, includes five subindexes ranging from the highest AAA slice to the lowest, and riskiest, BBB-minus slice. Investors such as hedge funds and banks wagering on the performance of subprime loans have focused their trades on the riskiest tranche of the index in recent months.
Meanwhile, risk premiums for highly speculative bonds have fallen to historic lows. The index of CCC-rated bonds posted a record-low spread level of 4.59 percentage points in late January, according to Merrill Lynch, well below the historical average of 11.20 percentage points over 10-year Treasury notes.
#25
I hope so. This is like watching paint dry.
My only suggestion to Obama. Buy a few ties and wear them.
jb
JB, thanks for taking that out of moderation. Any chance you can tell me what triggered it so I know what to avoid?
Can’t tell with a quick look. Usually it’s because some moderated word exists within a larger word.
jb
#27
what’s interesting is that you have the same innovations in corporate in consumer credit.
firms have responded by reducing their leverage and strengthening their balance sheets. most of the credit risk that is traded is synthetic (i.e. does not involve an investor taking a funded position in a bond or loan). there really doesn’t seem to be a bubble on the corporate side.
however, consumers have responded the opposite way, borrowing like crazy and letting their balance sheets worsen by the quarter.
maybe we should force people be to be publicly-traded and publish quarterly financials.
“maybe we should force people be to be publicly-traded and publish quarterly financials.”
abamitphd,
That would be a good reason for taking a hel. Utilize it to sell the s*it short. Lever up on each and every tranche of that trade.
“On Friday, the riskiest BBB-minus slice of the benchmark ABX derivative index widened by 1.5 percentage points to 8.75 percentage points over the London interbank offered rate, or Libor. Less than a month ago, that figure stood at 4.62 percentage points.”
Chi[29],
Close to double in a month. WOW. The market giveth and the market taketh. Nothing more than that. Only one question remains, how long/how severe??
abamitphd Says:
February 10th, 2007 at 11:39 am
#27
firms have responded by reducing their leverage and strengthening their balance sheets. most of the credit risk that is traded is synthetic (i.e. does not involve an investor taking a funded position in a bond or loan).
Q: How do the market makers lay off the risk? Someone is taking a funded position if they can’t find a speculator to close out the exposure.
Clot – Care to give your take on Post #14?
#37
that’s the beauty of synthetic derivatives. it’s more like selling insurance than buying a bond. you just have to margin on the mark-to-market value of the position.
as long as there are people that want to buy and sell at the same price, the market maker has no net position, and when something bad happens, a big gain somewhere is offset by a big loss elsewhere.
the problem is when the market maker thinks he knows better than anyone else and starts to take net positions. this is what happened last may, when investment banks thought that investors were willing to sell mezz protection for two low a spread.
the fact that prices in the ABX are so volatile suggests that investment banks have learned their lesson, keeping zero net positions and letting price go where it needs to.
A “networking event” sounds like a great idea, but then we’re no longer anonymous. How will that effect our posts?
Same thing that happens to most message boards. The regulars eventually meet (or communicate outside of the board) and cliques form.
How will that effect our posts? (from my own #40)
Make that “affect” our posts, for all you defenders of the language and editors out there.
“In addition to the rising hostility between US and Iran, that’s what is driving up the price of gold.”
Twice,
It started as a dollar play and will finish a dollar play. However, when you are in a bull market, the media can beat any drum.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aBDouX0a6h6o&refer=home
abamitphd Says:
February 10th, 2007 at 1:03 pm
#37
you just have to margin on the mark-to-market value of the position.
WHAT IF THE VALUE IS THEORETICAL AND IS BEING CONTESTED BY COUNTERPARTIES?
as long as there are people that want to buy and sell at the same price, the market maker has no net position, and when something bad happens, a big gain somewhere is offset by a big loss elsewhere.
THIS IS MY QUESTION…..AT A CERTAIN POINT, A MARKET MAKER WILL JUST PRICE AT THEORETICAL COST PLUS A MARGIN WITH NO COUNTERPARTY TO LAYOFF THE RISK….HOW OFTEN DOES THIS HAPPEN WHEN THERE IS MONEY TO BE MADE IN XACTING
the problem is when the market maker thinks he knows better than anyone else and starts to take net positions YES
the fact that prices in the ABX are so volatile suggests that investment banks have learned their lesson TRUE?
keeping zero net positions and letting price go where it needs to TRUE?
I AM ASKING MORE FOR EDUCATION THAN DISPUTING ANYTHING YOU ARE POSITING
“Clot – Care to give your take on Post #14?”
For some reason, I had visions of Jim Mora and the Coors Light commercial,any football fan will understand.
Coach Mora, “How would Clot respond to this post?”
Jim Mora, “Clot?? Clot?? “Why ask a Tar Heel that question, you must ask a Dookie. Ask Clot???
#45
I understand we’re just tyring to figure this stuff out. If either of us had a handle on it we would be spending the weekend in the Carribean instead of posting here.
WHAT IF THE VALUE IS THEORETICAL AND IS BEING CONTESTED BY COUNTERPARTIES?
My sense is that the one doing the margin lending determines how market value is calculated in order to mark the position to market. If you as an investor are not happy with how it is done, you have to go find someone else to finance your position.
I have heard some people worry about competition to the bottom, where margin lenders who want business will give terms (i.e. permit too much leverage) in order to attract trading business.
THIS IS MY QUESTION…..AT A CERTAIN POINT, A MARKET MAKER WILL JUST PRICE AT THEORETICAL COST PLUS A MARGIN WITH NO COUNTERPARTY TO LAYOFF THE RISK….HOW OFTEN DOES THIS HAPPEN WHEN THERE IS MONEY TO BE MADE IN XACTING
I think that a market maker will price so that he has zero net position. If we’re talking about the BBB-rated tranche of the ABX, the spread should be set so that the dollar volume of protection sold by investors is equal to the dollar volume of protection purchased by investors.
The market maker makes money off the bid-ask spread and in principle has very little risk.
The trouble that the banks got into last year is that they thought the market price of the BBB tranche on the corprate CDX was too low, and they tried to make money off of that by running unbalance positions. In particular, they sold the BBB tranches (i.e. purchased protection), and then turned around and sold protection on the entire portfolio. This left them implicity with an equity tranche and a senior tranche. If nothing happens, they get cash flow from the protection tha they sold on the portfolio and only have to pay for protection on the BBB tranche that they originally sold. Then they try to hedge the risk that they retained. It turns out that they couldn’t hedge as well as they throught they could, and they lost a ton of money.
“I think that a market maker will price so that he has zero net position”
“abamitphd”
I am curious how many market makers don’t have a zero net position. How much is kept in house and traded, repackaged,and sliced. If kept “in house”, then it can be counted as an asset and placed in leveraged portfolios, passing
around more risk.
On the other hand, in conjunction with your “flat” thesis, the market makers add a time provision where the lending institution must take back non performing loans. Is this just the first arrows being shot, ownit, new century,mln, etc…??
http://www.consumeraffairs.com/news04/2007/01/mln_subprime.html
Any tips for a first time homebuyer. I’m a single guy, 29, work in Finance making about $75K – $80k. Got $10K saved for a down payment and can borrow about $23K from my 401k (which I’m not convinced I want to do as its been my only consistent form of savings over the past year). Leaning toward a 30 yr fixed and putting about $20-$25K down, borrowing the rest (80-10-10). Looking in the $200-$250k range in Middlesex County. You all seem well versed on the topic and any comments or help would be greatly appreciated. For example, any recommeded lenders with good terms?
I see your point, and I was going to raise the issue that you mentioned in the last paragraph….that being, these markets are almost impossible to dynamically hedge for the market maker {or non-speculating counterparty/client}, because there can’t possibly have been enough experience under duress, and through so many exponential outcomes, to provide sufficent guidance {e.g., Amaranth – non absolute truisms}. You can be all clear in the morning and bankrupt at lunch. So much of this work is theoretical, that extreme outcomes (i.e. statistically infinitessimal in the model) almost guarantee blow up. It goes beyond a VAR issue, because it is a matter of “heads” I win big, and “tails” you lose and I keep last year’s outsized fees paid in cash.
What happens when risk is laid off and you counterparty that you are depending to cover you blows up rendering your insurance uncollectible?
This all sounds alarmist, and for the most part it is. However, IF AND WHEN it blows, this will be the pattern, and it also may be sourced in the collateral piece {MBS use as de facto cash}, forcing margin calls, forcing position unwinds, forcing REALIZATION of loses on the books.
to put my fact to my posts
should be
to put my face to my posts
#48
There are two sides to any financial transaction. If the risk isn’t retained by the investment bank, it is sold to some other investor.
You worry about these banks taking big positions because large losses could impair their ability to make makets and underwrite new bonds and loans.
But if we’re just talking about one rich guy making some money and another rich guy losing money, it doesn’t seem like that big of a deal.
The market makers are really there just to buy and sell securities. The mortgage pool you are talking about is structured by another part of the bank.
There is a natural problem when you originate loans but don’t retain any risks (as is the case of mortgage brokers), that you don’t have an incentive to screen closely. The put-back provision is intended to discipline the broker into getting underwriting right so problems don’t develop. However, it won’t be very effective if the broker goes under and there is no one left to put the loans back to.
John H.
I would wait until 2008 before buying anything, I think you’ll get 20% off next year. 200K is a lot for a condo in Middlesex County.
200K still won’t get you a nice place in Middlesex Cty. Maybe in a few more years it will. And then again, maybe it won’t.
#50
counterparty risk management is crucial to you having any chance to make money.
that’s why these positions are marked to market every day. if you have an in the money position, your counterparty will have collateral backing his liability to you. the main risk is that prices swing in your favor during the day and your counterpary doesn’t have the collateral at the end of the day to cover.
for exchange-traded derivatives, this would be a big deal, as it would affect the ability of your counterparty to trade in the future. so they will make every effort to make that collateral call.
i think that the big threat is the other way around. you have a position that goes out of the money and you want out. however, liquidity dries up and you can’t find someone to help you unwind the position at a reasonable price, and end up losing tons of money.
53,
Thanks.
“Any tips for a first time homebuyer. … Got $10K saved for a down payment…”
Yes — with only $10K saved, you’re ready to become a tenant, not a homeowner.
100% financing? That’s so 2005. Hang around here for awhile, but don’t let the abuse get you down, it’s like eating broccoli — hard to take, but good for you in the end.
The history of the house i am renting is that he baught the house 1 1/2 years ago as an investment. He owns the house next door. Based on the sale price i know i rent for about 2/3 of what his mortgage is.
So I get a visit from my landlord today. My lease is up in about 2 months so he asks me if i am interested in signing a new lease. I tell him I am. Then he says that he is losng a couple hundred $$$ each month on the house and he is going to have to raise the rent because of this. (Like i feel his pain it is my responsibility to help him out) Tell him i will have to think about it. I know i am paying the going rate for rental houses where i live.
Oh the kicker is he works for the REALY big bank that is having big problems rght now ;)
Have no problem moving if he raises the rent.
#58,
You’re right, that’s how we got in trouble in the first place, people like John that should be renting are buying with 100% financing at ultra low rates. On the first sign of trouble they’re defaulting and foreclosing. That’s how you get 7% delinquency on a MBS pool and 20% drop for the ABX index.
Went out today to see a home in yardley, pa. nice lil 4br,2.5 ba house (20 yrs old) priced at 499k. Finally put in an offer at 415K. My realtor being the dick that she is fought us tooth and nail to not put in such a low offer. i threatened to go to another realtor and also refused to tell her what my reservation price was (i.e. how much i was willing to max out at).. will keep youse guys posted on how this goes
–BM
http://www.brokeruniverse.com/hearing/
In some quarters it’s being called a liquidity crisis, the likes that haven’t been seen in the subprime sector since 1998. On Friday, National Mortgage News Online reported that Merrill Lynch was making margin calls on certain warehouse customers, asking these non-depositories for more capital. Meanwhile, we’re told that higher-ups at Merrill are questioning why it bought First Franklin — and why it paid so much money for it. Will heads roll at Merrill? A spokesman there told us that yes, margin calls are occurring, but the company is more than happy with First Franklin. We’re also told that some Wall Street firms are getting ready to trim back their warehouse lending operations. Which Wall Street firm will be the first to run screaming from the industry, shouting, “What have I done? What have I done?” Stay tuned…
Lenders Direct CEO Mike McQuiggan had this to say about the subprime carnage: “I see our industry in true recession right now. It’s touching everybody.” LD closed its wholesale platform on Thursday…
One source who’s been in the industry for 30 years told us that loan buybacks could affect, at worst, 10% of subprime production this year. If B&C lenders fund $600 billion, that would be $60 billion…
John H.
I agree with the other folks…save some more money and come back in a year or two. You’ll probably may even get 20% off today’s prices and be able to save 20% for a down payment. Good luck!
Rentlord,
Weren’t you looking in the Brunswicks?
Did you see the one on Craig’s List that’s going to an auction tomorrow with a starting bid of $274,500?
http://cnj.craigslist.org/rfs/276428580.html
SG Says:
February 10th, 2007 at 7:55 am
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
SG, this Friday is the friday before a long weekend. Is it possible to reschedule.
Thank you for all your hard work of putting it together.
CC
Scribe,
Is this really an auction? It looks like the seller can negotiatiate with bidders privately, in a seller controlled enviornment until an offer “acceptable to seller” is recieved.
Winner’s curse?
i threatened to go to another realtor and also refused to tell her what my reservation price was (i.e. how much i was willing to max out at).. will keep youse guys posted on how this goes
That’s funny my policy is to ask my clients not to tell me what there top or bottomline is, I don’t want to know until I need to. I prefer to negotiate based on the fact that this is their offer/ask take it or leave it. However many blurt it before I even get to say I don’t want to know.
KL
njrebear,
Gosh, I don’t know. Just saw it in passing and thought it might be of interest to rentlord.
Hey Rhyming’
I made a lowball offer a few months ago and was told that it was dismissed out-of-hand. Since then, while speaking with some “other people,” am now suspicious that my offer was ever presented at all. Is there anyway to be sure that the seller gets an offer ?
Beware of the pundits;
“Oct. 17 (Bloomberg) — New Century Financial Corp., Impac Mortgage Holdings Inc. and other real estate investment trusts that specialize in mortgages to risky borrowers will be able to weather new guidelines from regulators that call for tighter underwriting standards, according to Fox-Pitt, Kelton Inc.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aF_EIg2desjM
Zac
Where was the house and has it sold? Could you give me an Address? It is probable your offer was given to the owner, its just the question of how. A steak served on a dirty garbage can lid is garbage.
KL
“A steak served on a dirty garbage can lid is garbage.”
KL,
Sounds like some of the best diners in town.
910 Belvidere Ave, Plainfield. Still for sale, more than a year now. Tudor style with red roof. Has been relisted.
Can anyone with access to Somerset County mls give me the address, DOM, any re-list information of MLS# 2268533.
This is in Warren Township. Any other information on this development will be appreciated.
Thanks in advance.
Zac
Please ask Jim for my rhymingrealtor email.
BC BOB,
We do have the best diners!
But I want elaborate on my point. I know 99% of realtors present all offers even when they are verbal, it’s just how they present them.
Like:
You know Mr. Smith I am only telling you about this really bad offer because I am legally bound too. I don’t think you should take it seriously.
Or
Mr. Smith we have recieved a verbal offer that you may feel is low, why don’t we have them write it up so we can see if they are serious and what the other terms are.
Steak on a garbage can lid or
Garbage on a beautiful platter
KL
anti-trump
2268533, 11 highmount Ave Dom 297
I Believe know that I saw the owner’s name he is an Orthodontist from my town.
KL
Situs (38)-
So, what’s my take on BC Bob’s post #14? Well, much as in previous discussions here about downturns in the RE cycle and recognizing “bottoms”, I think BC has the mechanics and the timeline just about right. Residential RE downs are a slow, methodical unwind more than they are spectacular crashes followed by a rush for the exits. It’s also been mentioned here that the current downturn has actually been relatively rapid and precipitous, as compared to the late 80s- early 90s RTC debacle.
I would only differ with BC on a few points, most having to do with phenomena that are market-specific to RE:
1) I don’t think that even in 4-5 years- and after more market decline than what we’ve witnessed so far- you’ll hear the cocktail party chatter go negative on RE. The desire for homeownership, for whatever reason, springs eternal. If the S & L debacle didn’t do in ALL types of RE for at least a full generation, I don’t think anything else can. We Americans seem to be hardwired with self-erasing memories (core-dumping about once every 10 years) when it comes to our thoughts and feelings about owning a home.
2) Following from #1, my best explanation for this phenomenon (other than my facetious decennial “core-dump” thesis) is that, contrary to BCs posit, captal preservation is on NO ONE’S mind when it comes to home purchase decisions. BC is a trained, paid financial professional whose own approach to residential RE runs counter to virtually everyone in America who does not regularly post at this blog. BC has applied logic and forethought to his own decisions regarding an asset class that regularly turns logical, levelheaded citizens into adrenaline-charged, eight-headed Tetras. And…that’s living proof that housing has NOTHING to do with sticks, stones or “location, location, location” and EVERYTHING to do with ego, insecurity, conspicuous consumption, flash, one-upsmanship, misguided notions of security and the desire to resolve one’s own childhood wounds and neuroses.
About the only proof of my thesis I have to offer is that I’ve been selling RE- steadily- for many more years than I care to publicly admit. In all that time, I have never- and probably will never- become interested in houses. Houses…and styles, decorating, landscaping, maintenance and construction…interest me about as much as…hmm, what’s a good parallel? Dog racing.
However, I find people- especially people in intense, emotionally-charged states, endlessly interesting. I also find the study of what one can convince people to do while they are posessed of these states wholly fascinating.
3) Finally, you can’t dismiss good, old-fashioned peer pressure as a catalyst for a steady underpinning of public desire to own homes. Moms, Dads, wives and friends place an admittedly constant thrust of psychological pressure to buy RE that the average purchaser of, say, pork bellies, will never feel. We’re the only asset class on Earth that is propelled by the application of righteous, familial guilt.
KL. appreciate your comment but im a strong disbeliever in what ANY realtor says. i’ve had similar expereinces with 2-3 realtors and well, i’m a stronger personality than they are
Ok, guys and gals, you interpret this one for me.
I emailed a realtor asking about a specific property that was an open house last week. I don’t know how long it’s been listed. I think less than a month.
I asked if any offers were made and the reply back was, “No offers have been made but it’s seen a lot of activity and is priced aggressively to sell.”
So, let me get this straight: It’s priced aggrssively to sell but no offers have been made.
I’m I missing something here? Help me out, because in the immortal words of Joe Pesci in Goodfellas, “maybe it’s me, maybe I’m a little f***ed up” here.
Drat! My #77 moderated. Sorry, Situs. Was trying to answer your #38.
Bowel Movement (78)-
Don’t even sniff again at “appreciating” KL then taking a backhanded swipe at her and others like us. I seriously doubt that you are a “stronger”- or more determined- personality than me (especially when I’m tired).
Work out your trust issues somewhere other than here. If not, I promise I will get after you something fierce. And pretty much anyone who hangs here will verify that for you.
bully
Clotpoll,
Which post are you referring to?
you, ya big goon
oops – sorry Gary. I was referring to Clot. And Clot is referring to you. post #78.
um.. it looks like post #77 to me.
“Blue chip” is the nickname for a company that is generally viewed as being in excellent financial shape, firmly entrenched as a leader in its field, having quality products and delivering long-term shareholder and customer value.”
“Like traditional blue chips, New Century Financial Corporation has had excellent performance in comparison to its competitors with consistent and strong financial performance.”
“New Century aims to generate consistent results like traditional blue chips, while putting strong emphasis on the way these results are achieved.New Century is the first of a new breed of companies.”
http://www.ncen.com/new_shade_of_blue_chip/index.html
IRVINE, Calif., Feb. 7 /PRNewswire-FirstCall/ — New Century Financial Corporation (NYSE: NEW), a real estate investment trust (REIT), today announced that total mortgage loan production for January 2007 was $4.2 billion, reflecting a 5.0 percent increase compared with $4.0 billion in January 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20061012/LATH070LOGO)
“Given the current environment and our recently tightened underwriting guidelines, we are pleased with the year-over-year loan production growth in January,” said Brad A. Morrice, President and Chief Executive Officer.
#31 J.B. /Obama needs a tie:
Heck, maybe he’s mild sensory and can’t stand anything around his neck.
I’d be more worried about http://sptimes.com/2007/02/07/Worldandnation/Obama_tries_to_drop_d.shtml
But I guess I don’t even see that as a real issue as long as he doesn’t smoke up the historical paintings with yellow tar stains.
umm, you’re right.
Yeah, #77. No bone to pick w/Gary.
JB – Great website!!
Many of the new homes(VACANT) in Middlesex County which are owned by Realtors. Has anyone noticed this?
Meet a realtor today and the realtor mentioned that its great time to buy. Sounds like this is what they are driving into the brains of all agents. Coming straight from the NAR. Realtor tells me its a great time to buy if YOU KNOW HOW TO NEGOITATE.
New Century Mortgage/Home123 Open House
February 15, 2007
By Invitation
Interviews conducted 10 am to 7 pm (by invitation only
“New Century Mortgage is looking to hire Loan Advisors & Production Managers for our state of the art call center in Morris Plains, NJ.”
“Leads….Leads….Leads……
At Home123 Mortgage http://www.home123.com our Loan Officers are paid to sell, not to locate potential borrowers. Home123 Mortgage generates thousands of borrowers who are ready to move forward.”
“Our team is the reason for our leadership position in the mortgage lending field, and our ongoing success across the nation has catapulted us into a season of tremendous growth, creating a need for more talented Loan Officers.”
http://www.ncen.com/career_opportunities/recruiting_events/new_century_mortgage-home123_open_house_24297.html
Although, Gary, haven’t you ever dealt before with someone employing basic salesmanship?
Of course, the salesperson in your example was employing a tactic that was last effective in 1977.
News flash: sales people do employ various sales techniques when attempting to stoke a prospect’s interest. This- in and of itself- is neither illegal nor evidence of deep moral turpitude.
Realtors sell things. It is a selling job.
All Obama needs to worry about is coming out the other end of his candidacy alive.
I fear that any serious traction his candidacy gains makes the target on his back bigger and juicier for some wacko who’s probably already cleaned out a sporting goods store.
although it’s a fine line
Clotpoll,
I understand, but the realtor has me scratching my head on that one. If the sellers want to move the house, perhaps it’s not priced as aggressively as this realtor thinks.
you’re right Gary.
Yes, Gary, you are right. You’re just applying logic to an illogical sales approach to an untenable selling proposition.
Like David Byrne once said, stop making sense.
Clotpoll, I agree he’s in need of some special consideration in his run.
How do you think he’d look in the Popemobile?
Maybe the Irish guy who bought the used one is willing to loan it for a good cause.
http://news.bbc.co.uk/2/hi/europe/5309454.stm
Gee, that’s funny, my wife keeps telling me I don’t make sense. :) “See honey, I do have a couple of brain cells left!!”
Gary, wait about 6 months, then offer them a lowball.
Pat (98)-
LOL…yeah, but I don’t think that car is his style.
I like him the same way I admire conservatives like Goldwater. Purists. Consistent.
When you paint yourself into an intellectual corner in politics, your only alternative is honesty.
Zac, If that house is still listed in 6 months, I’ll serve them up a David Cone laredo pitch.
You know, the more I think about it, the more I really think the Popemobile would clinch it for him.
Could Hillary compete with a tie-less, skinny dude waving from the inside of a smoked up Popemobile?
You gotta believe people would vote for him knowing why he was in that car.
what’s a fast-ball mean in RE terms ?
Zac, I’m referring to a slow, side-arm sinker. As for a fast-ball… ya got me. Maybe it means, “swing and a miss”.
gotcha. How about making a fastball an offer only good for 24 hours.
Bingo, Zac! Sounds good to me!! I could see it now: “This is Jack Bauer, here is my offer and it’s only good for 24 hours!”
Cash. Take it or leave it.
lol!! Cash, I wish! Maybe somewhere in rural Mississippi but certainly not in North Jersey.
“All-cash” offers. RE’s ultimate idiot test.
It’s all cash at the closing.
More fun tommorrow.. here’s hoping that the open house listings in the Sunday Bergen Record are 36 pages long. I will now retire to bedlam… (as the National Anthem begins and the flag waves)
tommorrow = tomorrow… NOW I’m done. (Damn, and I thought I had 2 brain cells left)
Experience speaks for itself and when dealing with certain folks one needs to look out for oneself. the reality is that i personally don’t care what you think :) its my money and i’m going to do with it accordingly regardless of your “something fierce”. i think we know that the deal happening is not always in the buyers interests only. Oh and how mature with the :Bowel Movement: connotation..got any more?
Sorry guys, was busy yesterday so could not post.
Yes, the NJ RE Report group meeting is on Feb 16th at J R Cigar in Whippany. So far we have 13 people sign up, and 6 may be.
I know the place is probably most contentious. My take is lets do it this time at JR, if we plan to meet again later, we can do it someplace else.
So if you have not, Sign up for NJ RE Report Network meeting February 16th 6:30 PM at,
http://www.evite.com/app/publicUrl/skgala@yahoo.com/njrereport
syncmaster & jmacdaddio:
RE: your post on lot of Indians planning to going back.
Well India is in very high RE Bubble at present. NJ or even FL, CA etc… is nothing compared to Indian RE bubble. I am from Bombay, the prices there have doubled in just one year alone. I have heard same stories in most major cities (where the real jobs are). A 2 bedroom condo in decent suburb in Bombay now costs at least $200,000 USD (about 80 lakh Rs). This condos used to cost about half 2 years ago with no buyers.
With that kind of RE Prices in India, I will tell you, most people won’t be going back soon.
How many designated Transit Villages are there?
There are currently 17 designated Transit Villages. They are Pleasantville (1999), Morristown (1999), Rutherford (1999), South Amboy (1999), South Orange (1999), Riverside (2001), Rahway (2002), Metuchen (2003), Belmar (2003), Bloomfield (2003), Bound Brook (2003), Collingswood (2003), Cranford (2003) Matawan (2003), New Brunswick (2005), Journal Square/Jersey City (2005) and Netcong (2005).
http://www.state.nj.us/transportation/community/village/faq.shtm
Real Estate
How to Avoid Foreclosure
BusinessWeek Online
By Maya Roney
Has the American dream of homeownership turned into a personal nightmare? To hold onto your house, consider these tips and traps
http://biz.yahoo.com/weekend/foreclosure_1.html
Inventory is going up in NJ, +1% just last week, brace yourself for big discounts this spring. I am going to church to pray for the housing market.
Clot (81)
Thank you Clot, I guess chivalry is not dead. I must add however when I read post(78) I laughed, because I have met many BM’s, you know with “stronger personalities” if I were to post an answer it would be:
Um oookay.
KL
Re #111
Um oookay, now I’m confused: If it’s “all cash at closing,” [I always thought that myself]why is it that realtors even consider a buyers finances when presenting an offer, why is a cash buyer considered a stronger buyer than one who finances.
It cannot be both. It either matters or it does not.
#76 Thanks KL.
BTW which town is your office located?
Can someone look up this one for me in Farmingdale: MLS #20705228. Address, DOM, OLP.
“I am going to church to pray for the housing market.”
Frank [119],
Since you brought up church. For those of you that are non-catholics or catholics that don’t attend mass, there is a prayer in the middle of the mass called prayer of the faithful. Normally, there are 4-5 items that prayers are offered for. Usually, it’s centered on the sick, homeles, elderly, war, etc…
Well last night at mass, one of the prayers offered was; “We pray that our Legislator’s will represent their constituents in the manner that they were elected, to serve the people. We pray that they don’t utilize their position for personal gain”
I could not believe it. I actually choked. I was sitting around some people that I knew. They got a chuckle out of it. Can you imagine one prayer was for the safety of our soldiers in Iraq, the next praying for honesty and accountability from Trenton?? It’s so d*mn bad, that we are now praying for it in church???
BM:
I don’t think it is fair to judge every real-estate agent based on your past experience.
The way I look at it, I do my homework prior to making an offer or selling a place. The agent is essentially executing the transaction on my behalf and giving me certain recommendations which I can choose to accept or ignore based on how much trust/respect I have for the agent. I don’t let emotions come into play here. End of the day, it is a trade, i.e a financial transaction. It’s just that it is very emotional for most buyers/sellers.
I would assume that people get ripped of by their stock brokers much more easily than their realtors, yet there is not much emotion in buying stocks.
Funny add from today’s star ledger. Completely unedited:
“Be the envy of your family & friends. Buy your dream house without great credit and little down payment. 5BR, 5Bths, fireplace, 2 car garage, fnsh bsmnt, $895,000. Call Allen”
Clot [77]
“BC is a trained, paid financial professional”
Clot,
I must disagree. Yes I am paid, trained thru the school of hard knocks and hardly a professional, just a wee bit aware.
“contrary to BCs posit, capital preservation is on NO ONE’S mind when it comes to home purchase decisions”
My fault, I should have elaborated. You are right,presently capital preservation is not on the agenda. Dumb statement on my part. Hell the majority is/was putting zero down. It’s their credit standing and maybe a IRS problem, [if they are dealing with a recourse loan and foreclose] that are the possible consequences.
What I was referring to, but didn’t state it, was those that will be putting down 20-50%. For the masses, dumb statement. However, many on this site have stated that when they are ready to buy, they are prepared to come to the table with a hefty down payment. These are the ones that can be affected greatly by buying 12-18 months too soon.
HSBC targets migrants to salvage US loans
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=CH3XFSB51KL2PQFIQMFSFGGAVCBQ0IV0?xml=/money/2007/02/11/cnhsbc11.xml
The bank has scaled back much of its US sub-prime lending in response to the rapid, and unpredicted, deterioration of credit quality. But it plans to divert more resources to targeting new immigrants to the US…
An HSBC spokesman said: “Migrant workers coming into the US from Mexico and central America of all consumer groups are automatically part of the sub-prime market, as they don’t have a credit rating in the US. The vast majority will soon get a job, work hard and settle down. Two or three years later, they are no longer sub-prime customers.”
>>
IMO, HSBC has more to learn. When the current construction phase ends in the next couple of months HSBC will be left with another bagfull of bad loans.
Zac (122)-
Realtors are concerned with verifying the buyer’s financing so that the deal will end up being “all cash at the closing”. Once the financing is confirmed, there’s no difference between an all-cash and a financed offer.
Ironically, I’ve found more skullduggery lurking within all-cash propositions than those done with conventional financing. Very often, a slick buyer will use the inducement of “all cash” to: a) pump up an otherwise-weak offer; or, b) use “all cash” in order to hide a contingency.
I was taught by a very sharp agent a long time ago to immediately verify the source and amount of cash available to a buyer making an all-cash offer. Often, these buyers boast that it’s “sitting right in my checking account”.
I wish I could describe to you the faces of some of these people when I asked them to go to an ATM, run a balance check and bring me the receipt. Priceless!
i would never keep that much money in one account, let alone connect it to a bank card.
i still wish houses came with a bar-code to scan for a price. i hate the negotation process; often results in hard feelings. Hmmm, i wonder if Pathmark will take a couple of bucks off that steak.
BC (128)-
With you on the take about people who post here. However, anyone flush with cash (to the tune of a 20-50% downpayment) is definitely in the deep minority in today’s marketplace. In fact, that minority is so statistically-small that it can’t move the market at large.
Also, in my book, you qualify as a trained, paid financial professional…even if you’re not. LOL!!!
Regarding 128,
One other item. The cocktail chatter was referencing those who haved bought in this crazed cycle with zero down, and can’t afford it, and the flippers. It was not a reference to long term owners/investors. RE was one of the greatest investments that I have ever made. My animosity is only directed at this past, short term, crazed cycle.
Clotpoll,
It’s interesting what you said in post #133. In your estimation, what percentage of people are putting 20% down?
And I know this must’ve been asked 100 times and I probably missed it but does someone prepared to put at least 20% down with sizeable assets have any advantage over someone who is borderline both in assets and little down payment?
What are the pros/cons of taking out the maximum mortgage allowed without falling into the Jumbo category? Are there significant savings from not paying the mortgage insurance? Are rates better? Assume the buyer could pay all cash for a $600k home. How does he determine how much to finance?
could someone lookup 2371198 ?I need address, LD, DOM, OLP? thank you
Scribe, Yea i was looking in the brunswicks. Thanks for that link – although that house wouldn’t cut it.
I am starting to think about Bridgewater as well. My only real big criteria is commute to Rutgers (less than 1/2 hr prefered) and good schools.
HSBC’s meltdown, just an anomaly indeed:
“New Century, the second-largest subprime lender, said late yesterday it probably lost money in the last quarter and will need to restate 2006 earnings, and the company won’t make as many loans this year as it had previously forecast.”
” David Viniar, chief financial officer of New York-based Goldman Sachs Group Inc., said today about subprime lending. “That market’s going to get worse before it gets better.” ”
The iceberg grows larger….
“And watch the backhanded swipes at KL.”
Are u seriously on crack… the comments were not directed at KL. Seriously dude u need some evaluation…
SG,
Thank you for organizing the event, but unfortunately I will not be able to make it due to the choice of venue. Smoke does nightmarish things to me, so I think my inhaler and I will need to pass this time. Thanks again for organizing.
#125,
There’s no sense of praying for NJ politicians, they’re a lost cause. Make that all politicians.
Just thought I would add a little local flavor to the HSBC meltdown in the form of Solomon Dwek.
He’s the Monmouth County “investor” who bounced a $20M check at PNC bank. He needed the money to satisfy an immediate obligation to HSBC.
Aside from the fact that he’s clearly a disreputable moron, I haven’t heard one word about why he was willing to commit the crime to make sure HSBC got paid.
He does have a relative on the HSBC America board…
More vultures smelling the blood;
“KGS Announces Filing of Shareholder Securities Fraud Class Action Lawsuit Against New Century Financial Corp. — (NYSE: NEW)”
“New Century and certain of its officers and directors are charged with issuing a series of materially false and misleading statements in violation of Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.”
http://biz.yahoo.com/iw/070210/0214024.html
Weekly commentary on the markets from breakoutwatch.com :
The outlook for the economy is uncertain but on balance seems to be expansionary. Early in the week we had evidence that the service sector is expanding in contrast to manufacturing which is already in recession. The service sector is a bigger contributor to GDP, so on balance GDP is expected to grow, but at a slower pace than last year. Productivity is increasing and wage costs are rising only modestly, so wage push inflation does not seem to be a current threat. The biggest unknown quantity remains the potential impact of the downturn in the housing sector, how it will affect other sectors that rely on home sales to generate appliance, furnishings and DIY sales, and whether consumer spending will contract. The increasing number of mortgage defaults indicate consumers are coming under financial pressure and the savings rate was again negative last year indicating that personal debt levels are increasing. While some observers are optimistic that the housing market has bottomed, others point to the high levels of inventory still held by home builders as evidence that further price erosion is inevitable. A warning by Toll Brothers, a leading builder of residential homes, that revenues would fall by 19% in the first quarter, reinforces that view. The slower GDP growth this year will also limit profits in most sectors and so earnings are likely to be lower this year than last, so the current level of stock prices may come under pressure. The bottom line is that investors are nervous, as always, and there is little news to support a move to the upside at present.
Bob,
There are at least 10 vultures and probably more on the way.
http://www.marketwatch.com/tools/quotes/news.asp?siteid=mktw&symb=NEW&doctype=2007&dist=TQP_Mod_pressN
bear,
It doesn’t take long.
G7: Call for hedge fund scrutiny
Finance ministers say they will get ball rolling for greater oversight of hedge fund industry.
http://money.cnn.com/2007/02/11/news/international/g7_hedgefunds.reut/index.htm?postversion=2007021108
Great thread, guys. Made for a good reading early in the morning (I know it’s not, but I just woke up).
I am surprised at Clot’s assertion that 20-50% DP is a small portion of the market these days. Not saying I don’t believe him, just surprised. I would have thought it was more. But I guess with prices as high as they are…
I bought in 2003 with about 25% down. I recall the guy I bought it from telling me after closing that he had another offer at 35K more than mine but with only 5% down. He also thought the guy seemed shady so he decided to take my offer. I recall thinking I would have never said no to an offer that was 35K more, I’d probably take a chance and see if it worked out.
SG #117,
That list doesn’t include Elizabeth. It should.
SG #116,
Agreed. Moving to India with prices the way they are is ridiculous. Only way I’d do it is it I had ancestral property in a good location (which I don’t).
Gary (135)-
Most of the big-downpayment crowd are empty-nesters coming out of detached, SF homes that they’ve occupied for quite some time. No surprise there.
You might find it surprising that PA is the 3rd most-popular retirement destination (after FL and AZ), and NJ is home to a burgeoning over-55 population. More people are choosing to retire and stay close to home and family. NJ’s trade-down buyers are the ones, who IMO, are getting the best deals right now…both on the sell and buy side.
And, yes, in the current market, a buyer who has a significantly larger downpayment does have the inside track over someone putting down 10% or less. You see this advantage most markedly in multiple-offer situations in which the price is getting bid up to a level that threatens the subject property’s eventual chances of appraising for value. The buyer who is putting down a large amount is much more likely to be able to stay in the deal if the appraisal falls short (which is happening with much more frequency these days). The buyer who is putting little down usually gets blown out of a deal by an appraisal shortfall, because the lender may decide not to lend as much as previously expected, or the seller must withdraw concessions toward prepaids, closing costs or points in order to bring the appraisal in line.
Sync, SG
Question: Are the Indians still interested in buying in Iselin, Edison, and Colonia – or have prices gone too high?
Seneca (136)-
Every buyer’s situation is a little different, especially in those situations. I’ve found that people with gobs of cash to spend on housing usually come to a decision based upon how much tax advantage they may need and their personal feelings about the value of RE vs alternative investments.
scribe #153,
I don’t know anyone who is looking to buy there anymore. It’s too expensive and way too crowded. The newer immigrants tend to not mind the congestion as much (for obvious reasons) but they’re priced out. And the newer immigrants who have commuted to work to places like Bridgewater and Basking Ridge and Whitehouse station realize what they’re missing out on.
All that said, I do know a few Indian families who live in Edison and are looking to tear their places down and rebuild. Many of them are unwilling to move because they’re comfortable. It’s a comfortable place to live if you’re an Indian immigrant with spotty English.
“And the newer immigrants who have commuted” should have read “And the less recent immigrants who have commuted”… doh!
Bilious Moron (140)-
Don’t play disingenuous with me. Read back in the thread; evidently KL did take some offense at your blanket indictment of Realtors (in case you haven’t put the pieces together, KL is a Realtor).
I read at an above-elementary-grade level, and I don’t think I misconstrued the meaning of your original Piltdownesque barb. However, I’m perfectly willing to believe that you might not have intended to insult KL.
But that’s the funny thing about making absolute statements…the only thing about them that’s totally true is that you’re absolutely guranteed to cheese someone off.
When are you going to offer up something of substance here? The regulars don’t have a habit of feeding trolls.
Sync,
That was my feeling, too – that prices have gone too high.
A lot of people seem to think they’ll still be able to sell to the Indians at a premium because of proximity to “little India.” But I think that assumption may be flawed, especially when it comes to the older “development” houses that are way overpriced and not that great.
scribe (158)-
Second that. When these buyers “comparison shop”, other areas start to stack up better in comparison to “Little India”. We’ve seen a tremendous influx of Indians in both Somerset and Hunterdon over the past 2-3 years. You can get a much better home and school system here…and Edison is only a short 78-to-287 drive away.
I just wish somebody who owns a really good Little India restaurant would open one in Hunterdon.
Clot,
I think you’re indulging in a bit of name calling for BM, which I thought Grim has discouraged. You also seem pretty fast on the trigger and a bit thin-skinned. No? Just my impression.
I generally enjoy the depth of knowledge and experience you bring to the discussion, and I have to admit you have a fine command of the language. Sometimes I feel you might be too clever by half.
Clot,
I think the area around that Metropark train station is going through a more fundamental change – from being blue-collar/working class to being more white-collar/commuter-based.
The big building boom was from about 1957 through the early 1960’s, after the Parkway came through.
I think what’s going on now is that it’s 50 years later, and the area is just at the start of being re-developed.
People talk about how the Indians are buying like mad, but I think that trend has already passed, and the new trend is that a more upscale, urbanized population is moving in. A lot of the new houses are much more high-end.
“However, anyone flush with cash (to the tune of a 20-50% downpayment) is definitely in the deep minority in today’s marketplace.”
Clot,
Amazing. It’s hard for me to comprehend how the deep majority have no skin in the game. I am not doubting what you are saying, you know a lot better than me. I guess it is true,zero downers are essentially owning a free option. What’s is their incentive to stay put, [no pun] with nothing down, if market dynamics result in them being upside down??
I went to an open house today and met a real professional,experienced and knowledgeable realtor. Boy, does she have her pulse on this market. She will even lowball for me. By the way, her name is KL.
If I were buying a home, which I’m not, I would only put 20% down.
Just enough to avoid PMI. That’s the worst form of insurance ’cause it protects the lender, not the borrower. Keeps an extra couple of hundred bucks a month in my pocket.
I’d retain control of any monies over the 20% needed to beat the PMI.
Any more than 20% is just not necessary if your FICO scores are good.
BC Bob,
“Lowball” is KL’s middle name, I understand. Keep us posted how things look in the trenches. I’ve just renewed my lease so I’m going to sit tight. Somehow, I just can’t believe you’ll desert us for “bagholding” status.
BTW, can anyone define “bagholder?” Is that a no-down buyer who is upside-down from the day of the close? Is a 20% down buyer still considered a “bagholder?” If you have 50% equity are you a bagholder? Unless you own free and clear, are you a bagholder?
Never too late to define terms, especially one that’s thrown around a lot.
Bagholder: Of the buyer and seller, the one who loses the most equity in a real estate deal in a stagnant market.
Just one attempt at this.
“Somehow, I just can’t believe you’ll desert us for “bagholding” status.”
Twice,
You’re right. Only probing. Kind of like chasing at the Jersey shore. Just looking for fun, not ready for marriage.
Twice,
Forget about bagholder, what the hell is a real estate wiki??
ACC Final- BC over Fla St in Tallahassee, 68-67. Getting ready for the Dookies on Wednesday and of course the Tar Heels on Saturday, both in Beantown.
Clot,
Wager??
A lot of people seem to think they’ll still be able to sell to the Indians at a premium because of proximity to “little India.”
I can’t help but laugh. I’m Indian and I have no desire to move closer to Little India. Little India is good eating but the drive is terrible, parking is a pain and the locals drive like they’re in Bombay. I hate going there.
I think the only Indians who will buy in that area are a. people who want to be in walking distance of NJ transit train stations (and that only targets a small subset of the total area) and b. new immigrants who want to cushion the initial culture shock.
Sync,
For all the times I’ve walked through “little India,” I’ve never eaten there.
Some day, I have to do that :)
What central NJ really needs more of are places to eat good middle eastern food. Indian food pales in comparison to that stuff. The nearest from me is this Turkish place in Highland Park but it’s kinda pricey so I don’t do that a lot. Would be nice if there were more (and cheaper).
Man, oh, man, synch. Now I’m jonesin for vindaloo.
You know, somebody would make a killing over here in PA if they did delivery on Indian (with spice selection/low/medium/hot)
We have to go ten miles for decent stuff.
Have you ever been to Chutney Manor on Rte 1? Any good?
Clot,
Indian restaurant in Hunterdon?? I may invest in that???
Chutney manor is fine. It’s about average I’d say. I personally like Moghul (Oak Tree Rd in Edison).
“Wiki” is the Hawaiian word for quick. As in, “bring me that haole to roast in the imu, wiki wiki.” Of course, Wikipedia appropriated it. As did Akamai Technologies, if they’re still around, “akamai” meaning smart in Hawaiian.
As to real estate wiki, BC Bob, I haven’t the faintest, and since Grim (who brought this up) is no doubt searching thru his humidor for the right stogie for Friday’s hang, or calculating his new electric bill for the coral grotto come June, we’ll have to keep guessing :)
Brad Inman has a wiki on his site. I think it’s pretty new, or else he recently linked it in a new spot.
Twice,
You’re roasting haoles? How do we taste?
Two questions for all of you- where is Little India exactly and what is the difference between Roselle and Roselle Park and are either area to be considered seriously?
2x Shy (160)-
Yeah, I am probably way too quick on the trigger. But I think everyone here, no matter what the viewpoint, has a pretty healthy respect for ANY well-argued opinion. The level of blanket invective and finger-pointing at Realtors has also gone way down over the past few weeks, and it’s nice to get a conversation going without having to contend with a pack of trolls. As even many of the most strident bear camp have pointed out repeatedly, the RE industry is not the army of Satan on Earth. So when I see rather blatant trolling- such as BM’s- especially in retort to a Realtor who’s just answered his question…well, then it’s time for a bit of the ultra-violence.
If the consensus is that I’ve just shot a sparrow with a howitzer, I’ll back off.
Speaking of trolls, where is Booyah Bob?
BC (173)-
I think the Indian thing is so right for Hunterdon, I wish I hadn’t posted the idea here!
Indian- with a delivery service to boot- well, whoever does that here is gonna do scary good biz.
The category is so wide open that the food, theme & decor can be anything between a Little India joint and Bread Bar/Tabla in NYC…street food to three-star. As long as it’s good, it’ll be a hit.
BC-
Wager on BC/Heels?
How about a quart of Boston Baked Beans vs. a carton of Winstons?
All,
You mean I missed the opportunity to buy my home(s) with zero down?
That’s enough to make ‘listen’ cry.
WAAAAAAAAAAAAAAAAAAAAH!!!
2x Shy (175)-
Akamai? Oh yeah, they’re still around. Also one of the biggest tech growth stories going over the past 18 months (NASDAQ: AKAM). They’re the guys who have all the juju behind streaming netcasts of March Madness and the World Cup (some World Cup games approached 2 million live streams). Check this beauty of a chart:
http://finance.google.com/finance?q=akam
All disclaimers apply. Anyone following stock advice dispensed by me is an idiot.
Frtom Post #49
Thanks for the advice, although I must admit that isn’t what I was hoping to hear, but I do appreciate it. With $23K able to borrow from my 401k, I actually have about $33K saved and available for downpayment if need be. Seems like most on the board here think that prices will continue to drop, but what about interest rates. As prices drop, interest rates will undoubtedly increase. What do you think one of these places will go for in a years time? Better yet anyone with an MLS access want to tell me what places in the same complex have sold for recently? MLS ID: 711508
On the creepy side, Akamai technology also allows the DOD to stream real-time feed of battles in Iraq. Yuk.
I held an Open house today
Did anyone come? I’ll bet you’ll all say
Well, Not to many
It was pretty slow.
But someone came
That you all know
It was a fellow blogger
That came thru that door
It was BC Bob !
And I must say, he is a roar!
It seems we know all
the same folks
And so, we understand all
the same jokes!
Well I hope that he & BC Jane
Will drop by another I’m at
It made the time at my open house
seem to go by, like that!
KL
#177
Most of Roselle is BAD (drugs, stolen cars, killings, etc…) Roselle Park is GOOD (good schools, train station) and livable.
John (#184),
Prices will drop and the interest rates because Fed will cut rates to deal with this mess. You can check recent sales on zillow.com or cyberhomes.com
“How about a quart of Boston Baked Beans vs. a carton of Winstons?”
Clot,
I prefer liquids, a case of Sam Adams, right from the brewery in Southie. Of course, its the point spread. Right??
Clot,
Did you see the post “Sorry wrong house” ? It is the second one below this.
Can you just scream ( in a manly voice of course) ? Have you ever see showing instructions that said ” Go around and check to see if any doors are open ,disregard the address, don’t even check the picture”.
How does that saying go?
We have seen the enemy, he is us.
Oh but I’m sure even Doctors have felt this frustration, do you think it’s with such regularity though??
KL
“That’s enough to make ‘listen’ cry.”
Listen.
How was the Super Bowl???? Did BOOOYAAAAA enjoy??? Will BOOOYAAAAA be with us later tonight/tomorrow??
John H,
2B/2B on 93 GOODWIN DR in North Brunswick Twp sold for 239,900, OLP was 289,900, DOM 120. Few others sold at a big discount as well.
” Check this beauty of a chart:”
Clot,
Beauty is in the eye of the beholder;
http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AKAM
“Finance ministers and central bankers from the Group of Seven nations urged investors to recognise Japan’s economic recovery may be stronger than they think, warning against making “one-way bets” against the yen.”
This may turn out to be the most oversubscribed warning the markets have ever witnessed. If the G-7 is onto it, obviously it’s not a problem. Does the hiccup pop up elsewhere??
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFXxAnBIQEUI&refer=home
lostinny,
“little India” is in Iselin. Take the train to Metropark and ask any of the cab drivers to take you there. Can’t miss it.
Clot,
Move on that idea. One of the Iselin restaurants is fairly famous, though I don’t know which one. Find out, and get the owner to go in with you! :)
John H.
Funding a down payment using 401k funds is a problematic approach at best. Borrowed 401k funds must be paid, on top of the new mortgage, property taxes etc. And if you change jobs, the 401k loan must be paid in full immediately. Just some considerations here.
In any case, if you buy a home with intentions to stay three years or more, you should be fine with the purchase.
WAAAAAAAAAAAH!!!!
Clot [190],
Went to the vidoetape. Upon further review, how about a Sat or Sun lunch at the Clinton House?? However, don’t want to interfere with an open house. Don’t show Crazie Janie a house in Clinton, she may want to buy. She loves Clinton.
KL (190)-
All that cr@p is just background noise. The fools only make the good stand out in greater relief. Lock, load and fire.
“Funding a down payment using 401k funds is a problematic approach at best.”
Listen,
Good advice.
“In any case, if you buy a home with intentions to stay three years or more, you should be fine with the purchase.”
How about get your *ss comfy in that couch for at least 10 years.
BC (198)-
No problem w/the open house thing. I don’t do ’em.
Don’t know if you’ve been to the Clinton House lately…has gone way downhill. Only thing safe to consume there comes out of a bottle. But plenty of other good places around here.
Don’t let the wifey pry any Clinton listings out of me. I live in Annandale (the historic, old house part of Clinton), so I understand her love of the area. Fortunately for you, the only two homes for sale in Annandale are under contract now.
Will e-mail you re: a suitable wager. And, yes, I want points!
“And, yes, I want points!”
Hah!! Carolina will be giving. Thank you, I’ll take.
Nothing wrong with a bottle at the Ole’House.
listentothecrybabywannabehomeowners
That is a great name. I’ve been living at home since May, so I’m certainly one of those cry baby’s. Its either rent and spend $900-$1000 for a place that’s not in the ghetto or get a place of my own and pay like $1500 or so on a mortgage. I could always rent it while waiting for the market to come back when I look to upgrade in 4 years or so.
Clot – Thank you for your response in #77. I couldn’t agree with you more that for the vast majority, housing decisions are primarily emotional rather than rational. Also, condoshacks aside, houses are just not fungible goods. Too many times folks on this board assume that one can lease a rental that is equivalent to a house available for purchase and in my experience, that just isn’t the case with respect to single family homes.
“China’s “A” share market — restricted mainly to Chinese nationals — has run up almost 140% in the past 12 months, soaring 46% in the fourth-quarter of 2006 alone.”
“Late last year the market was exploding, and I thought this is just a super-bullish market,” said Zhu Hui, a 28-year-old journalist in Shanghai. She started buying stocks in January, and says her investments are up about 10% so far. “Of course,” she added, “the market has been going too fast, but I don’t think it is too risky to be in the market right now.”
140% in 12 months, presently not too risky??
Could her reasoning be attributed/traced to the nitrous oxide fluxes from the rice paddy fields??
http://www.marketwatch.com/news/story/if-shanghai-stocks-have-meltdown/story.aspx?guid=%7BF7192988%2D0BA1%2D4F8D%2DAD10%2D88AB9BB8B980%7D
Situs (204)-
Give those SF home rentals a little more time. NJ is a bit of an anomaly in that our rental stock- even in the best of times- is pi$s poor, but so many homeowners attempting to sell are bent over right now that some amazing rental deals are there for the taking.
How about a 4 BR Colonial with a pool, in a top school district, for around $2,300/month…pets allowed? That woulda been $3,000+ 18 months ago.
BC (205)-
That lady’s up 10% in a month, and she thinks the game still has run left in it? OMFG!!!!
I heard that China’s TV networks now feature stock tout shows, a la Mad Money, all day long.
John H.,
Glad you like the name. The name is exactly what it says, referring to crybabywannabes on this blog who either missed the real estate runup and are bitter about it, or are so ultra risk averse they wouldn’t buy a nice home marked down to a dollar. So they scream, THE SKY IS FALLING, in hopes that the RE will do just that. Who knows, these folks might even be successful. I like to think otherwise. Meanwhile, the name applies.
But I digress. One item in your most recent posting – rent your property in four years until the market recovers – is another red flag. Don’t plan on rental cash flow four years hence being favorable, especially if your initial down payment is small. Buy the house the live in and enjoy, period. I say that has a non-crybabywannabe and owner of rental property.
Good luck in your search.
WAAAAAAAAAAAAAH!!!
Booyah Bob can’t be far behind now.
Would’ve loved to see Booyah/Waaah at the Super Bowl, dripping wet, as the tide of the game turned the Colts’ way.
I guess that’s why Clonopin was invented.
That’s Klonopin, Clot, and Booyah can tell ya all about it.
WAAAAAAAAAAAAAAH!!!
“So they scream, THE SKY IS FALLING”
Listen.
No! No! You know better than that! That’s just the high fastball. That’s easy to avoid. The screwball is the bricks and mortar crumbling. That’s the tricky part.
“Masala Grill” in downtown Princeton is everyone’s favorite at work. “Kalluri Corner” again in down town Princeton is on the more authentic side.
“Would’ve loved to see Booyah/Waaah at the Super Bowl, dripping wet,”
I thought I recognized them both sitting in Wayne Huizenga’s box. I think BOOOYAAA was wearing a Peyton Manning jersey and Listen was wearing a Brian Urlacher jersey??? Or vice versa.
WSJ
AHEAD OF THE TAPE
By JUSTIN LAHART
Hedge Funds Start to Look Like Risky Bets
February 12, 2007
Last week’s initial public offering of Fortress Investment Group — the $30 billion hedge-fund and private-equity shop — shows these are heady times for Wall Street’s financial wizards. The stock shot up on its first day, making its principals very rich men.
But some recent research reports point to trouble lurking for the $1 trillion hedge-fund industry.
[edit]
Hedge funds can improve returns by adding to investments with borrowed money, getting more bang for their buck. Dresdner estimates hedge-fund borrowing ranges from $900 billion to $4.2 trillion. In other words, for every dollar they have received from their investors, Dresdner estimates hedge funds have added at least a dollar of borrowed money. Leverage makes for high returns, and big losses if things go sour.
As Dresdner notes, it is tricky to generalize about hedge funds. They employ so many different trading strategies. Some make bets on the direction of currencies, others on the outlook for corporate mergers or the direction of interest rates. The Dresdner analysts say one common denominator is that many hedge funds have been betting in the direction of less market volatility.
They liken hedge funds to individuals selling “deep-out-of-the-money” put options. A put option gives an investor the right to sell an asset at a prearranged price should its value fall. For the buyer of a put, it is a hedge against a down market. For the seller, it is a way to turn a profit as long as prices don’t fall. Deep-out-of-the-money options look especially safe because prices have to fall a long way to trigger them. When prices do tumble, the losses are steep.
“The slow virtuous cycle on the way up can turn vicious quickly,” Dresdner warns.
“The Dresdner analysts say one common denominator is that many hedge funds have been betting in the direction of less market volatility.”
With vol so low, is sucking up nickels worth the inherent risk??
Scary to see so many financial “wizards” lining up on the same side of any trade.