From the Wall Street Journal:
Wall Street, Bear Stearns Hit Again
By Investors Fleeing Mortgage Sector
By KATE KELLY, LIAM PLEVEN and JAMES R. HAGERTY
August 1, 2007; Page A1
The nation’s weak housing sector sent another shudder through Wall Street, with insurers and lenders taking further hits and Bear Stearns Cos. shutting off withdrawals from a mortgage-investment fund.
The stock market, which had been up sharply early yesterday, reversed course abruptly amid renewed concerns about loans and securities derived from home mortgages. The Dow Jones Industrial Average, which had been up more than 140 points, closed down 146.32 points, or 1.1% from a day earlier, at 13211.99 — a swing of nearly 300 points, or more than 2%. U.S. Treasury bonds rallied as investors sought the stability of government-backed bonds.
…
The nervousness was fed by rumors of troubles at hedge funds that are invested heavily in mortgage securities. Bear Stearns, its reputation already dented after two of its hedge funds that bet heavily on securities connected to risky home loans blew up in June, has prevented investors from taking their money from another fund that put about $850 million into mortgage investments.In recent weeks, as the housing market continued to weaken and trading firms began to price many mortgage investments at discounted levels, Bear executives realized their Asset-Backed Securities Fund was facing a rough July, said people familiar with their thinking.
Unlike Bear’s other two funds, these people said, the asset-backed fund borrowed no capital and had practically no exposure to subprime mortgages, as home loans extended to people with weak credit are known. But a combination of markdowns on a broad range of mortgages and a series of refund requests could force the fund out of business eventually, according to one person familiar with the situation.
A spokesman for the firm disputes that, however. “There are no plans to shut down the fund,” said Russell Sherman, a Bear spokesman. “We believe the fund portfolio is well positioned to wait out the market uncertainty. And we believe by suspending redemptions, we can ensure the best long-term results for our investors. We don’t believe it’s prudent or in the interest of our investors to sell assets in this current market environment.”
Traders said yesterday’s stock-market selloff was ignited by a warning from American Home Mortgage that pressure to repay its creditors may cause it to liquidate its assets. Its shares subsequently plunged 89% to $1.13. Several Wall Street firms have loaned money to American Home, the 10th-largest U.S. home-mortgage lender in this year’s first half, according to Inside Mortgage Finance, a trade publication.
The Melville, N.Y., company said turbulent mortgage-market conditions forced it to mark down the value of its portfolio of home loans and loan-backed bonds. Some financial backers want their money back, and the company said it needs to hold on to cash in case the credit environment worsens.
The insurance sector was also singed as two large mortgage insurers saw their share prices drop sharply after announcing that their stakes in a firm that invests in subprime mortgages had been “materially impaired.” What spooked investors in MGIC Investment Corp. and Radian Group Inc. was the firms’ holdings in Credit-Based Asset Servicing and Securitization LLC. As of June 30, each insurer had more than $465 million of equity in C-BASS, which invests in mortgages and related securities.
…
“The market [for mortgage securities] is pretty much terrified at this point,” said David Castillo, senior managing director at Further Lane Securities, a dealer based in New York. “It’s starting to sink in that this is a broad-based issue that’s not going to go away any time soon.”
From the Wall Street Journal:
Another Australian Fund Faces
Big Losses From Market Turmoil
By LYNDAL MCFARLAND and IAIN MCDONALD
August 1, 2007
Volatility in global credit markets has hit another Australian high-yield fund, Macquarie Bank Ltd.’s Fortress Investments Ltd., which said that investors in the funds face losses of up to 25%.
Fortress is the third fund manager in Australia to flag serious problems and is the latest sign that the fallout from U.S. subprime mortgage sector woes is spreading ever wider. Australia has the largest hedge-fund industry in Asia, according to the Australian government, and Australian hedge funds have been some of the first to say that the global widening in yield spreads has cut deep into their value.
Investors in Fortress had put in 220 million Australian dollars (US$188 million), which was then leveraged to create a fund of between A$1.2 billion and A$1.3 billion, according to Fortress. The funds weren’t directly exposed to U.S. subprime mortgages, but problems in that sector have pushed down the value of riskier investments in credit markets generally.
The problem is that as the value of the securitized loans in the fund has fallen, Fortress has had to sell some of its assets in order to meet covenants on the borrowings it has.
The director of Macquarie Fortress Investments, Peter Lucas, said in a statement that the average price of assets in the portfolios had fallen by 4% in June and may have fallen a further 20% to 25% in July, so the funds face possible margin calls from their lenders if they aren’t able to sell enough assets to reduce leverage.
From Reuters via the Washington Post:
American Home may liquidate assets, shares plunge
American Home Mortgage Investment Corp (AHM.N) said on Tuesday it can no longer fund home loans and may liquidate assets, putting its survival in doubt and sending its shares plummeting 90 percent.
The development was the latest sign the U.S. housing slump is broadening, as worries about credit quality and defaults spread beyond subprime lenders, which lend to people with weaker credit, to lenders that make higher-quality loans.
American Home, a large mortgage provider, said its lenders cut off access to credit, leaving it unable on Monday to fund $300 million of loans it agreed to make. It expected to be unable to fund $450 million to $500 million of loans on Tuesday.
Melville, New York-based American Home hired Milestone Advisors and Lazard to help evaluate options and advise on “the sourcing of additional liquidity, including the orderly liquidation of its assets.”
American Home offers “Alt-A” mortgages, which fall between prime and subprime in quality, and recently held a roughly 2.5 percent share of the U.S. mortgage market. Last Friday, it delayed a common stock dividend and announced “major” write-downs.
While there’s currently a media pile-on for Bear Stearns, this sewage will leak from Goldman, Lehman, etc, soon enough.
The American Home Mortgage news is ugly, it wasn’t even a subprime lender. This toxic cloud is spreading, and it’s amazing how many idiots and lemmings couldn’t see all this coming.
Moody’s refines ratings methodology for Alt-A loans
http://www.reuters.com/article/bondsNews/idUSN3127205720070731
The changes, which will go into effect on Aug. 1, address the poor performance of subprime-like loans, low and no equity loans, and low and no documentation loans which are present in certain Alt-A transactions, it said.
source : CR
Maybe Moody’s should talk to the “1 senior manager and 2 folks” before they start downgrading Alt-A.
Richard said >>
>>So now we have a major Alt A / Prime lender imploding.
don’t make the assumption it has anything to do with a lender being in trouble that’s handing out prime loans. i know 1 senior manager and 2 other folks that work there and without divulging too much information that could get me in hot water the main troubles had nothing to do with the quality of the borrowers they lent to. wait for more info before you paint the broad stroke
https://njrereport.com/index.php/2007/07/31/credit-derivativesfinally-being-testedare-performing-poorly#comment-112414
http://en.wikipedia.org/wiki/Subprime_meltdown
If you click on history, and compare selected versions, you’ll get a pretty good armchair quarterback summary every night of the action as it unfolds over the next month.
Only problem there is that there’s no page of fun predictions ;) like here.
O.K. who wants to list the next three chubby zebras currently racing for that dead end?
“I wish there were more,” Corzine said. “There are huge demands with regard to the needs of some of our less economically well-off cities. There are special situations that show up on a regular basis, but again we’re resource constrained.”
What a bunch of lies, the amount of money Trenton wastes is mind bugling. But NJ keeps voting for these idiots so we need to suck it up and pay. One day the voters will wake up.
Commission will set affordable housing plan
http://www.southbergenite.com/NC/0/222.html
A recent appellate court decision will now require the New Jersey Meadowlands Commission to be responsible for area affordable housing, yet released the New Jersey Sports and Exposition Authority from any Council On Affordable Housing obligation. Last week the commission approved the first steps of a comprehensive policy addressing the creation of affordable housing in the area.
The appeal was filed by the New Jersey Builder’s Association (NJBA) and the New Jersey Fair Share Housing Center. The suit targeted the New Jersey Sports and Exposition Authority (NJSEA) whose land houses Xanadu and is expected to spurn thousands of jobs and significant affordable housing requirements. That suit, however, was ultimately dropped. Instead, the three-judge panel targeted the commission as a means to create area affordable housing. The commission argued unsuccessfully it was not responsible for affordable housing because it is a state entity, not a municipality. The ruling stated that although the NJMC is a state agency, it is not exempt from the rules applicable under Mount Laurel and Council On Affordable Housing (COAH) that governs every municipality in the state.
LETS THE GAMES BEGIN. AHM Said the mortgages in the pipeline that were not sold off are off. So last month you sold your house to a buyer who borrowed from AHM and closing is today and AHM is the lender, guess what you ain’t closing, talk about a shot in the shorts to the seller.
The buyer becomes an unsecured creditor for the fees he lost to AHM and since AHM does ALT A and does types of loans have dried up he can’t go elsewhere. There is going to be a slew of “sold” houses go back on the market in August that was supposedly sold in June and July.
Not sure if anyone posted this before. From Tuesday’s WSJ.
Owner Ranks Fall As Credit WoesHurt Housing
By RUTH SIMON
July 31, 2007; Page D3
“The nation’s homeownership rate has declined to its lowest level since 2003, the latest sign that the mortgage industry’s ills are taking a toll on the housing market.
New data released by the Census Bureau this month put the share of American households that own their own homes at 68.4% in the second quarter. The homeownership rate, which peaked at 69.4% three years ago, has declined steadily over the last three quarters, on a seasonally adjusted basis. Economists say it could drop further over the next two years.”
Frank,
“One day the voters will wake up.”
Sorry to say, not going to happen.
I knew American Home Mortgage would be next. Working at the credit bureau gave me heads up on their scheme. I can’t believe they were giving loans to people with no social security numbers. Horrible just horrible.
Reckoning, no link.
The subprime fiasco is even hitting millionaire fund managers’ wallets… in a big way. John Devaney, CEO of United Capital Markets, a hedge fund that focuses on buying subprime ARM-backed securities, has been forced to sell his $23.5 million 145-foot yacht and his $16 million Aspen vacation home.
Looks like John had his own skin in the game. Early this month, he stopped granting investors’ requests to withdraw their investments in the United Capital Markets fund. Soon after, the value of Bear Stearns’ dashed funds were revealed. Mr. Devaney has yet to reevaluate his fund… but what’s inside must be crotte, too. How much financial trouble would you have to be in to sell your house and your boat?
And the ironic icing on this sardonic cake? The boat’s name: “Positive Carry.” We bet investors in John’s fund might call it something else… like “Lost My Shirt,” or “Holy Sh*t, What Happened to My Money?” Or simply: “Bad Idea.”
I’m not sure but I wanted to know if First American mortgage is on the list of impodeometer?
I think First American Mortgage is next.
Domi (13)
Without disclosing too much, can you tell us how working in the credit bureau gave you a “heads up” on American Home Mortgage?
I work in IT for a major subprime lender here in NJ. With the news of Wells Fargo shutting its subprime wholesale business, I sent my manager an email asking if we should get nervous. His response was that as more lenders stop doing subprime, we capture more market share and things get better. In the meantime, we’re modifying the system to stop taking in all Subprime ARM’s with less than 5 year initial fixed period and all subprime 2nd mortgages.
The “not me” mentality in the industry is so unbelievable.
So, what do you guys think? Is this the beginning of the end? 1929 at last? If credit is the lubrication that keeps the engine of commerce going, will these latest events cause the engine to seize up?
Another issue that may go unnoticed, AHM is huge FHA loan provider, more plankton removed from the sea as well.
Orion (16)
I worked in the mortgage unit, the majority of the loans that I’ve verified were from American Home Mortgage, they were our biggest provider. When I questioned the number of bad credit applicants, I was told that bad credit applicants make us money. So I did whatever the loan processor requested and added in trade lines to get the mortgage approved. There were a large number of Hispanic applicants with no social security numbers. On average, I would review 30 to 35 credit applications per day. The trade lines that were added were from personal references from the applicant. I didn’t agree with the practice, so I decided to leave.
18,
It’s not the end of the world, just the end of the world as we know it[the new paradigm of eternal, unlimited liquidity]. These clouds have been brewing for a long time. We have been discussing this for over a year. The world has been on roids. Now risk is being re-calculated. There will be an ongoing repricing of all assets. The main question is the effect the world’s economies.
Don’t count out the printing machine. The sun will come up. Unless, of course, if the solar system is now manned by hedgies/nar/goldilocks, etc.
It’s all normal. You could see this coming. Don’t get bent out of shape. It’s the difference between losing money and losing your shirt.
August 1………Hurricane Chip is quick pitching us?!?!?
x-underwriter Says:
August 1st, 2007 at 8:59 am
The “not me” mentality in the industry is so unbelievable.
x: you are at Wells….the thesis of the opinion is correct, they will survive. You know better if the context in ludicrous.
We are not talking about a good investments, we are projecting which players [Countrywide, Wells etc.] stay solvent [i.e. avoid bankruptcy/eventual liquidation].
Send lawyers, guns and money..
I’m completely clueless about this so please answer a question. If a mortgage company goes out of business/files bankruptcy, etc., what happens to those loans (closed) financed through them? I’m guessing they are sold off to other companies. If so, do the terms of the loan remain the same?
LOL @ chubby zebras
lost (26)-
Many mortgage companies do not portfolio their loans. They loans are sold, in the parlance, “off the line” at the time of closing to the grinders who mash them together into the smooth forcemeat known as mortgage-backed securities.
If a lot of these lenders were forced to own the garbage they wrote, thousands of currently non-performing loans would never have been made.
chicagofinance Says:
x: you are at Wells
Chase, not Wells. The organization is big enough that I don’t expect the whole division to go poof but then again, who knows.
“I wish there were more,” Corzine said. “There are huge demands with regard to the needs of some of our less economically well-off cities. There are special situations that show up on a regular basis, but again we’re resource constrained.”
The Corzine property tax rebate plan is all smoke and mirrors. The rebate will be largely paid for with …higher property taxes.
Corzine cuts you a check so you don’t punish the Dems in the November election
The money going to municipalities gets cut
Local property are raised to make up the shortfall
This essentially becomes yet another tool to redistribute wealth. Everyone’s taxes go up to pay for the rebate & NJ kicks back some money depending on your income level.
From MarketWatch:
Weekly mortgage applications down 0.3%
The volume of applications for mortgages slipped 0.3% last week compared to the prior week, the Mortgage Bankers Association reported on Wednesday.
Rates on fixed-rate mortgages slipped for the week ended July 27 compared with a week earlier.
Also on a seasonally adjusted basis, applications volume was up 14.2% compared with the same week in 2006, the MBA said.
According to the group’s weekly survey, applications for refinancing existing loans increased 1.8% last week, while purchase loans decreased a seasonally adjusted 1.8%. The four-week moving average for all loans was down a seasonally adjusted 0.5%.
ChiFi (22)-
Category 5…and the eye hasn’t even moved onshore yet.
Paulson says subprime woes contained
BEIJING (Reuters) – U.S. Treasury Secretary Henry Paulson said on Wednesday that the market impact of the U.S. subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades.
European and Asian stocks tumbled on Wednesday following a sharp drop in U.S. shares on Tuesday, after American Home Mortgage Investment Corp. (NYSE:AHM – News) said it may have to liquidate assets, fuelling worries over problems in the subprime mortgage market spilling over into other sectors.
The recent volatility in global stock and currency markets reflected a repricing of risk and the unwinding of excesses in U.S. mortgage and leveraged buyout financing, Paulson said.
“There’s a wake-up call, and there’s an adjustment to this repricing of risk, but I see the underlying economy as being very healthy,” he told reporters before leaving Beijing, where he pressed top officials to let the yuan strengthen more quickly.
http://www.freerepublic.com/focus/f-news/1874678/posts
You gotta love this guy…
lostinny,
Yes. You are right. Those mortages are assets that would be divided by the bankrupcy court.
This happend to me once. I sent my car payment to a new address, otherwise nothing changed.
Crazy how this little company out on Long Island is causing markets in Seoul, Hong Kong, Malaysia, etc to drop 3-5%
Thank you for the info Clot and Renting. I guess it depends on the circumstances.
As an outsider, I’m finding myself less than impressed by Wall Street and the financial community.
July 31 (Bloomberg) — Oddo & Cie, a French stockbroker and money manager, plans to close three funds totaling 1 billion euros ($1.37 billion), citing the “unprecedented” crisis in the U.S. asset-backed securities market.
Oddo said it will wind down the funds within the “shortest possible time frame” because of a plunge in prices for collateralized debt obligations, notes backed by other bonds, loans and their derivatives.
The highest level of defaults in 10 years on U.S. mortgages drove the risk premium on corporate bonds in Europe to the widest in at least three years yesterday, based on prices for credit-default swaps. Commerzbank AG, Germany’s second-biggest bank by assets, yesterday said it expects to make provisions of about 80 million euros for potential loan losses tied to the U.S. subprime mortgage market, and IKB Deutsche Industriebank AG in Dusseldorf said it was scrapping its earnings forecast as “massive uncertainty” threatens access to funding.
http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=an06StEp.bjo
Seems like they dropping one by one like flies…all over the world.
Indeed Lisoosh
I think the people most blind to what was going on have been the so-called finance professionals. A good friend of mine who works on a trading desk that was neck-deep in the less-leveraged of the two original bear funds that imploded kinda laughed at me when i’d forwarded him a link to this site and another general economics blog since clearly he and his co-workers and bosses knew how this would play out better than some outsiders…
“As an outsider, I’m finding myself less than impressed by Wall Street and the financial community.”
lisoosh,
Then you are ahead of the game. Be careful of anyone trying to get into your pockets.
U.S. July ISM new orders 57.5% vs 60.3% in June
congrats for all bears …
June pending home sales index rises 5%
By Robert Schroeder
Last Update: 10:00 AM ET Aug 1, 2007
WASHINGTON (MarketWatch) — Contract signings on existing homes climbed by 5% in June, the most in more than three years, the National Association of Realtors reported Wednesday. But pending sales are still down 8.6% below June 2006. An increase in pending home sales was seen in all four major regions of the United States, the group said. In June, pending sales rose 3.5% in the Midwest and 4.7% in the South. Pending sales rose 8.6% in the West and 3.1% in the Northeast.
From MarketWatch
June pending home sales index rises 5%
Contract signings on existing homes climbed by 5% in June, the most in more than three years, the National Association of Realtors reported Wednesday. But pending sales are still down 8.6% below June 2006. An increase in pending home sales was seen in all four major regions of the United States, the group said. In June, pending sales rose 3.5% in the Midwest and 4.7% in the South. Pending sales rose 8.6% in the West and 3.1% in the Northeast.
Pooch123 Says:
August 1st, 2007 at 9:47 am
“Crazy how this little company out on Long Island is causing markets in Seoul, Hong Kong, Malaysia, etc to drop 3-5%”
Revelation!!
Just something/somebody’s way of reminding us that we still live on planet Earth and that we are all interdependent….. contrary to what most think !!
This essentially becomes yet another tool to redistribute wealth. Everyone’s taxes go up to pay for the rebate & NJ kicks back some money depending on your income level.
——————————————-
You are absolutely correct. Not only is the rebate bracketed to varying income levels, but it is only rebated on your first 10,000 of property taxes. This is a double whammy. And lest we not forget that he raised sales tax 1% for this so called property relief.
Guys, guys, no need to worry, this is all part of the New Economy 2.0.
The New Economy 1.0 (.COM) failed miserably. Pets.com didn’t have it in them, Mercata.com just had a poor business model, we didn’t need 500 auction websites, and we just couldn’t turn cab drivers into day traders.
The New Economy 2.0 (Home=$$BANK$$) is still chugging along! It’s a great time to buy a home and cash out equity to put on a new addition, third garage for the new BMW X5, and take that 2-week vacation to Tahiti like you’ve always wanted. Mortgage rates are STILL at historical lows, and everyone knows that real estate only goes UP! Don’t worry if you can’t afford today, you can ALWAYS refinance.
Keep watching HGTV, painting those kitchen cabinets with Rustoleum adds $5,000 of instant equity to your home!!
UP UP and AWAAAAAAAAAAY!
lisoosh Says:
As an outsider, I’m finding myself less than impressed by Wall Street and the financial community.
Wall St, like Realtors, are motivated to sell their product and collect a ommission…nothing else.
As such, don’t ever expect any advice or messages coming from them that benefits you but not them at the same time.
Pending sales rose 8.6% in the West and 3.1% in the Northeast.
But not in Bergen County…
NJMLS Bergen County Under Contract (UC) Data for June:
Down 3.5% from last year (previous June was down 22.4%!)
Second lowest year since 1995
Year #UC
1195 898
1996 973
1997 919
1998 1013
1999 971
2000 917
2001 969
2002 891
2003 1124
2004 1132
2005 1185
2006 919
2007 887
how about PPH (pharma holdings)? i got in yesterday at 77.60
Damn! italics off
Thank God the housing slump is over.
#42 bi: They are pending, lets see how many close, and how that number trends for the rest of the year which of course I am sure you are aware of no?
#48 Thank You Rich, by bi.
From MarketWatch
U.S. July ISM manufacturing index 53.8% vs 56.0% in June
The nation’s manufacturers cut back production slightly in July, the Institute for Supply Management reported Wednesday. The ISM index fell to 53.8% in July from 56.0% in June. The decline was just a bit sharper than expected. The consensus forecast of estimates collected by Marketwatch was for the index to slip to 55.5%. Readings above 50 indicate expansion, while readings below indicate contraction. New orders fell to 57.5% in July from 60.3% in June. Inventories rebounded a bit to 48.5% from 45.3% in the previous month. The employment index inched lower to 50.2% from 51.1%. The price index fell to 65.0% from 68.0%.
52#, i would pay more attention to XHB (homebuilder index ETF). it is still weak but it should be up ahead of real eastate market.
x-underwriter Says:
August 1st, 2007 at 10:08 am
lisoosh Says:
As an outsider, I’m finding myself less than impressed by Wall Street and the financial
community.
l: did you read the article from the WSJ that I posted yesterday?
July 31st, 2007 at 8:06 am
this one
From Bloomberg:
Bear Hedge Funds File for Bankruptcy
Two Bear Stearns Cos. hedge funds heavily exposed to the flagging mortgage industry filed for bankruptcy protection late Tuesday, two weeks after the company told investors one was essentially worthless and the other had lost more than 90 percent of its value.
The Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd. and the Bear Stearns High-Grad Structured Credit Strategies Enhanced Leverage Master Fund Ltd. — which invested in securities backed by risky mortgages — filed for protection under Chapter 15 of the bankruptcy code, according to court documents.
Chapter 15 covers cross-border petitions and was used because the funds are technically registered in the Cayman Islands.
The funds were squeezed after Bear Stearns made wrong-way bets on the home mortgage market and was caught as loans to risky investors began to default. In July, the company said the assets in the Enhanced fund were essentially worthless, while the other was worth 9 percent of its value at the end of April.
go away!
Yea! We’re doing fine without you!
Bring me back something… nice.
Chi,
Went back and read it, I tend to skip a lot of those articles as many contain Wall Street shorthand and abbreviations that make my eyes glaze over.
It really all underscores that you can’t trust anyone but yourself, but the myopia is astounding.
Wall Street and major economists didn’t see the .com bust coming, didn’t see the Enron/MCI/you name it debacle coming, and didn’t see the current crisis coming. I get that Wall Streets vision is somewhat obscured by dollar bills, but the fact that petty much every major economist and financial commentator is similarly blind to what is right in front of their eyes is depressing in the extreme. Is there absolutely no professionalism? No standards?
I didn’t know about the big insider stuff, but out here on the street both the .com bust and housing bust are/were painfully obvious long ago. Much like employees know when companies are in trouble even when stocks are up and earnings look good – they are usually on the receiving end of increased pressure to perform and the cutting of perks and benefits, good people start to leave and by the time the “economists” see the writing on the wall, the damage is hard to reverse. Likewise $100 pets.com and wealthy couples figting tooth and nail over a 60 year old cape. It just doesn’t smell right.
here is something nice… BZH down 32% starting at 10:40
“I’m pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some bathers. But, as you see, it’s a beautiful day, the beaches are open and people are having a wonderful time.”
Mayor Vaughn, “Jaws”
Basically the unexpected home sales increase in June was due to Realtors singing this tune.
BZH down another buck to 8.64… next one?
http://www.recharts.com/reports/CSHB031207/CSHB031207.html?ref=patrick.net
These charts are great if you want to understand the whole story of alt a and subprime.
I guess once again NAR shills try to put their spin on headlines, “Pending Home Sales Index Rises 5 Percent in June, Surprising Wall Street”.
Everyone knows RE is seasonal market. Summer is where RE transactions peak. The key number to talk is YOY gain/losses. On YOY basis we are not in gains.
I wonder why reporters are giving into NAR releases.
#55 bi: Why pray tell? Just like home prices increasing 20% a year for the next 5 years in certain area, and than bursting?
#66 SG And now we are into August, and as most of us know much has transpired in the housing market since June to August 1st,a nd for the most part its all been negative.
why nobody here talks about BZH (a homebuider) got under?
Open House Details
Date: 08/05
Time: 1:00-4:00Pm
Notes: Wine Raffle. Winner Announced At 4 P.M
Now this is a sign of despire – BZH is still breathing for now.
Thx John,
According to this chart,
http://www.recharts.com/reports/CSHB031207/e51.gif
NJ has 18% sub-prime & 18% Alt-A loans. 36% in total that can fall into issues.
I apologize for contributing to July’s pending home sales number – we closed, but late so we probably counted in the July numbers.
here is something nice… BZH down 32% starting at 10:40
BZH down another buck to 8.64… next one?
why nobody here talks about BZH (a homebuider) got under?
What’s your point?
How does this reinforce your argument that RE will rise 10%, nay! you changed it to 20% in the next 5 years?
Rich
“why nobody here talks about BZH (a homebuider) got under?”
Yesterday’s news. Trash, move on.
74#, not yesterday’s news. it is happening right now. down to 8.10 but moving back to 11.80. something is going on here?
NJGal,
Congrats!
Pending home sales are homes Under Contract.
The NAR data for June is for units that went Under Contract in June, not closed sales.
SG,
I guess once again NAR shills try to put their spin on headlines, “Pending Home Sales Index Rises 5 Percent in June, Surprising Wall Street”.
Exactly. They create a great headline comparing June to May, but comparing June ’06 to June ’07 pending sales are down 8.6%
The market jumped at this data then finally started reading the fine print.
http://www.recharts.com/reports/CSHB031207/e42.gif
This is the one that interests me the most. Considering that almost 1 in 3 mortgages were exotic, in about 15 months the poops gonna hit the fan when all of these subprime and alt-a loans reset. That’s when it’s going to be time to go house shopping. Looking at this chart, it will probably be 5 years before the recovery begins.
3b: Good point.
I just did a simple check based on my criteria in central NJ. In June 80 houses went off listing, while in July only 56 went off listing. So, next month NAR won’t be able to spin same headline. Both %s from prev month and from YOY month will be off by large margin.
Thanks Rich! I think we went under contract in June, so perhaps I contributed to last month’s numbers instead:) But we’re closed now, and moving shortly…
Question:
Why are builders still building 2-3 family homes and condos when there is a huge amount of homes still on the market? Just asking for clarification.
Thanks
From MarketWatch:
Private-sector jobs rise 48,000, weakest since 2004
ADP report suggests nonfarm payrolls could be weaker than forecast
…
“This month’s ADP national employment report suggests a deceleration of employment,” said Joel Prakken, chairman of Macroeconomics Advisers, the economics firm that designed and computes the report from anonymous payroll data provided by Automatic Data Processing Inc.
More at the link above, Rich
njgal:
we spoke awhile back on here as you were looking in a similar area of westchester county as we were (and I believe we both have to commute to the city to our law firms).
in any case, i take it from your comment that you decided to stay in nj…what happened?
where did you decide to move (don’t mean to prod, but we are still looking and are considering staying as well…depending on the commute).
What are the builders supposed to do? Abandon the projects? Sell all their land and options? They face a tough choice – sell out entirely and take a fat loss or keep building and hope to god that in the event you have to take a loss in the future, it wont be as bad. For what its worth, Jim Cramer thinks the builders that are continuing to build in this environment are toast.
#81 Rich: Oh my God!!!, Could this be a sign of a possible recession….., in our life time?
By Nicholas Yulico
TheStreet.com Staff Reporter
8/1/2007 11:20 AM EDT
Beazer Homes (BZH – Cramer’s Take – Stockpickr – Rating) plunged 40% Wednesday on market rumors that the homebuilder would file for bankruptcy.
Several market sources say they have heard the rumor, but said they had no information to verify it.
Beazer could not be reached for immediate comment. The stock was trading down $5.09 to $8.90.
Like most homebuilders, Beazer has recorded steep losses and declining home orders amid the widespread housing downturn.
The Atlanta-based homebuilder is under formal investigation from the Securities and Exchange Commission about alleged violations of federal securities law.
The company is the subject of various lawsuits related to its mortgage-origination business. The Charlotte Observer reported in March that Beazer was being investigated by federal authorities for loan practices related to a North Carolina development.
Beazer has launched its own investigation into the matter, and in June it fired its accounting chief for attempting to destroy documents related to the probe.
Shares of other homebuilders were also tumbling. Hovnanian (HOV – Cramer’s Take – Stockpickr – Rating)was down $1.41, or 11%, to $11.83, Toll Brothers (TOL – Cramer’s Take – Stockpickr – Rating) plunged $1.76, or 8%, to $20.17, and Lennar (LEN – Cramer’s Take – Stockpickr – Rating)slid $2.32, or 7.6%, to $28.18.
Smaller builders fared even worse. WCI (WCI – Cramer’s Take – Stockpickr – Rating) plunged 16% to $7.39, while Comstock (CHCI – Cramer’s Take – Stockpickr – Rating) tumbled 14% to $1.54. Meritage Homes (MTH – Cramer’s Take – Stockpickr – Rating) fell 13.5% to $16.87, and Standard Pacific (SPF – Cramer’s Take – Stockpickr – Rating) fell 14.3% to $12.69.
looks like today is the capitulation point for housing market
BZH is toast. They listed on NYSE and did SOX the C-level people signed the 302 certifications and now their ass is in the sling. Crash Time
“BZH is toast.”
Burnt toast. This is # 1. Who will be # 2?
“looks like today is the capitulation point for housing market”
Don’t confuse the stocks with the physical.
Why are the builders still going?
Because that’s how they generate cash flow. For some period of time after the market topped, they could continue to sell units for lower prices. They still make money, but with smaller margins.
But as the downturn accelerates, it’s a race to the bottom. Who can cut expenses and move units the fastest?
Looking at the Risk Summary graph (Exhibit 51) of the CSFB RE report, 36% is Alt-A and Subprime in NJ. I am surmising a vast majority put no money down and are seriously upside down already. The resets are going to be ugly in terms of monthly sticker shock.
Besides, a +/- 40 FICO point difference could make you prime or alt-a; it’s a fuzzy boundary. My hunch (going by the recklessness of this credit party) is that there will are a fair number of prime borrowers who stretched to buy, because they were fed more bull that they can very easily refinance since they already have fantastic credit. Viz-a-viz the alt-a/subprime borrower who was told they can refinance because house prices only go up.
The door is shut and the mortgage trap (unintended?) has sprung.
Why are builders still building 2-3 family homes and condos when there is a huge amount of homes still on the market? Just asking for clarification.
They could be targeting the rental market, which is considerable stronger than the owner occupied market.
Just wondering why NAR has been so quiet lately? Hmm, coincidental?
Bi:
Pending sales up. But…:http://biz.yahoo.com/rb/070801/usa_economy_mortgages.html?.v=1
I’d wager the latter is a more important metric.
Mortgage applications dip to 5-month low
http://biz.yahoo.com/rb/070801/usa_economy_mortgages.html?.v=1
in about 15 months the poops gonna hit the fan when all of these subprime and alt-a loans reset.
I think the fan will already be covered in feces 15 months from now. Between October through December of this year, about $150 billion in ARMs will reset (peaking in November). These ARM resets will occur in an environment of tightening lending standards, falling home prices and at a slow time of year for selling a home.
home builders erased 10% loss in the morning and now almost positve. if it was not capitulation, i don’t know what capitulation means (english is not my first langugue though)
bi Says:
August 1st, 2007 at 11:39 am
looks like today is the capitulation point for housing market
??? – no way, are you kidding?
“in any case, i take it from your comment that you decided to stay in nj…what happened?
where did you decide to move (don’t mean to prod, but we are still looking and are considering staying as well…depending on the commute).”
No, what bubble, we’re in NY – still in NJ for a bit until the actual move (we’re having a little work done on the place) but it’s Bedford for us. So while our commute by train isn’t short, neither of us are train sleepers, so we can make the ride productive if need be (and since we’re both originally from the ‘burbs we’ve done train commutes before). Plus we’re both pretty direct to our offices out of GC – no crazy subway transfers or anything. And our house is a 2 minute drive from the train, and we have parking. The commute was an issue for us, although I admit I may eventually look to work up in Westchester or Stamford.
Our issue with NJ is that with the exception of a few towns, the trains are longer than they should be for places not that far from the city (Summit, for example, is about 20 mi. from NYC and has the same train as Bedford, which is further away). And NJ Transit is the least reliable system of the area, LIRR being just a little better, and Metro North the best, at least on the Harlem line – CT is a different story. Metro North is just a good train to ride.
And the area – as we drove around this weekend doing stuff, I really could not be happier with our decision – Northern Westchester, despite being a NYC suburban area, is so peaceful and quiet, full of trees and parks. That was important to us. That, and not having our neighbor on top of us – we really lucked out in finding pretty much everything we wanted in a town/home.
(english is not my first langugue though)
Since you can’t answer how or why RE will improve 20% in the next five years I’m gonna guess BS is your first?
RE “That was important to us. That, and not having our neighbor on top of us -”
Depends on how hot the neighbor is!!
Is anyone using treasurydirect or other e-savings accounts to park their down payment money?
How secure are these accounts against hacking and fraud?
100#, BS is my first college degree -:) i stick with my prediction:
1) 10% up in certain area next spring;
2) 100% up in 5 years in certain areas.
good news. pharmas lead the market up. the point is you have to be in the market. i was down 1% 10 minutes after i got in.
(103)-
Uh…documents?…evidence?…statistics?
Anything to back up your statements?
Enjoy your tinfoil hat.
RentinginNJ
Builders were making profit when then were selling a house for 200k in year 2000. Builders was making profit when they were selling the similar house they were building and selling for 600k in year 2005. Builders are still making profit when they selling the similar house for 500k in 2007. So why should builders stop building.
Regarding where to “park your down payment” i havent heard of any significant security breaches with respect to treasury direct or savings accounts. If you’re in a high tax bracket it might make sense to consider muni money market accounts.
NAR Advertising Claim Reality
Interest Rates Near Record Lows
Today’s interest rates are comparable to 40-year lows, offering homebuyers a once-in-a-lifetime opportunity.
Interest Rates WERE at record lows in 2003 when the Fed Funds Rate was 1%; Since then, rates have climbed
Large Inventory Won’t Last
We have had a record inventory of homes on the market in recent months, offering consumers the greatest choice in decades. Slowing Sales and Overbuilding are the reasons for the inventory buildup; Year-to-date sales are down 16.5%.
Economics 101 tells us that increased supply means decreased prices.
Large selection also means selling your current home has become more difficult;
Prices Overall Have Stabilized
Home prices have experienced their first price drop in a decade;
As unit sales continue to slump, the Median Price Keeps Falling;
This is no basis for assuming any price stabilization has occurred.
Positive Outlook
Former Federal Reserve Chair Alan Greenspan recently said that housing prospects are looking up. “Most of the negatives in housing are probably behind us. The fourth quarter should be reasonably good, certainly better than the third quarter.” According to industry estimates, 2006 will be the third-best year on record for home sales. Is this the same former Fed Chief Greenspan who advised getting variable APRs at the precise low in interest rates?
As to the “record sales,” its more informative to look at the current trends, rather than the raw numbers (population growth will create meaningless “record numbers”).
Real Estate is a Great Investment
Homeownership is a safe, secure way to build long-term wealth. The national median price of homes bought ten years ago has increased 88 percent. The number of US households is expected to increase 15 percent during the next decade, creating a continued high demand for housing. Actually, it performs about half as well as stocks do over the long run.
Up 88% over the past 10 years is far above the historical norm — mean reversion is very likely.
(But you gotta live somewhere, right?)
Don’t Delay
Now is a great time to buy or sell a home.
If you delay, you run the risk of paying less for a new home.
In all my experience trading, I cannot recall ever coming across any item that it was a great time to buy and sell something simultaneously.
Perhaps the NAR is a fully hedged Long/Short fund . . .
This was very surprising.
Our old friend David Lereah was speaking on MSNBC just few minutes ago. He infact predicted that in next 18 months there will be 1.2m to 1.8m homes in foreclosure. According to him that number was 500K higher then previously predicted. He was basically saying people were buying properties without thinking how they will pay for.
Hurray, David’s back, but on different side now.
Bye (104)-
“…i was down 1% 10 minutes after i got in.”
Dude, are you medicated?
If not, perhaps you should consider it.
Beazer Homes Says Bankruptcy Rumors ‘Unfounded’
Beazer Homes USA said Wednesday that rumors that sent down its stock down nearly 40% are “unfounded.”
“We have become aware of rumors circulating in the market about Beazer Homes’ liquidity and a prospective bankruptcy filing,” the company said in a statement. “We do not know where these scurrilous and unfounded rumors started.”
…
With home sales plunging, homebuilders have been writing down the value of their unsold homes and the land they have bought for future development. The lower value is reflected in each builder’s tangible book value — what a company could get if forced to hold a fire sale.
Before Wednesday’s selloff, the bulk of the builders’ stocks were trading below the value of tangible book value.
thx njgal..good luck.
i have the same issue w/ nj transit (places are close but the train takes forever and then I have to transfer at penn station to the e to go across town). i’d like to get on the metro-north line as I too can walk from GC.
we’ve been lookin in croton and katonah, but it’s slim pickings.
“Dude, are you medicated?”
Clot,
Jim Jones Kool-Aid?
you guys just keep grabbing headlights here. put your money in play.. market moves down you make money and moves up you make money.
#98 chgo: yeah but prices will be up 10% in certain areas in the Spring, so there.
Too bad us cooties infested renters do not know those certaina areas, we could get in now!!
i havent heard of any significant security breaches with respect to treasury direct
I use it. No problems. Easy to use system.
#92- RentingInNJ
No these units (condos) are for sale for sure. I was on Realtor.com searching in Elizabeth and there is a good amount of new condos for sale so I was just wondering what is going to become of these condos in months to come. Thanks for your reply.
“market moves down you make money and moves up you make money.”
bi,
Make an investment.
http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0764556894.html
118#,
my trading in last 2 months has no loss in single day. anyone here wants to compete?
bi,
The posts do get sidetracked from time to time but the main focus is New Jersey (mostly Northern) real estate.
It’s not about the stock market and investing.
And though I could be wrong, no one cares where you’re putting your money.
Ahh, the joys of home ownership…
http://www.comics.com/creators/ballardst/archive/ballardst-20070729.html
I guess “bi” is short for bipolar :(
i know you guys are not in good mood. pissed by new NAR data…
i know you guys are not in good mood. pissed by new NAR data…
Why would we be pissed to hear that Y-O-Y pending homes sales are down 8.6%?
Do you have a reading comprehension issue we shuld know about?
115#,
here is a list of towns with 10% up potentials:
1) short hills/millburn
2) westfield
3) princeton
sorry i am not familiar with BC.
#98 chgo: yeah but prices will be up 10% in certain areas in the Spring, so there.
Too bad us cooties infested renters do not know those certaina areas, we could get in now!!
bi Says:
my trading in last 2 months has no loss in single day. anyone here wants to compete?
Let’s compete. All my money is under my mattress. What’s your strategy?
“my trading in last 2 months has no loss in single day.”
Who’s your margin clerk, Nurse Ratched?
Katonah and Bedford are beautiful. Great choice.
You are spot on regarding NJ transit. I grew up in LI and I used the LIRR extensively. The trains on LI and Metro North are just plain faster. NJ Transit has to share too much with Amtrak and there is only one tunnel into NYC. I take the train from Summit to NYC and it takes about 45 minutes. The LI town where I grew up is exactly the same distance from NYC and the train ride is barely over 30 minutes. ~15 minute difference for two equidistant places. The trains just run slower, period.
NJGal–
I look at the new Harlem line trains with envy.
This morning was the 3d time this week that I was on a packed New Haven line train at rush hour with no air conditioning. These trains are 30 yrs old, full of people paying $200+ per month to ride. No idea where all the money goes.
If you don’t mind me asking– how were you able to get a parking pass so quickly? Where I live there is a 3 yr wait.
Walnut St Montclair – New York Penn (about 15 miles)at 43 minutes during rush hour is an embarassment.
#109 You Lereah will do his best to re-write his personal history as RE cheerleader extraordinaire
““We do not know where these scurrilous and unfounded rumors started.”
Blame Richard, he let the cat out of the bag last evening.
#87 – John – are we gonna see some BZH execs go to jail under the criminal provisions of SOX?
“Depends on how hot the neighbor is!!”
Ours is decidedly NOT. I am glad he will not be on top of me – he has a lawn jockey, enough said. I think he’s older though, so maybe he will move and take said jockey with him. You can’t see it from the street, but hubby noticed it.
What bubble, I hear you – when we got our place, there were 3 bids on it, even though there were numerous other houses in the price range, because a lot were crap, and location is an issue for commuters (which is why we tended to skip Lewisboro and Pound Ridge, even though there were some great places there). Too many raised ranches up there for my taste, and in bad shape for what they are asking. Land is not enough for me to pay 750 for a wreck of a raised ranch last updated in 1979. We looked at a lovely house in Croton Falls that was listed for 725 and is still around – we just didn’t want to be up that far. But it was very charming and done beautifully, with great property.
Skep-tic, Katonah allows all newcomers a parking permit in it’s “worst” lot. Then you have to be on a list to move up to different lots, and you can do so to any of the Katonah or Bedford Hills lot. It will take a few years to get to the ‘good’ lot but I have time, and frankly, the newcomers lot isn’t bad at all. Most towns do not have this little luxury, and it helped make our decision for us.
#128,
NJ Transit is a joke. 20% fare increases over the last 3 years for what? More delays and less seats? Did you know they are on time 99% of the time (their stats). You just have to exclude all the signal problems, Amtrak delays and cold weather issues.
#106 Robin
“Builders were making profit when then were selling a house for 200k in year 2000. Builders was making profit when they were selling the similar house they were building and selling for 600k in year 2005. Builders are still making profit when they selling the similar house for 500k in 2007. So why should builders stop building.”
Maybe because oil wasn’t $80/barrel in 2000. Their expenses have radically increased in the past 8 years.
some illegal stuff went on at american home mortgage. i’m sure it’ll come out soon enough.
#135 – Bystander – Don’t forget the 6 minute grace period they allow themselves for those on-time stats. If your train arrives in NY Penn 6 minutes late, it still counts as on-time!
My commute from Montclair is 43 minutes (actually usually closer to 50 with all the delays). When Midtown Direct service was started in 2002, we were scheduled for a 32 minute ride to NYC!
Sometimes I wonder why people pay a premium to live here.
#120 Rich
You’re not wrong.
#123 bi
I think it was entirely predictable that pending sales for June would plummet almost 10% on a YOY basis, as they did. I think it’s sad that the MOM increase from May, which would have been the lowest month EVER if it weren’t for the 9/11 terrorist attack in 2001, was so paltry – you’d think since we ALWAYS increase from May to June that there’d be a bigger jump from the worst May ever.
June sales plummeted like a lead balloon. End of story.
#125 bi
Funny, I know a couple people who were going to buy in Westfield and have decided not to. Town doesn’t even have a direct line to NYC! They’re first in line to lose a mint.
#125 bi
Funny, I know a couple people who were going to buy in Westfield and have decided not to. Town doesn’t even have a direct line to NYC!
Westfield is first in line to lose a mint.
bi (123)-
Check Otteau’s June NJ sales report.
Tell us how happy you are after you read that.
bi (125)-
Here’s a list of planets with 10% upside potential:
1. Pluto
2. Mercury
3. Jupiter
“Potential”- and a nickel- will buy you a cup of coffee.
141,
Hey, tell them the Trans-Hudson Tunnel is only 9 years away. Raritan Valley Line will be direct into NYC. Time to raise asking prices $50 G.
Personally I take the bus. That is its own adventure but surprisingly it is more stable than RVL. Only one or two accidents, bus breakdowns or unknown delays a week.
Who’s your margin clerk, Nurse Ratched?
Priceless!
143#,
Otteau’s report is quite postive to me.
bi (123)-
Check Otteau’s June NJ sales report.
Tell us how happy you are after you read that.
#123 bi: Seriously what is there to be pissed at? But if you wish to remain dense, that is your choice of course.
#147 bi: Like I said , dense.
(147)-
“What a waste it is to lose one’s mind.”
-Dan Quayle
Did anyone watch the new “Flipping Out” show on TV yesterday? Could not stand it for long, flipped to the Colbert show on Comedy Central instead.
“Potential”- and a nickel- will buy you a cup of coffee.
Nah. That overstates the value of potential.
150#,
what ia waste when you throw away a good tomatoe -:)
market looks like a weathervane in a tornado. The sheep don’t know which way to run!!
“Blessed are the young, for they shall inherit the national debt.” Herbert Hoover
All this train talk makes me want to catch my train and grab a cold frostie beer. Thank God I don’t have to take one of those Prohibition era Jersey Buses where there is no beer even after a hard day of work.
If you are talking up and coming areas for Transportation how about the area near the LIRR in Jamaica Queens. You got the air tran to Jamaica, express to hunterpoint, flatbush avenue and Penn Station as well as the E to NYC and a express bus to Laguardia. Soon the LIRR will be non stop to GC. Plus the final kicker is the CannonBall to the Hamptons leaves out of there and the train to Long Beach is a lovely 25 minute ride to the beach. The houses around there are DIRT CHEAP as the neighborhood is very iffy. But mark my words 20 years from now that will be the next LIC and Hoboken. You cant have a transportation set up like that forever with out the yuppies and DINKS invading.
On that note-
I just made my last car payment. Paid it off a year early. I know a lot of people here don’t believe in buying new cars but I’ve had a few POS’s and I spent so much in repairs I might as well have been making payments.
Now I can put more into savings and retirement. Flame away.
“The houses around there are DIRT CHEAP as the neighborhood is very iffy.”
Saying Archer Ave is “very iffy” is similar to saying Donaghy has made some questionable foul calls.
Yes, Real Estate Prices Can Drop in Half–Even in Manhattan (June 8, 2007)
One of the most enduring cliches of the real estate industry is that properties in “prime locations” such as Manhattan and San Francisco “never go down.” Nice idea, but wrong.
http://www.oftwominds.com/blogjun07/manhattanRE.html
I think what he’s saying is prices when adjusted for inflation are still below their 80’s peak… is that possible?
Keep Your Eyes on Adjustable-Rate Mortgages
Two years ago, when the housing market was roaring along, I called a mortgage broker on the West Coast and asked for some help. I told him that I wanted to interview some recent home buyers who had taken out an adjustable-rate mortgage — one of the big drivers of the boom — and he was nice enough to pass along a short list of names.
One of the buyers was a business consultant in her 40s. She told me about her charming new house and the fact that she expected it to be a good investment, even if it had cost a bit more than she wanted to spend. Then I asked about her adjustable-rate mortgage.
“I don’t have an adjustable rate,” she said.
Confused, I called the broker again to see what was going on. A little while later, I got a sheepish e-mail message from him explaining that her loan did, in fact, have an adjustable rate. She just hadn’t realized it.
Now, I think this was an honest misunderstanding in which the broker believed that he had explained the terms of the loans more clearly than he had. And the mortgage ended up being a good one for the buyer anyway: she recently decided to move to a new area and sold the house before her rate jumped.
But the fact that this confusion could have occurred neatly captures the ridiculous state of the home buying business in 2005 and 2006. The fallout is going to last a long time. House prices will need years to work off their irrational values, more people are going to lose their homes and Wall Street can probably look forward to some more nasty surprises.
In fact, the mortgage meltdown has arrived at something of a turning point. So far, most of the loans gone bad were among the worst of the worst. Some were based on outright fraud, either by the lender or the borrower. In many cases, buyers were never going to be able to make their monthly payments and were instead banking on a rapid appreciation in home values.
But the pool of people falling behind on their house payments is starting to widen beyond this initial group, and adjustable-rate mortgages are the main reason. Starting in the spring of 2005, these mortgages began to get a lot more popular, largely because regular mortgages no longer allowed many buyers to afford the house they wanted.
They turned instead to a mortgage that had an artificially low interest rate for an initial period, before resetting to a higher rate. When the higher rate kicks in, the monthly mortgage bill typically jumps by hundreds of dollars. The initial period often lasted two years, and two plus 2005 equals right about now.
The peak month for the resetting of mortgages will come this October, according to Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. The level will remain above $30 billion a month through September 2008. In all, the interest rates on about $1 trillion worth of mortgages, or 12 percent of the nation’s total, will reset for the first time this year or next. A couple of years ago, by comparison, only a marginal amount of mortgage debt — a few billion dollars — was resetting each month.
So all the carnage in the mortgage market thus far has come even before the bulk of mortgages have reset. “The worst is not over in the subprime mortgage market,” analysts at JPMorgan recently wrote to the firm’s clients. “The reason for our pessimism is that loans originated in late 2005 and all of 2006, the period that saw peak origination volumes and sharply decreased underwriting quality, are only now starting to reset in large numbers.”
It isn’t hard to figure out what will happen when buyers who were already stretching to afford a house are faced with suddenly higher payments. Many will manage. They will cut back on other spending, or they will refinance their mortgage and get a new one they can afford. Others, like the buyer I interviewed two years ago, probably planned all along on selling their homes after a few years. For them, the artificially low initial rate was a no-lose proposition.
But there are also likely to be a shocking number of people who lose their homes. From 1994 to 2005, some 3.2 million households were able to buy homes thanks to subprime mortgages or other such loans, according to an analysis by Moody’s Economy.com. About 1.7 million of them will probably lose their homes to foreclosure when all is said and done. More than half of the homeownership gains from subprime mortgages will be erased.
The flood of those homes onto the market will further depress house prices. So will the newfound conservatism of mortgage lenders, which will make it harder for tomorrow’s buyers to get a mortgage. (Thank goodness.) The S.& P./Case-Shiller index of home prices covering 10 major cities has fallen about 3 percent since its peak last summer. Two or three years from now, JPMorgan predicts, the index will have fallen 15 to 20 percent. Adjusting for inflation, the decline will be worse.
The big unknown is whether the housing bust will cause a recession or a bear market. Most people who have looked closely at the mortgage market argue that the answer is no and that the damage will be contained. Subprime loans still make up a distinct minority of the mortgage market. Over all, only 3.4 percent of mortgage holders are currently behind on their payments. And as Victoria Averbukh, a former mortgage analyst at Deutsche Bank now teaching at Cornell, points out, “The housing market is still a limited portion of the U.S. economy.” Consumer spending has slowed recently, but is still fairly strong. Corporate balance sheets and the job market seem fine.
Rationally, the argument for optimism is pretty compelling: the economy’s strengths do look big enough to overcome its weaknesses. Yet even many of the optimists confess to an uncomfortable amount of uncertainty. There has never been a real estate bubble like the one of the last decade. So it’s impossible to know what the bust will bring, especially when there are still so many mortgages that are about to get a lot more expensive.
“Flame away.”
How dare you deprive a used car snakesman of his bread by buying new?
“Paid it off a year early”
How dare you deprive the loan company of their fair share of interest to be earned?
You need to be flogged.
Erich Merkle, vice president of forecasting for auto consulting company IRN Inc. in Grand Rapids, said with high gas prices and rising rates on adjustable mortgages and home equity loans, consumers simply have less money to buy cars.
http://biz.yahoo.com/ap/070801/auto_sales.html?.v=7
just testing here
“Did anyone watch the new “Flipping Out” show on TV yesterday? Could not stand it for long, flipped to the Colbert show on Comedy Central instead.”
How did you manage to do that? Flipping out was on at 10:00 and Colbert does not start until 11:30.
Forget the NYC trains. The bus towns are better. Riding a bus might not be as comfortable as the train, but they run more often.
lol. the Quack keeps ‘testing’ to see if he’s been blocked yet. what a character.
A guy in Long Island bought a Volvo brand new in 1967 that has way over a million miles with the original engine and transmission. I read recently the guy is retired and just drove the car around the world. Currently drives around 40,000 miles a year in the car. ALso it is single driver miles, he claims he never let his wife drive it. I guess that explains the no accidents.
That last sentence was to get NJGals Goat.
lostinny Says:
August 1st, 2007 at 3:01 pm
On that note-
I just made my last car payment. Paid it off a year early. I know a lot of people here don’t believe in buying new cars but I’ve had a few POS’s and I spent so much in repairs I might as well have been making payments.
Now I can put more into savings and retirement. Flame away.
Well Dream I didn’t know it was going to be that kind of party. But since it is, I’ll wait to get my flogging at the next gtg.
dreamtheaterr Says:
August 1st, 2007 at 3:08 pm
You need to be flogged.
How can you make your car last 500,000 miles? Irv Gordon, owner of the world’s highest-mileage car, a 1966 Volvo with 1,753,000 miles:
Change the oil every 3,000 miles.
Check the tire pressure weekly.
Switch to 15W-40 oil in the winter.
Inspect the belts and hoses for cracks every single time you buy gas.
Keep it clean. If you take pride in your car, you’re going to do a better job of keeping it up mechanically.
Powerwash the undercarriage to clean off the road salt in the winter. That stuff will corrode the body if it stays on too long.
Degrease the engine once a year.
John
Stop being a pain in the ass.
John #156,
Interesting comments about Jamaica. People have made the case for that neighborhood as an office location for years, citing the transport hub and aiports. Downtown Newark features similar attributes.
But Jamaica and Newark haven’t caught on as attractive office and residential locations. If people aren’t in Manhattan, they seem to want to be in the suburbs or in close-in locations like Jersey City and northwest Brooklyn.
I still like places like Park Ave. in Union City and Woodside, Queens, as future gentrification neighborhoods.
John, you can no longer get my goat. I have known many sexist pigs in my time. I can just add you to the long list…
“Soon the LIRR will be non stop to GC.”
This is a true statement for large values of “soon”.
John #160 –
If you are going to copy an article verbatim, you should at the least provide a link and properly credit the author. Apart from the potential for plagiarism, this can cause copywrite problems for the sites owner.
The link for the article is:
http://www.nytimes.com/2007/08/01/business/01leonhardt.html
#174 lisoosh
correct, and a good point. Other than “copyright”.
credit worry is behind us. dow up 155 pts. pending home sale up 5% mtm. with low inflation and low interest rate, we are entering goldilock economy again.
Please stop feeding the trolls
sl
From today’s “Hotsheet”
Mahwah
ACT WINDSOR TER $999,000 12/13/2006
PCH WINDSOR TER $975,000 1/24/2007
PCH WINDSOR TER $949,000 3/22/2007
PCH WINDSOR TER $899,000 5/31/2007
ACT WINDSOR TER $899,000 6/7/2007
SLD WINDSOR TER $850,000 7/31/2007
patient – Correction accepted, one of those words I can never remember the spelling of.
It takes a man (or woman) of strong conviction to buy in Jamaica or Newark today based on a perceived future upside. You would buy dirt cheap right now and have a full 20 years to enjoy “all that transportation goodness”
The problem is that you would hate your home so much you would literally spend all your time traveling to get away from it.
I want to make some positive contribution to this blog. here is an opportunity:
MLS# 4966714
OLP: $1.25M
Relisting: $799K
Current Listing Price: $774K
#176 bi: You have so much to learn my child
AIG Subprime Debt May Cost $2.3 Billion, Analysts Say (Update2)
http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=aGuw9h.w2Ksc
credit worry is behind us. dow up 155 pts. pending home sale up 5% mtm. with low inflation and low interest rate, we are entering goldilock economy again.
Yup. The market goes up 155 points in the final hour of trading and home sales for one month (subject to revision) are stronger than expected (although we weren’t expecting much).
Good enough for me. Looks like we’ve broken out of the downward trend. I’d say we can put the months of bad news housing behind us and enjoy our new permanent prosperity.
New paradigms for everyone!
…and home sales for one month (subject to revision) are stronger than expected…
I know you’re being facetious but I want to reiterate that they are pending home sales, not closed home sales.
Sunshine and bluebirds,
Rich
Commute times are what one makes of them, IMO:
Bus from Leonia (7:15): 20-25 min to PABT; 15-20 min walk to my office; total door-to-desk commute: 45 min (approx)
Bus from Leonia (7:55) 1 hr- 1:15 to PABT ; 15-20 min walk to my office; total door-to-desk commute: 1:25-1:30 min (approx)
Bike ride from Leonia to office (mid fifties and B’wy): 40-45 min door-to-desk commute.
Lesson learnt: if you’re riding the bus, leave home early.
bi: I recommend the short bus for you.
ChiFi,
This one’s for you:
http://www.hobokenhomes.com/cgi-bin/index.cgi?mode=view_listing&id=2234&so=&sd=&groupmode=for_sale&subcat=Condos%20/%20Co-ops
I think the headline should be your new mantra.
ugh
To: Subject: (no subject)
Bono, the lead singer of the band, U2, is famous throughout the entertainment industry for being more than just a little self-righteous.
At a recent U2 concert in Glasgow, Scotland, he asked the audience for total quiet. Then, in the silence, he started to slowly clap his hands, once every few seconds. Holding the audience in total silence, he said into the microphone, “Every time I clap my hands, a child in Africa dies.”
A voice with a broad Scottish accent from the front of the crowd pierced the quiet. . …
“Well, foockin stop doin it then, ya evil basturd!”
Re: 189
Guess he’s an easy target, what with all the charity work he does, but come on:
http://www.snopes.com/music/artists/bono.asp
Just for the record, we put in a pseudo-bid on a house listed at 650K. The realtor is very cool, very down to earth, sort of like a layed back hippie type with a “hey baby, whatever smokes your shorts” type attitude. Anyway, I told hime to float an offer out there without writing any paper work just to see how the seller reacts.
I told the realtor, who happens to be representing the seller, that the price was too high, which he agreed (lol). I told him to let the seller know we’re willing to offer 550K and to let the seller know we’re prime buyers and pre-approved.
The realtor calls me today and tells me that they’re negotiating an offer just under asking and I said God Bless them, let’em have it.
I asked him if the sellers are going to make the potential buyers feed the squirrels as a part of the deal. He loved that one. LOL! These people are way over paying for this house. I also told the realtor that if this deal falls through I’d be willing to listen but my offer might be lower. He says, “whatever works for ya, baby.” LOL! I like this guy.
My wife and I like the house. Oh well…. next!
ChiFi #189 – funny stuff.
Bono is definitely a mook, but the bastard sure can sing.
http://www.youtube.com/watch?v=NKqGyxSK1xI
Since I’m pumping U2…
http://www.youtube.com/watch?v=n13CU-NvPMU
Gary #191, one of these times you’ll connect — especially after this week.
About the same time time as the above U2 clips, just weeks after 9-11…
World Series – Oct 2001
Windows Media Player
http://media4.streamtoyou.com/gwb/nineinnings_256k.wmv
World Series – Oct 2001
RealPlayer format
http://real.streamtoyou.com/gwb/nineinnings_256k.rm
UnRealtor, cut it OUT.
I work very hard at being a tough guy ova heah, and you go and post that.
I don’t have any tissues.
Case anyone is interested Norway’s housing bust is beginning (yes, they had a bubble too). Seems prices have dropped up to 10% in a month in some areas. A miserable Fall is predicted.
UnRealtor 194,
Why after this week?
Let’s see … $150,000 off the asking price for a house that was on the market for 8 months.
150/8 = nearly $18,000 PER MONTH
That’s what the asking price went down while this house was on the market. Was it overpriced, or priced to comp 2005/2006 sale prices in the area?
Again … why would anyone buy now? Major, major deals will be had this winter, people. Patience.
Mahwah
ACT WINDSOR TER $999,000 12/13/2006
PCH WINDSOR TER $975,000 1/24/2007
PCH WINDSOR TER $949,000 3/22/2007
PCH WINDSOR TER $899,000 5/31/2007
ACT WINDSOR TER $899,000 6/7/2007
SLD WINDSOR TER $850,000 7/31/2007
just another test today
“Again … why would anyone buy now? Major, major deals will be had this winter, people. Patience.”
There are going to be NO deals this winter. Inventory is shrinking rapidly. I have counted at least 5 houses in my town that have been withdrawn just this week! Gone. Disappeared into thin air!
Come winter, you will have at least a 30% reduction in inventory.
Rich,
I just raised my asking price by $30,000. Does this mean that you will be moving to North Carolina?
Most of the people posting here are saying recession this, New Jersey that but the reality is you all want to buy a house in NJ so why put your life on hold just to save a few bucks? You shouldn’t time the market, If you are going to stay in a house for the long term which most of you appear to want to do then you will end up making money on the house over the long term. Now is the time to buy while rates are still at historic lows. I don’t understand why you all want to wait this out. It is no good for the economy. We NEED buyers to stop procrastinating and start living the American Dream. The dream that you all want to live. My house has been on the market for almost 2 years now. I need a quality buyer and I know they are out there. In the last 6 months we have had one offer. The last offer was over our asking price but the deal fell through because the potential buyer could not get financing. I don’t understand why people don’t want to buy?? Our neighbors sold for over $600,000 2 years ago, we are only asking in the mid $500,000. I don’t get it!!
“Gone. Disappeared into thin air!”
Yo quack, how about you disappearing too? Raise your house price as much as you want for your temporary elation; a buyer will eventually get it from the sheriff at a price on their terms.
We have raised our price, we have lowered our price, nothing works. We even painted.
Bi is right. There are MANY towns that will be 10% higer next year. They have already been mentioned on kannekt multiple times. Oh, that’s right, all of you renters with cooties have been banned from that site!
Well, here they are:
1. Jersey City
2. Hoboken*
3. Weehawken
4. West New York*
*waterfront only
Hou53,
Do not give in to the buyers. I was in the same position as you were 6 years ago. I had an apartment in lower Manhattan that I listed in late Auguust of 2001. A few weeks later, armagedon was taking place less than a mile away at the WTC. I ened up sitting on the place for 2 years! I finally got the quality buyer I was looking for. Do not take lowballs, unless you are depserate to sell.
oh, and one more thing Hou,
Do not give out anymore information about your house. If you do, someone with MLS access will out you and post your address and zillow pictures all over this site.
gary (191)-
What did you accomplish thru doing all that?
Un (194)-
Yeah, right. By running verbal lowball offers thru listing agents who just nod their heads and continue on their merry way? BTW…that’s exactly what I do when self-proclaimed market geniuses try to run slop thru me.
No matter how bad a buyer thinks the market is, when it’s time to offer, you step up to the plate, put it on paper, present your bonafides and play the game.
Lookers look…and buyers buy.
I wonder what the real estate market is like in Poland. JB is probabaly keeping track of it, knowing him!
I agree with you Clot (LOOK, we agree on something!) I still do not understand why buyers insist on putting in verbal offers. That shows that you are not serious. There is no excuse. It does not cost you anyhting to sign a few papers. I view verbal offers the same way as I do dog poop.
Clotpoll,
Simply trying to gauge things. If the sellers took a step forward, I would’ve taken a step forward. As it goes, they’re entertaining an offer. The DOM was at 55 with no offers so I wanted to “dabble”.
Gary,
Why are you even looking at houses? You have no intentions of buying anyhting. If you were, you would have put the stupid offer into writing. If you want to know if the seller is going to accept it, PUT IT INTO WRITING so that it can be presented to the seller. If it is oral, someone might make a mistake and tell the seller that your offer is higher or lower than it actually is.
For all you bears out there, foreclosures are appearing in Manhattan. Check out http://www.realtytrac.com if you don’t believe me.
“As it goes, they’re entertaining an offer.”
Yes, they were entertaining offers… those that are in writing. In real estate, ALL CONTRACTS MUST BE IN WRITING! That is what the law states. Come on Gary, you are buying a half million dollar home, not a used car!
Hey, you know what guys, you’re right. I’ll belly up and make a formal offer next time. What was I thinking.
Frank,
realtytrack is a con site. They advertise foreclosures that do not exist. They advertise unbelievable deals, like a 2 bedroom apartment in gramercy park for $400k. Look at your newspapaper’s classifieds and you will see homes listed with toll free numbers at great prices. You call up and they tell you to subscribe to their service. When you do, you get their foreclosure listings and the ones they have are no way near as good as a deal.
#218 Gary,
Are you being sarcastic?
Duck,
Not at all. Your absolutely right. So, just so I have this straight, I can expect a faxed copy of an offer if I decide to list my house, correct? I shouldn’t just rely on a phone call from my realtor with a bid from a potential buyer, correct?
“Keep watching HGTV, painting those kitchen cabinets with Rustoleum adds $5,000 of instant equity to your home!!”
In Manhattan, blowing up your brownstone adds about $2 million to your property value. Are you listening flippers??
Yes,
That is just about coreect Gary. The offer needs to be in writing so that you know the buiyer is serious. Buyers who use verbal offers are probabaly giving these offers to every seller in the neighborhood so they have no dedication to the house. They are fishing to see who will take their bait.
“Henry Paulson”
Yes, this guys says somethings sometimes that make ya shake your head. BUT…
If it wasn’t for this guy, China would have brought the stock market to it knees. He knows what he is doing behind closed doors.
SAS
BTW, I did email a copy of my pre-qual to the realtor before I made a “verbal”.
Get a load of this place in Edgewater. It is 30% sold out even though it sits directly next door to a highly toxic EPA superfund with all sorts of cancer causing toxins!
http://www.peninsulanj.com/news/files/articles/15/Peninsula%20Article.pdf
Duck (217)-
“…In real estate, ALL CONTRACTS MUST BE IN WRITING!”
Uh, Duck…wrong. Verbal contracts ARE considered valid but are also deemed potentially unenforceable. To take it further, Realtors are only required- legally and ethically- to present written offers.
OT… can any one confirm that?
Starting on August 15th, the price of a ticket for violation of NJ Law
39:3-29 (failure to show your driver’s license, registration, or insurance
card at the time you are stopped) is going from $44.00 to $173.00 . Please
make sure your vehicles have the proper documents in them. If you jump in
the car to run to the store and forget your wallet with your license in it
and you are stopped…. Oh well… you just spent $173. And the fine for
not having all three documents is $519!!!
Forward to people in NJ, and let them know of this change. And be
careful, the fine for hand held cell phone use while driving will be going
up to $180.00.
“He infact predicted that in next 18 months there will be 1.2m to 1.8m homes in foreclosure. According to him that number was 500K higher then previously predicted. He was basically saying people were buying properties without thinking how they will pay for.
Hurray, David’s back, but on different side now.”
I wondered why NAR fired him, I mean why he resigned…
And you know what else, you guys have opened my eyes even further. I haven’t ruled out using a realtor when I sell my house. I had someone interested when I was ready to sell but I think I’ll just list. But, the asking price just went up 10%. No reason to act courteously, this is business. Since everybody else in this day and age is a f*cking wh*re when it comes to money, I’ll be one too.
Good for you Gary. I have a seat waiting for you at the “only way I will sell my house is if I torch it” party!
I never thought I would say this, but the market is bad. Why am I saying this? Because my realtor told me and he was the only person I knew who kept saying that the market would change for the better very soon. He is having to resort to living on his savings because all of his income is gone!
Gary don’t lower yourself to other’s standards. Just the mention of your “plan” is making you miserable. Be yourself. And f@ck everyone else if they don’t get it.
lostinny,
My parents owned a local tavern and restaurant for over 30 years; they retired in the early 90’s. I saw the way they conducted business; Christmas parties for the local kids who had nothing, Mom made turkeys during Thanksgiving for poor people and my father was always lending a buck to someone without demanding a return. This business put three children thru prep school and college. This is the way I thought business was conducted.
When I sold my first home, it was to a young couple. We gave them a break and even threw in the washer and dryer, too.
Business isn’t done this way anymore. It’s all about “me”. So, call this an epiphany. Why should I compromise?
Because when you thought business was conducted not just to make money but to help those less fortunate when you can, you were happier. You’ll be even more unhappy if you sell out and you know that.
Now cut the crap and have a beer.
Gary (223)-
“When I sold my first home, it was to a young couple. We gave them a break and even threw in the washer and dryer, too.
Business isn’t done this way anymore. It’s all about “me”. So, call this an epiphany. Why should I compromise?”
It’s a shame, isn’t it? Even though I’m a Realtor, I remember (and have been party to) significant deals done on a handshake. A couple of those deals were the best ones I’ve ever made.
But, in this day and age, would I do that again? No way. There is a coarseness and subtext of sleaze throughout RE that, I guess, signifies its new pride of place as the crown jewel in most people’s financial lives.
However, there’s a silver lining to the black cloud. Over the past couple of years, I’ve been able to join- and participate actively- in several local charitable organizations. There’s no shortage of opportunities for significant giving in any part of NJ…and when you get into one of these situations, at least you know everyone around you is doing the right thing for the right reason.
So tell me what are these condos at The Peninsula selling for being as they’re so “affordable”.
lostinny,
lol! Ok, you made me laugh but I’m serious about re-thinking this whole thing. There’s an Italian saying in reference to wearing ones hat in their hands but I can’t think of it right now. In other words, one shouldn’t feel like they must apologize all the time. So, f*ck it, I’ll just approach it with a cold stare. I really feel for everybody looking to buy who’s currently renting. There’s absolutely no breaks to be had, even in this so-called buyers market.
lost (234)-
Last time I checked, business IS conducted to make money.
Perhaps in a more civil time, making money was not the ONLY acceptable conclusion to deal. Win/win, community good and helping a neighbor or person in need better their circumstances were all worthy objectives in the sale of a home.
However, big- and bigger- amounts of money at stake get players in the game thinking more about #1…and less about using a home sale as an altruistic vehicle.
The charitable impulse is a natural and laudable human aspiration. Perhaps nowdays, it’s just better channeled into other, more precisely-defined activities.
Clotpoll,
Yeah, it is a shame. Look at everything today. What about sports? The Vick thing, the NBA ref, steroids, even doping in the biking world. It’s a microcosm of life. This wasn’t this bad when we were kids. The most you heard about was some athlete getting drunk.
But as I said, I’m not going wear my hat in my hands either. If I’m shelling out hundreds of thousands then I’m sure as h*ll gonna try and get the best deal I can.
Clot I never said business wasn’t conducted to make money. What I meant was that people, in the past, more often then rather then now, seemed like they had a conscience and cut someone a break here and there. I said help less fortunate when you can. I didn’t say give it all away. Although if I was in a “Brewster’s Millions” situation, I could spend it in less then a month.
In this market, verbal feelers are a seller’s wet dream.
Gary if you make a killing on the house, great. But you really just don’t seem like the type that’s gonna screw someone over because you think it’s fun to do.
Pat #197, sorry, I was just coming across the stuff one after the other. :)
Great stuff.
Gary #199, why after this week?
Have a look at the main page for the last few days:
https://njrereport.com
Sentiment of ‘nice nice’ when hundreds of thousands of dollars are on the line are misplaced.
Remember: people kill for less. Much less.
Trust no one.
lost,
It’s not my intention to screw anyone. I’ve always been fairly shrewd when it comes to dealing and investing, perhaps I learned something from Mom and Dad after all. LOL!! I just need to thicken the outer layer a little bit more. Besides being theraputic, this blog does tend to educate in a multitude of ways.
Unrealtor,
I always enjoy reading your posts. You have a knack for saying a lot in just a few words.
Gary
I know it’s not your intention to screw anyone. Well maybe your wife. But I digress. Yeah this blog is very educational. I’m not sure theraputic is the word I’d use. Speaking of which, I’m thinking of setting up shop in Manhattan. Why not? I’d make a killing.
lost,
LOL!! On that note, I think it’s time for me to depart to that place where I toss and turn for half the night. More fun tomorrow, folks.
$800 Million – The amount of LOANS that AHM promised but failed to deliver on Monday and Tuesday to Home Buyers. OUCH
A good business knows the importance of charity. If a RE broker does not do the right thing she needs to be run out of town. A sleezy RE broker in my town started placing people who she knew were going to illegally rent to multiple people in a single family neighborhood, she made a few quick bucks until the local CPAs and a few others threathened to black ball her from town and advise all clients not to use he again. If she was caught selling one more house like that it was over. All at once she advised clients that the extra 5K for the illegal tennant bid was bad and it wrecks the neighborhood and the sellers sold to a better mix of people and she started advertising in the church and temple fliers to show she was charitable. A Realtor HAS NO MONEY. A realtor that is based in a single town as his main source of income can only screw the local boy scouts, young couples and neighbors for so long before they stop using them and then there goes the money. If you want to take my Cash I don’t have to give it when you are a commodity. I rather give it to the realtor who gives back 5% to the community then the sleeze realtor. But hey that is me.
#237 gary The breakd are coming gary, patience will pay off.
Just look at the difference in environment/sentiment from this time last year to now, and look at how quickly that time went.
#235 clot:guess, signifies its new pride of place as the crown jewel in most people’s financial lives.
I owuld add althiugh that crown jewel is getting tarnished right now.