From James W. Hughes and Joseph J. Seneca at the NJ Voices Blog:
The current global liquidity crisis has ended an unprecedented American housing bubble. New Jersey was one of the key epicenters of the housing boom, and thus now confronts a housing correction that could be very painful, both in depth and duration.
It is entirely possible that it could take until the middle of the next decade for the state to match the home price peak of 2006! The old adage that economic wild parties are often followed by prolonged economic hangovers may be borne out again.
What caused the wild housing party? Well, after all is said and done, it turned out that it was greed (surprise!) that did it!
…
Given the party is now over, what can New Jersey now expect? The collapse of the state’s home price boom of the 1980s (Boom-Bubble I) provides a glimpse of one possible future. According to the Office of Federal Housing Enterprise Oversight (OFHEO)between 1980 and 1988, home prices in New Jersey increased by 141.2 percent – nearly two and one-half times in just eight years.It turned out then (as now) that such rates of increase were simply not sustainable. Home prices peaked in New Jersey in 1988, and then started to retreat, bottoming out in 1991. During the three-year 1988-1991 period, prices declined by 6.2 percent.
Home prices finally began to recover slowly in 1992 as the economy gradually emerged from recession. But housing had to traverse a long road back. It took until mid-1998 to finally match the price peak of 1988, and this ignores inflation!
In the slow 1991-1998 recovery-period, prices increased by a total of 6.6 percent in New Jersey, or by only about 1 percent per year.
But then Boom-Bubble II emerged. Between 1998 and 2006, another eight-year period, New Jersey’s home prices jumped by 129.1 percent. While this rate of increase was somewhat less than that of 1980 to 1988 (141.2 percent), the 1998-2006 house price run took place on a much higher base, leading to much higher absolute price gains.
Again, such rates of increase were not sustainable. In retrospect, they were achieved only because of excess demand stimulated by aggressive and risky subprime lending practices.
But that era is past. The bill is now due, and a painful correction is in place.
The future, if predicted by New Jersey’s experience in Boom-Bubble I, is that home prices will slip in the region through 2009, and then begin to slowly recover. It could then take until 2016 to match the nominal (i.e., not inflation-adjusted) home price peak of 2006!
We’re not saying this will actually happen, but it certainly stands as a likely possibility.
From Reuters:
Wall Street bonuses, jobs lose certainty
Wall Street’s four-year jobs expansion boom could end in painful retrenchment as early as December and bonuses for some could take a hit, too.
The jobs ax may cut swiftly and deeply, experts said, as turmoil in the credit market and mortgage industry spreads to other corners of the U.S. economy.
“It would not be surprising, should the market continue to correct, that come December people will be surprised by the paucity of their bonuses next year,” said Harlan Platt, a business professor at Northeast University who has written books about corporate meltdowns. “And a goodly number may find themselves looking for work elsewhere.”
That would be a turnabout from a hiring binge that looked healthy as recently as two months ago, before the subprime mortgage crisis began to roil larger brokerages and hedge funds and shaky credit markets stalled big corporate takeovers.
Johnson Associates said aggressive U.S. hiring will be hard to maintain. But it said strong growth in the first half of 2007 should lift bonus payouts over the record set in 2006.
…
Employment in the U.S. securities industry reached 848,300 jobs in June, a full recovery of the jobs lost between the March 2001 peak of 840,900 and the October 2003 bottom of 751,000, according to the U.S. Bureau of Labor Statistics.
…
The two smallest Wall Street firms led the pack in recent years, with Lehman Brothers doubling its worldwide payroll — from 13,100 to 28,323 — on acquisitions and internal growth. Bear Stearns was No. 2 with a 43 percent gain. Goldman Sachs, the largest firm by market value, was not far behind, with employment increasing 42 percent.
…
U.S.-based employees at the large brokerages could be hardest hit because operations in Europe and Asia are growing faster than theirs. For example, Merrill Lynch said non-U.S.revenue grew four times faster than in the United States during the second quarter.
“Indeed, all of the growth for the brokers in the recent quarter was from outside the United States,” Deutsche Bank analyst Michael Mayo said in a research report.
For contrast, from MarketWatch:
Wall Street bonuses to see ‘modest’ impact from turmoil
Wall Street bonuses will see a modest impact from recent woes in the market, according to a survey released Monday by Johnson Associates Inc. Compensation will be hit by firm-wide financial losses from loan-related fees and write offs. Those losses will be offset by the seven- to eight-month build up of the bonus pool, the report said. Bankers also can expect to see more options in compensation packages. Private equity professionals and investment bankers can still expect to see 20% gains in yearend compensation. Prime brokerage, hedge fund, derivative workers can expect 15% increases. Senior executives can expect 5% to 10% increases.
so….
the 1980’s boom was more inflated than the most recent?
I was just a youngin’ in the 80’s. Any veterans out there-
was there as much hype and speculation about housing during that boom? pre-construction flippers, people buying second homes just for then hell of it, etc?
I worked at EF Hutton back in the day and it was much more of a crash. There was several thousand people in my office building in battery place and there were ten people left standing on the last day and I was one of them. They laid off people so fast that sometimes departments locked their doors to keep security out and I remember them using the fire axes to bash down doors. Same old for everyone, up against the wall get searched and be told if you are caught in the building again you would be arrested for trespassing. I remember the stock loan department got it at nine am one day in December 1987 and in March of 1988 I was looking for a confirm ticket and their were high eaten moldy bagels and half a cup of moldy coffee sitting on people desks with their wive’s picture still on the desk. Really creepy. The AC in one battery place was out the week of the crash, which was kinda warm cause we had a jumper land in the central air and we were working in the heat watching them fish the body out. ED Hutton matched 100% in employee stock and it was a black out period when the crash happened. My boss had 100% of his money in the 401K and he lost 75% of his 401K in one week and his job the next month. Due to the black out he could not hit sell, he just stook at the quotron machine drinking vodka from a coffee cup watching his life savings disapear. He only had a GED and six months later he went from VP to working in a laundermat and my other VP with a GED was stuck driving a bus. Remember in 1987 most people on Wall Street started in 1960s and 1970;s when they were 18 and worked their way up. When wall street came back in the 1990’s they only wanted MBA types so those people never worked again.
The re crash was also related to the stock market crash, remember re did not crash till two years later. One buddy of mine lost his job in 1987 and went into RE flipping, coops were rising so quickly he would buy a coop and he would have 60 days to close. On day 50 the coop had risen a few thousand bucks and he would sell his place at closing to a second buyer and walk away with cash. He then was doing so well he did bigger and biger properties. He was making 500K a year at 27 years of age. His end came very very swift he bought a 14 million NYC commercial building and went to flip it in 60 days, the market went south big time and he could not unload it to another buyer and did not have the money to close, the seller sold it to someone else at a multi million dollar loss a year later and my friend declared bankruptcy and the judge took his almost million dollar in assets and my the age of 30 he was back at home broke with Mommy and Daddy.
This is very similar to this time. The stock boom of 2000 flipped into a RE boom. Which is now crashing. My friend rode both booms back then but in 1991 and 1992 everything sunk at once, stocks, bonds real estate etc. and a lot of people went under.
“It took until mid-1998 to finally match the price peak of 1988, and this ignores inflation!”
Does anyone know when the peak price of ’88 got matched when you consider inflation?
2002
I am just sitting on sidelines and awaiting for best opportunity to BUY a home.Any ideas when will NJ housing bottom out? ( your opinions only of course).
Another blogger–a.k.a self-appointed expert speaks gloom and doom….LOL
I agree with this scenario. The ingredients for a secular bear market in real estate are defininitely present.
John (4) — great stories, very well told. Thank you.
John (4)-
You have a gift for the morbidly entertaining.
great stories (4). Regarding Hughes and Seneca, are they saying that the 80s boom/bust and the 00s boom/bust will be about the same? I though the 00s run up was much higher.
If John’s making it up, he’s good.
John gets the Falling Star Award August nomination from me.
# Doosh Says:
August 13th, 2007 at 6:18 pm
Another blogger–a.k.a self-appointed expert speaks gloom and doom….LOL
Words of a true…”Doosh.”
Sorry that the world outside the kannekt.com echo chamber is so inhospitable to your views.
Another blogger–a.k.a self-appointed expert speaks gloom and doom….LOL
Do you know who Seneca and Hughes are?
jb
“Doosh”= the sound Homer Simpson makes when he late pays his mortgage.
Here’s a hopeful landlord in my area:
http://philadelphia.craigslist.org/apa/394622564.html
This is your chance to live in a $350k condo for my COST.
John, you overpaid.
http://philadelphia.craigslist.org/apa/369726670.html
That’s a little more like it, John. Drop your price, and we might consider.
http://philadelphia.craigslist.org/apa/373065656.html
Oops…bring it in under 1900, John.
i never thought that i’d see the day when a condo in f**kin’ YARDLEY would be renting for over $3K, or selling for over $300K.
nope, no r/e bubble in the philly metro area … nothing to see here, move along.
Eis, he’s not renting, he’s fishing. Fishing for a fool.
You can get a SFH in that school district for 1400.
He’s bleeding.
oh i agree with you, Pat! i grew up not far from Yardley/Morrisville, so i’m just shaking my head in disbelief over this guy’s cluelessness more than anything else.
i’m also noticing a few flippers up where i currently live (Hudson Co.) also “fishing for fools” & asking exorbitant rates for their “investment properties.” i have a feeling that we’re going to be seeing a LOT more of those shenanigans in the near future.
whoops, instead of “exorbitant rates” i meant “exorbitant rents.” said “exorbitant rates” b/c they are PAYING “exorbitant rates” on their “investment properties.”
just to clarify.
>>Any ideas when will NJ housing bottom out? ( your opinions only of course).
prices will drop 3-5% a year until they approach zero and start giving them away with every happy meal order.
“home prices will slip in the region through 2009”
At least to 09, and thats optimistic…
sas
Great article.
One thing they didn’t mention was interest rates. Interest rates fell substantially during the early 1990’s. This is relevant for 2 reasons:
1) Owners with ARMs did not face higher resets, in fact your payment probably fell after your ARM reset. While the value of their house fell, assuming you still had a job, you could probably ride out the downturn. This time around, higher ARM resets will make this impossible for many people, increasing foreclosures & those forced to sell under pressure.
2) If you believe that people only care about their monthly payment, then home prices expressed as a monthly mortgage payment fell by about 21% from 1988 – 1991. (a 300k house in 1988 @ 10.34% versus $281K in 1991 @ 8.4%). This time around, interest rates will not be able to cushion the fall as they did in the early 1990’s.
sas Says:
August 13th, 2007 at 10:01 pm
sas
Where have you been? We’ve been getting trolled and we need someone with combat experience….
ChiFi (27)-
I think the biggest and worst wave of trolls has been repelled.
Some may disagree, but I think Regurgitator, Reech and bi provide excellent comic relief.
How the Mortgage Bar Keeps Moving Higher
WSJ
http://online.wsj.com/public/article_print/SB118705311075996714.html
Frankie Van Cleave says she has paid all her bills on time for more than three decades, save one car payment that got delayed in Christmas mail. But neither solid credit nor her track record running a number of businesses is sparing the 70-year-old from the turmoil in the home-mortgage market.
Several mortgage brokers had courted her to refinance a $1 million adjustable-rate mortgage she currently carries on her home, on two acres of prime riverfront property in Marietta, Ga. But most of them “dropped me like a hot potato” last week after two appraisals came in below $900,000, she says. Her bank of three decades won’t help her after her monthly mortgage payments recently ballooned to nearly $8,200, so Ms. Van Cleave is working 80 hours a week as a technical writer to make ends meet.
“A good credit record doesn’t count for anything now,” Ms. Van Cleave says of her futile refinancing effort. …
…
Whereas lenders used to change guidelines a few times a year and would give mortgage brokers advance warning, they are issuing revisions almost daily now and dropping products overnight, industry officials say.
…
“We thought the dust was going to settle, but instead, it just blew up,” says Mitchell Reiner, president of Mortgage Associates, a Los Angeles-based lender that does business in 48 states. “Everyone is being affected.”
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“Banks want to see that you have a vested interest in the property,” says mortgage broker Mark Cohen of the Cohen Financial Group in Beverly Hills, Calif. “Everybody thought the damage would be contained to the subprime market but it has spread to A-paper [products]. The impact is that there are fewer choices” for borrowers.
…
The screws are tightening at the upper end of the market, for so-called jumbo mortgages that exceed $417,000, the limit for loans eligible for purchase and guarantee by mortgage institutions Fannie Mae and Freddie Mac.
…
The fluid market is frustrating sterling borrowers such as Orange County real-estate agent Valerie Torelli, who recently sought a mortgage for an investment property she bought in Costa Mesa, Calif. She considered a 30-year fixed-rate mortgage of at least $450,000 for the house, which she plans to rent out until the market improves. She says that despite her high credit score of more than 800, lenders wanted 8.75% for a stated-income jumbo loan or 7.25% with full tax documentation, which she didn’t want to provide. The average 30-year fixed-rate for a nonjumbo loan, known as a conforming loan, is currently 6.64%, according to HSH Associates.
In Marietta, Ga., Ms. Van Cleave doesn’t have cash for a refinancing down payment, and she faces a problem hitting more consumers: Appraisers say her home is worth less than her current $1 million mortgage. Ms. Van Cleave concedes she took a risk, borrowing close to the appraised value of her home two years ago — at the market’s peak — to help fund a start-up company that sells a patented fishing-rod holder. She opted for a two-year ARM, with a piggyback mortgage at nearly 12%, and planned to refinance.
…
Ms. Van Cleave rejects the first two appraisals, saying that one report has factual errors and neither makes fair comparisons with other homes. She believes she is a victim of appraisers who are being pressured by lenders and are “so afraid they’re going to lose business or have their license taken away.”
…
One of the men who surveyed her property doesn’t entirely disagree. “The field has changed quite a bit. There is more pressure for tighter appraisals,” says Mike Russell. A year ago, he says, lenders weren’t as demanding for comparable home prices in the immediate neighborhood, and about 70% of his appraisals ended in approved loans. Today, about 70% of his reports end in rejected loans.
>>Some may disagree, but I think Regurgitator, Reech and bi provide excellent comic relief.
feeling is mutual.
excellent article. I’m not a bull or a bear, just someone with many questions.
from Hughes & Seneca above
“In retrospect, they were achieved only because of excess demand stimulated by aggressive and risky subprime lending practices.”
Am I the only one who isn’t convinced that the housing bubble was created solely by excess liquidity?
It’s also interesting that they don’t mention the root cause of the 80’s bubble. I’m curious to know what irrational exhuberance caused a 142% increase back then? Tweren’t no subprime back then, eh?
Aegis Mortgage files for Chapter 11 bankruptcy
http://www.reuters.com/article/marketsNews/idUKN1337247520070813?rpc=44&pageNumber=1
Aegis Mortgage Corp., a mortgage lender controlled by private equity firm Cerberus Capital Management, on Monday filed for Chapter 11 bankruptcy protection, a week after it stopped making home loans and fired 60 percent of its employees.
Aegis has described itself as one of the 30 largest U.S. mortgage lenders. It made “prime” and “Alt-A” wholesale loans, and “subprime” retail and wholesale loans to residential borrowers who couldn’t qualify for the best rates.
prof (31)-
Back in the ’80s, it wasn’t irrational exuberance. It was ye olde inflationary mindset:
“Buy today, because tomorrow it will be more expensive, and my dollar will purchase less.”
Marry that to some God-awful thrifts, avaricious developers and bogus apprasals. Shake well, rinse, repeat.
I suppose the views of the economists posted in the story above will have the same effect and accuracy of every other academic economic prediction over the last several years…..
From Bloomberg:
Home Depot Net Income Falls 15% on U.S. Housing Slump
Home Depot Inc., the world’s largest home-improvement retailer, said profit fell 15 percent and revenue dropped for the first time in four years after a U.S. housing slump reduced demand for appliances and remodeling.
The company repeated its outlook for annual profit to decline 12 percent to 15 percent, and said today that the housing and home improvement markets will “remain soft” into 2008.
Slowing home sales and falling house prices are curbing demand for renovation projects as owners hesitate to invest in a depreciating asset. The decreases are also eroding the equity that has helped consumers finance new washers, dryers and cabinets. About three-fourths of Home Depot’s revenue is tied to home sales.
“Remodeling activity is just beginning to slow and will continue to decline as housing prices fall,” Mitchell Kaiser, an analyst with Piper Jaffray & Co. in Minneapolis, wrote in a note July 26. He rates the shares “market perform.”
31-It’s also interesting that they don’t mention the root cause of the 80’s bubble. I’m curious to know what irrational exhuberance caused a 142% increase back then? Tweren’t no subprime back then, eh?
Wasn’t the S&L scandal related to the 80’s bubble. I recall my mom working all the time processing equity loans for city federal. Kind of seems banks were just giving away money then too.
Yeah giving away money at 14% INTEREST
p.s. HOME DEPOT is a crap company — try finding someone there to help you on any given day……sales drops for shit service….predictable.
From Bloomberg:
Wal-Mart Posts Profit Below Estimates, Cuts Forecast
Wal-Mart Stores Inc., the world’s largest retailer, said second-quarter profit rose less than analysts anticipated and lowered its earnings forecast after the company cut prices on thousands of back-to-school items.
…
“U.S. consumers continue to be under difficult pressure economically,” Scott said on the company’s recorded call today. “It is no secret that many customers are running out of money toward the end of the month.”
Re: Walmart
I must say, we went to Linens N Things to get a garbage can for the kitchen and an ironing board. They only had one type of ironing board at $70.00 and the metal garbage can was $129.00
We went to WalMart and got both items for $30.00
From the APP:
Judge allows auction of Kara project
Forest Edge Estates, an 11-home development in Stafford that was set to be foreclosed on by Sun Bancorp, will be auctioned instead. Like the Birch Hill case, it could hasten development, but hurt buyers whose homes weren’t completed.
“If we get something back, we get something back,” said Steven Doyle, 37, of Little Egg Harbor, who bought a home at Forest Edge and now stands to lose more than $100,000 in deposits and legal fees. “If we don’t, we lost out. We just won’t make the same mistake again.”
DooshUsMaximus Says:
p.s. HOME DEPOT is a crap company — try finding someone there to help you
Getting a real human in these stores to check you out nowadays is a luxury. They installed the self service checkout and fired 1/2 of the cashiers.
Citigroup May Lose $3 Billion on Subprime, LBOs, Bernstein Says
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahW1pLE7WZ7I&refer=home
The New York-based company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the three months ending Sept. 30, Bernstein analysts Howard Mason and Michael Howard said today in a note to clients.
Citigroup’s consumer unit holds $22 billion of subprime mortgages, and its investment bank has perhaps an additional $13 billion of subprime home loans, the analysts said. “The risks are greater for the $13 billion subprime mortgage portfolio in the markets-and-banking business since these loans would typically not have been underwritten by Citi,” the analysts said.
Prices on subprime debt have fallen about 20 percent since the end of June, twice as much as they did in the second quarter, the analysts said, so Citigroup could have lost between $2 billion and $3 billion.
Dupe.. Beat me to it..
jb
The global credit crunch claimed a Canadian victim yesterday, as financing company Coventree Capital Group Inc. [COF-T] saw its stock plummet on news that investors have turned their backs on its $16-billion portfolio of loans.
“In a move that speaks to the market’s newfound aversion to risk, Toronto-based Coventree reported yesterday that “unfavourable conditions” in credit markets meant it could not find investors for $250-million of asset-backed loans that came due yesterday. The move knocked backed Coventree’s stock price by 34 per cent.”
“You may be looking at the next leg of a deeper debt crisis, as problems in subprime mortgages give way to problems with liquidity in the asset-backed market,” said one Canadian fund manager who invests in Coventree’s trusts.”
http://www.reportonbusiness.com/servlet/story/RTGAM.20070814.wrrisk14/BNStory/robNews/?page=rss&id=RTGAM.20070814.wrrisk14
The self-serve checkouts are great, just as long as the technically challenged stay away from them
Somehow, you just knew this was coming.
“BRINY BREEZES, Fla. — Who wants to be a millionaire? Never mind.”
“That’s the come-on, and ultimate torment, recently served up to Briny Breezes, a 43-acre mobile home community on Florida’s Gold Coast.”
“In January, Ocean Land Investments of Boca Raton agreed to pay Briny trailer owners $510 million for their oceanfront property, a defiantly unpretentious middle-class oasis wedged amid mansions, high-priced condominiums and opulent hotels.”
“But two weeks ago, Ocean Land, facing an Aug. 10 deadline to pay the rest of a $5 million non-refundable deposit (it had put down $500,000) asked for a 45-day extension to talk to nearby towns opposed to the project.”
“Briny’s board of directors refused, and the deal is off”
http://www.usatoday.com/money/economy/housing/2007-08-13-briny-breezes_N.htm?loc=interstitialskip
comrades, the FSBO property in westfield i reported 3 weeks is gone. it was origianlly listed $950K and the greedy seller raised it to $1025K after receiving 3 offers in a week. this buyer is so stupid to take bullet in the midst of worst housing recession in history and the house must end up in court in 1 or 2 years.
comrades, please add westfield to your forclosure watch list.
From the NYT/Bloomberg:
Subprime Lender Seeks Protection From Creditors
The Aegis Mortgage Corporation, a subprime lender based in Houston, filed for bankruptcy protection yesterday, joining a growing list of companies hurt by investors’ unwillingness to finance home loans for borrowers with poor repayment histories.
The company said that it owed more than $100 million to creditors, including some of the investment banks that until this year financed many loans to subprime borrowers. The petition, listing more than $100 million in assets to pay as many as 5,000 creditors, was filed in Federal Bankruptcy Court in Wilmington, Del.
“Due to the extreme and unprecedented conditions Aegis presently faces in the marketplace, including the accelerated demands for capital, we were compelled to take the necessary and responsible step of seeking Chapter 11 protection,” the chief executive, Dan Gilbert, said in a statement.
Aegis said last week it was shutting down its lending business and firing a “substantial” number of employees. Its mortgage-servicing business will continue, it said. The company was among the 12 largest subprime home lenders last year, according to Inside Mortgage Finance, a trade publication.
Aegis is 81 percent owned by an affiliate of the New York hedge fund manager Cerberus Capital Management, according to a bankruptcy court filing.
Among Aegis’s largest creditors are units of Morgan Stanley, owed $16 million, and the Countrywide Financial Corporation, the biggest American mortgage lender, owed $14.3 million.
I’m curious to know what irrational exhuberance caused a 142% increase back then?
Among other factors, falling interest rates in the mid 1980’s & a strong stock market leading up to 1987 (wealth effect). While interest rates were high by today’s standards, they were in the high teens in the early 1980’s. When they fell to 9 or 10 percent, that was a really big deal.
Price trumps location in current housing market
BY ELLEN YAN | ellen.yan@newsday.com
August 14, 2007
In real estate, “location, location, location” has long been the mantra. But nowadays, “price, price, price” could be a better arbiter of what sells.
Homeowners who still have their hearts set on boom-time prices may be in trouble, Long Island real estate agents say. Monthly sales numbers show the median price for July contracts was as low as 70 percent of the median price for all properties for sale, according to July data from the Multiple Listing Service of Long Island.
MLS divides Long Island and Queens into 16 zones, so consider zone 3, which covers about 60 communities, including Muttontown, Centre Island, New Cassel and parts of Hicksville. Out of 309 contracts signed in July, $630,000 was the median price, or 81 percent of the $779,000 median list price of all homes for sale in that zone.
Zone 8, which covers Hempstead, Manhasset and some 20 other neighborhoods, fared better last month. The median price out of 167 contracts was $484,000, 99.6 percent of $486,000, the median price of all the homes for sale in zone 8.
“Two years ago, buyers were willing to overpay,” said Don Scanlon, president of the Multiple Listing Service of Long Island and broker owner of Century 21 American Homes in Wantagh. “Today, they’re not.”
MLS began comparing inventory prices to contract prices last fall, after buyers began refusing to participate in bidding wars and upping offers to more than 100 percent of list prices.
But for those selling now, don’t panic. As the percentages prove in zones 3 and 8, it all depends on what houses go to contract that month and what houses make up the inventory. That changes each month. So if Billy Joel’s zone 3 $32.5-million Centre Island estate and other high-end homes – or even the very low-priced homes – went off the market, that would affect medians and the percentages.
Plus, comparing the prices of the entire month’s inventory to contract prices signed that month does not quite reflect an apples-to-apples picture. A more accurate comparison would be between the original and contract prices of homes that were sold in the month.
When the entire Island and Queens are factored in, July contract prices settled at 87 percent of inventory prices. Queens zone 10, which covers Forest Hills, South Ozone Park and about 30 other communities, had the lowest contract to inventory median percentage last month – 70 percent.
Emmett Laffey, chief executive of the Greenvale-based Laffey Associates real estate firm, said
“That means the marketplace has a ton of overpriced houses,” Laffey said.
Even though each zone covers communities that can be very different from each other, the MLS figures can help turn around sellers who insist on listing for so high that one can hear a pin drop at open house time. Real estate agents have complained about homeowners who bring up neighbors’ huge profits during the boom.
In 2,807 closings on Long Island and Queens last month, the median price was $455,000, up from $452,300 a year ago. There’s no question that the number of homes for sale is up, a market bellwether. There were 36,185 homes for sale in July, up from 33,724 a year ago.
Selling for less
How contract sales prices compared to list prices of all homes for sale in the county that month.
SUFFOLK
Median Median Percent Number of
list price contract price difference contracts
June 439,900 410,000 93% 1,120
July 439,000 390,000 89% 1,167
Delinquencies and foreclosures up at Countrywide servicing unit..
From PR Newswire & Countrywide:
Countrywide Reports July 2007 Operational Results
Delinquency as a percentage of:
unpaid principal balance
Month ended July 31, 2007 – 4.89%
Month ended July 31, 2006 – 3.61%
number of loans serviced
Month ended July 31, 2007 – 5.10%
Month ended July 31, 2006 – 4.11%
Foreclosures Pending as a percentage of:
unpaid principal balance
Month ended July 31, 2007 – 1.04%
Month ended July 31, 2006 – 0.46%
number of loans serviced
Month ended July 31, 2007 – 0.79%
Month ended July 31, 2006 – 0.48%
New: Hedge Fund Implode-o-Meter
http://hf-implode.com/
The S&L crisis of the 1980’s was a combination, Mr. Bush, Ronald Regan, Mr. Milken, Mr. Bent and the inept S&L regulators.
Mr. Bush as Govenor of Texas was pro loosening S&L standards so they could invest in more risky things.
Ronald Regan who was pro-business pushed it.
Mr. Milken, “junk bond king” took advantage of the degegulated S&Ls to push all type of crap junk bonds on then that eventually defaulted.
Mr. Bent invented the money market fund in his grad school thesis at St. Johns and went on to start the first money market fund. Banks paid fixed tiny amounts of interest back then, Mr. Bent lobbied to repeal the laws that let bank charge below market rates and this in turn caused the banks to chase high yielding investments to pay the higher yielding CDs.
Remember you cannot hedge risk on a macro basis!!!!! When you push off you crap to someone else you may not lose the money someone else does. In a global meltdown you still get burnt.
Interesting enough Scott Pierce was the President of EF Hutton (not CEO) in 1987. He is George Bush Seniors Brother-in-law. He was a golf playing twit with a baloney job. EF Hutton thought his Brother-in-law would make President one day and the drunk CEO thought it would be cool to play golf with the President one day so he hired his do nothing brother in law. EF Hutton went under prior to Mr. Bush getting elected president. Oh Well. Wall Street was more fun back then.
John-
You have your history of George W. Bush mixed up a little. George W. wasn’t elected governor of Texas until 1994. Wasn’t the S&L debacle over by then?
JM
Uh, John, #54, it was kind of hard for George W. Bush to advocate for anything as governor of Texas in the 80s…since he didn’t get elected until 1994. Just sayin’.
http://www.itulip.com/forums/showthread.php?p=13776#post13776
Great read on our friends at Goldman.Hedgefunds that aren’t doing much hedging these days, subprime and the mess and credit crunch.
John [54],
You forget to mention another role for Alan G, his work with Charles Keating. Funny, Alan keeps popping up. Outside of the S & L, how about Alan and David Mullins. Drexel and its 5,000 employees were left whistling but the finance professors and central bankers with 200 employess were rescued.
“In 1985, Keating hired Alan Greenspan as an economic consultant, in an effort to convince an oversight agency to exempt Lincoln Savings from certain regulations. Greenspan delivered a favorable report, writing that Lincoln Savings was “a financially strong institution that presents no foreseeable risk to depositors or the government.” (Greenspan produced similar favorable reports on numerous other banks that also failed soon after.) The agency ultimately declined the request.”
http://en.wikipedia.org/wiki/Charles_Keating
[54] Classic. John, did you also know that George W. Bush causes warts, PMS and ingrown toenails?
You gotta love living in a blue state.
make [57],
Great stuff.
“Wasn’t the S&L debacle over by then?”
Yep – long since
Neil Bush had been bailed out of his S&L misfortunes (and told to get out of the financial business) several years before – when his dad was president.
#48
Duly noted with great amusement.
Hey all. Been away as we were painting the apartment. (I have never been so sore in my life.) Looks like this market is just getting worse and worse. And every day I am so thankful to Grim and everyone here for the info passed along. It’s what kept us from being upside down bag holders ourselves.
SOV CEO Appears on CNBC’s “Kudlow & Co.” Today [delayed
07:27 a.m. 08/14/2007 Provided by
Ridgeland, MS, AUG 14, 2007 (EventX/Knobias.com via COMTEX) — According to the published guest list on the CNBC website, the CEO of Sovereign Bancorp, Incorporated (SOV), Joseph Campanelli, is scheduled to appear on CNBC’s “Kudlow & Co.” today between 5:00 p.m. and 6:00 p.m. ET.
Neil Bush and Silverado Savings and Loan
Sorry guys, wrong bush!! Neil Bush was director of Silverado Savings and Loan when the institution collapsed in 1988, costing taxpayers $1.6 billion. Neil Bush was accused of giving himself a loan from Silverado with the cooperation of Ken Good, of Good International, although Bush stated it was not a conflict of interest. Neil Bush is a brother of President George W. Bush.
And then Neil went and got into all sorts of wonderful adventures in Thailand.
Had a visit from old college friend yesterday, a Chicago realtor for over 20 years. Market is so bad there that he decided to take the time to drive east instead of flying, cause there’s no business to rush back for. He says there aren’t even calls to look at property anymore.
# BUYER Says:
August 13th, 2007 at 6:00 pm
I am just sitting on sidelines and awaiting for best opportunity to BUY a home.Any ideas when will NJ housing bottom out? ( your opinions only of course).
***********
Buyer,
If you are biding your time, then in the next two-three years, you will see a cover of Time or Newsweek saying, “Real Estate–A Horrible Investment,” or something similar. That will be the exact bottom of the market.
The great thing about the internets is that they can be updated quickly. Hence “stocks edge higher” ought no longer to be the CNN headline…
#69
Very funny, and probably as good a proxy for the bottom as there is.
Aegis is 81 percent owned by an affiliate of the New York hedge fund manager Cerberus Capital Management, according to a bankruptcy court filing.
*************
Don’t these Cerberus dudes own Chrysler now?
Are the dominos starting to fall?
From the AP:
Luminent Backers Demand Repayment
Luminent Mortgage Capital Inc., a real estate investment trust which focuses mainly on mortgage-backed securities, said Monday that several of its financial backers have demanded their money back.
According to a filing with the Securities and Exchange Commission, eight lenders have declared events of default between last Tuesday and Thursday and demanded repayment of $1.6 billion.
Joe Public Suffers As Cheap Home Loan Fuelled Bubble Bursts
Posted by Adrian Ash on Aug 14th, 2007
Day traders in spring 2000, shoe-shine boys in 1929, the “meaner rabble” in 1720s London…
The one thing needful at the top of each bubble – the rabble – take on the role of greatest sucker, too. Piling in as the smart money runs for the exits, the common-or-garden investor pays top price. He or she is then left holding the “asset” as its price collapses…and by that time, the Lear Jets have long since cleared the tarmac…taking the money with them.
Think of it as the classic “life cycle” pitch from your financial advisor, only with a side-splitting twist. There, you’ll find a retirement wannabe moving from “accumulation” to “distribution” and then “legacy”. In a market-wide bubble, by contrast, the smart money first accumulates an asset, before distributing it to the dumb money, which is then left holding a legacy of wipe-out losses and debt.
Ha! It’s a laugh-a-minute when the poor schmucks find the “wealth” they’ve gathered is evaporating in the sell-off.
But something’s amiss with the pattern of the latest financial bubble to burst – the bubble inflated by cheap home loans worldwide. Yes, “Every fool aspired to be a knave,” as a broadside noted of the South Sea Bubble nearly 300 years earlier. No-doc and low-doc aren’t known as “liar’s loans” for nothing.
But rather than the fools merely failing to turn knave now they’re losing their homes, they have also succeeded in pushing the foolishness far higher up the food chain. The greatest excesses have come at the top, up in the marble-topped kitchen of haute finance – where the MBS, CDS and CDOs still can’t be served, mercifully, to ordinary investors calling their broker direct.
Driven by the “liar’s loans” of 2003-2006, in fact, this last gasp of air into the US housing boom saw the mortgage lenders and their creditors – the investment banks – playing the fools at every chance they got.
Mortgage lenders happily played the fool, apparently safe in the knowledge that the magic of securitisation – of packaging home-loan assets for sale to other financial institutions – would get them “off risk” quick smart. Why worry about risk when appraising a new loan? The chance of default by the wannabe home-owner was set to become somebody else’s concern.
Nor was the chance of default a concern for the investment banks. In running the sale of home-loan backed bonds, they simply passed on the risk…letting it trickle through their fingers in return for a fat fee. Bundling higher-risk securities into a collateralised debt obligation (CDO) with enough boxes ticked to qualify for a triple-A rating, managers could earn up to 0.75% of the sum total. One asset manager says he’d expect a pay-out of US$2.5 million each and every year until maturity on a US$500 million CDO.
With the money men playing the fools so gladly, therefore, it’s no surprise to find mortgage underwriting changed beyond recognition between 1998 and 2006, as First American Financial recently reported:
-Adjustable rate mortgages as a percentage of new mortgages rose from 0.7% to 69.5%;
– Negative Amortisation loans – where the principal owed actually increases over time – rose from 0% to 42.2% of the market;
– Interest Only home loans – where the borrower only has to cover the interest due, leaving the principal for repayment sometime in the far future – rose from 0.1% to 35.6%;
– Silent Seconds, issued on the back of outstanding loans to the most vaguely-related people, rose from 0.1% to 38.7%;
– Low Documentation – where the greater the lie, the greater the loan – rose from 57% to 79.8%.
In short, the US mortgage market switched from cautious Fixed-Rate borrowing to head-in-the-sand ARMs…while the underlying debt was left untouched or actually grew larger…as borrowers struggled to meet just the interest alone after fudging the numbers to bag a loan they could never repay.
Most shocking of all, as Robert Rodriguez of First Pacific Advisors has noted, “is that the origination volumes for the last two years, when the most egregious deterioration in underwriting standards occurred, total more than the previous seven years of originations combined.”
The Fed’s data only runs back to 2001, but it clearly shows that – just as in every bubble before it – the value of cash taken out by the smart money at the top of the US home-loans scandal was greater than the entire accumulation preceding it.
Quite who this smart money was, however, remains a real mystery. For the dumb money pumped in at the top actually came from hedge funds and Wall Street insiders, rather than flowing to them! This time around, it was the smartest guys in the room who played sucker – lending money to home-buyers with no thought for risk and no hope of repayment.
A victory for us poor fools at the bottom, perhaps? Trouble is for the “meaner rabble”, of course, the knaves and the fools at Bear Stearns, Queen’s Walk, Basis Capital, IKB, BNP Paribas, Barclays Capital and everywhere else were using our retirement savings to inflate that last gasp. Put mortgage-backed tomfoolery aside, in fact, and you’ll find the same problem – of professional investors neglecting the concept of risk in search of easy returns – right across the developed world’s pension portfolio right now.
“24% of all the hyper-leveraged assets managed by large hedge funds (US$1 billion or more) internationally, belong to pension funds and endowments,” says a June 18 report from Greenwich Associates, as quoted by Paul Gallagher in the Executive Intelligence Review. “This average is just below the 25% limit at which an individual hedge fund, under the [US] Employee Retirement Income Security Act (ERISA) as modified in 2006, becomes an investment advisor with fiduciary responsibility for the pension fund doing the investing – something hedge funds obviously do not want to do.”
More than that, pension funds have also stumped up one-fifth of the money held in ‘hedge funds of funds’, the aggregating super-funds run by many large banks. In first-half 2007, around 40% of current flows into the hedge fund industry has come from pension funds. And “as pension fund money is coming in,” says Gallagher, “it’s allowing ’smart’ money to get out.”
Or rather, the flood of pension fund money was allowing the smarties to get out before the start of August. Now even the dimmest pension fund trustee…sat on even the farthest flung beach for his vacation…will know just how foolish buying mortgage-backed bonds and derivatives would make him today. Quite how the so-called smart money now plans to exit the high-leverage debt markets is anyone’s guess.
“The overall flow of capital into hedge funds has dropped dramatically – from US$40 billion each quarter over January-September 2006,” Gallagher goes on, “to just US$12 billion in fourth quarter 2006, and US$20.7 billion in first quarter 2007. Numerous reports, including a new one from Chicago-based Hedge Fund Research, Inc., have shown ‘high net-worth individuals’ reducing their net hedge fund investments by half, between 2006 and 2007 – investing instead into real property and stocks. They now account for only about 20% of the assets of hedge funds, which were supposedly made for them.”
Instead of high-net-worth billionaires, it’s now Joe Public left holding this junk, thanks of course to his well-paid retirement fund managers. As late as May of this year, Jean Fleischhacker – a senior managing director at Bear Stearns – was telling fund managers gathered in a Vegas ballroom that they could generate 20% annual returns from un-rated mortgage-backed credit derivatives. The Dallas Police and Fire Pension Fund bought its first collateralised debt obligation (CDO) in early 2005. “We were beefing up our risk and we were hoping for a greater return,” said Richard Tettament, head of the US$3.2 billion fund, to Bloomberg in March. He couldn’t say what kind of collateral was actually backing the CDO, but he reckoned the returns were above 20% in 2006. The largest bank in the United States, Citigroup, recently sold US$140 million in just this kind of un-rated junk to the California Public Employees’ Retirement System, too.
Members of the Calpers scheme have just got to wonder, along with the rest of us: How much is that US$140 million worth today? Because the “meaner rabble” really did climb on board this mega-geared bubble in liars’ loans.
It’s just that in this money bubble, most people had no idea they were even involved – let alone put at risk. It should offer small comfort, however. Giving control of your money to a financial “expert” might indeed prove the most foolish decision of all.
# pigpen, you said:
August 13th, 2007 at 4:39 pm
o….
the 1980’s boom was more inflated than the most recent?
I was just a youngin’ in the 80’s. Any
veterans out there-
was there as much hype and speculation about housing during that boom? pre-construction flippers, people buying second homes just for then hell of it, etc?
no
By ’78, mortgage rates were going double-digit and lots of people were getting shut out of the housing market, and in October of ’79, the Fed raised the prime to 20% – Paul Volcker’s “Saturday night massacre.” So when rates started to come back down in the mid-1980’s, there was lots of pent-up demand.
Also, the local economy was severely depressed in the late 70’s and started to pick up during the early years of the Reagan administration. The late 70’s were particularly bad for the NYC/NJ region. NYC was in the middle of its fiscal crisis, and the vogue was people moving to the Sun Belt.
The chilly Northeast was out of favor – oil and gas and other commodities were going to the moon.
And one of the differences between the late 1970’s and the mid-1980’s was the rise of double-income couples. In the 70’s, most households were still single wage earner.
But in the mid-1980’s, mortgage bankers were still the kind the people who would count the change in your pockets and the pennies in your penny jar, if they could.
There was no such thing as buying a house with no down payment, no doc, etc.
i thought i could find some real estate investment tips here. but this blog is gradually turnning to a bashing circus. everyday we have something to bash: greenspan, hedge funds, bushes, illegals, under-classes, POS capes, democrats/republicans, foreigners, euros, oil companies… and finally we bash each other when there is nothing else to bash for the day.
Thornburg Mortgage Inc
Price
10.280 Change -4.000
% Change -28.011
bi Says:
Here is a tip – DONT BUY REAL ESTATE
August 14th, 2007 at 9:54 am
i thought i could find some real estate investment tips here. but this blog is gradually turnning to a bashing circus. everyday we have something to bash: greenspan, hedge funds, bushes, illegals, under-classes, POS capes, democrats/republicans, foreigners, euros, oil companies… and finally we bash each other when there is nothing else to bash for the day.
# PeaceNow Says:
August 14th, 2007 at 8:52 am
Uh, John, #54, it was kind of hard for George W. Bush to advocate for anything as governor of Texas in the 80s…since he didn’t get elected until 1994. Just sayin’.
*********************
Also, wasn’t “W” busy smoking crack or whatever back at that time?
So is this my working women doubled household income which in turn doubled real estate prices theory?
And one of the differences between the late 1970’s and the mid-1980’s was the rise of double-income couples. In the 70’s, most households were still single wage earner.
From MarketWatch:
No liquidity injection from Fed this morning, NY Fed says
If their was any doubt about NJ being a
Welfare State , go over the recent developments in Newark, etc.
and of course the Gov. does not favor 287G
Where’s Sharpton and Jackson.
and poor Mattel recall everything.
blame it all on George Bush and sweep it under the rug.
“No liquidity injection from Fed this morning, NY Fed says”
When do they reverse?
I know I am a little late to the party, but I am officially short RE. I purchased a whopping 240 shares of an inverse RE ETF that is leveraged to double the drop (or increase) in RE. So I officially put some money where my mouth is. I’ll give an update when I gain or lose my first 1,000.
Admittedly, it is a bit of a hedge against some of my financial investments such as Factset Research and Global Payments.
If all goes well, I will use the profits to increase my down payment on my second home I plan to purchase in 2009.
BTW, kudos to JB for keeping this site afloat and occasionally letting the board meander off topic without feeling the need to moderate.
-83.89
Another Goldilocks day.
Not to mention that gold is down and oil is up.
“Not to mention that gold is down and oil is up.”
Wasn’t that the inverse of the BI strategy?
yep – that’s the inverse.
86, 87, 88# you guys need to dig out my old posts at the end of last and begining of this month. today will be a goldilocks day again. bonds erased early losses and put more pressure for fed to cut rate…
Richard’s RSF is down another 12% today, following yesterday’s 16% decline. Richard aka RSF, please let us know when you plan to dollar-cost average. The yield must be feeling pretty good now, eh?
John #80
In the post-war 50’s and 60’s, it was socially unacceptable for women with children to work.
When I was 14, my mother wanted to go back to work part-time in a department store in the afternoons to have some money of her own. My father’s mother threw a stink fit: “They’ll think you can’t support a family.”
In the 70’s, when I was going to college full-time and working, the mantra was: “Oh, but you’ll get married and have kids, and you’ll drop out.” That was the justification for keeping women trapped at low level jobs at deeply discounted salaries. I had job after job where I woke up to the fact that I was being seriously shorted …I made $175 a week, but a guy I recommended, who didn’t have anywhere near the background I had, breezed in at $225 – and $50 a week was significant in 1976 … or I was making $12,500, and the guys I worked with who did exactly the same job were making $40,000 – big bucks for the late 70’s, while I was barely making the rent.
During the late 70’s and early 80’s, there were lots of ferocious battles for equal pay and equal opportunities for promotions. I won an action for discrimination.
By the mid-80’s, those battles were starting to pay off.
That’s why the salaries of women became a more significant factor – because women finally had jobs and salaries that were worth something.
No question it changed what married couples could pay for a house.
DUUH!
If you look closer, you will absorb investment tips from greenspan, hedge funds, bushes, illegals, under-classes, POS capes, et al. There are signals in all of them.
But if you want unbiased, quality tips, go to NAR. Open your eyes.
Bi Says:
“i thought i could find some real estate investment tips here. but this blog is gradually turnning to a bashing circus. everyday we have something to bash: greenspan, hedge funds, bushes, illegals, under-classes, POS capes, democrats/republicans, foreigners, euros, oil companies… and finally we bash each other when there is nothing else to bash for the day.”
“There’s been real distress selling. Whether it’s hedge funds facing redemptions or people trying to cover their margins, I don’t know. It’s the first time we have seen selling like this since the start of the current bull run in 2003.”
“It’s a complete bloodbath,” one trader said. “I can’t tell you how bad it is. This boom hasn’t really been caused by India or China or anything substantial; it’s a massive amount of money and debt and deals that have grown out of nowhere. In 2002, you couldn’t borrow a penny, but recently no amount has been too big. Now we’re worried that, since the money appeared as if by magic, it can disappear like magic too.”
http://www.theaustralian.news.com.au/story/0,25197,22232861-643,00.html
Blogs are agog with tri-state RE deals falling apart due to higher rates for jumbo loans. Seems like people with 780+ FICOs putting 20% down are being offered rates upwards of 7.5%, about 1% more than the current prime rate for 30 yr fixed loans.
Now, will the sellers lower their prices 10% to enable the buyers to adjust the 1% increase in loans?
Come on BI. You shoot your mouth off and more often than not are wrong. Goldilocks my butt. We are headed into a recession and the FED is not going to lower rates until we get there. If they did, they would be setting a dangerous precedent that their role is to artificially inflate the market. The FED tries to control the economy, not the market.
BTW, I’m close to pocketing my first $1,000 ;)
“If they did, they would be setting a dangerous precedent that their role is to artificially inflate the market.”
And yet this is what the street is hollering for. Not a free market capitalist among them, I guess.
The market is down a whopping 6% since the start of this correction. The real panic stems from what damage lurks around the corner (arm resets).
Homebuilder confidence out at 1pm..
jb
RE: I think women have reached a point where they have better rights in certain companies. My friends at D&T, KPMG, E&Y and PwC now all have NOW groups (Network of Women) and offer compressed work weeks to working mothers as well as it is easier to make Partner if you are a women. However that won’t help you any as they are not going back in time. But your daughters will have it made.
From Reuters:
Countrywide foreclosures at multi-year high
Foreclosures and delinquencies among home loans that Countrywide Financial Corp. services rose in July to their highest in at least several years, the largest U.S. mortgage lender said on Tuesday.
The company also said it made 14 percent fewer home loans in July than in June after tightening lending standards, while daily mortgage applications fell 15 percent to a nine-month low. It nevertheless added more than 1,100 workers as many smaller rivals curtailed lending or folded.
Countrywide said expected foreclosures as a percentage of unpaid principal rose to 1.04 percent from 0.46 percent a year earlier, and 0.96 percent in June. Delinquencies rose to 5.10 percent from 4.11 percent last July, and June’s 4.98 percent.
July’s totals are the highest that Calabasas, California-based Countrywide has reported in its monthly data reports since at least March 2002.
#99, James,
i dont think we will need to hold our breath on that one! by now we kinda know what they are going to say right?
Homebuilder confidence – none!
As far as we know, are even RE Agents pressuring the sellers to lower 10%, any amount? they did pressure the sellers to ask unusually high prices all these years right?
Looks like this market is just getting worse and worse. And every day I am so thankful to Grim and everyone here for the info passed along. It’s what kept us from being upside down bag holders ourselves.
My parents can’t sell their house in Bloomfield and have fallen on financial times. Fortunately for me and my wife we’ve been given a rare opportunity to help them out money wise (we’re both young and have very good jobs) and put a ton of money in the bank and wait on the sidelines. We currently rent and will be paying significantly less living back home (we’ll be back home Sept 30 2007). We’ll be prepared to buy at pretty much any time because we don’t own anything. It’s a pretty good feeling.
scribe,
#92
good stuff.
Prices are being cut, in todays Newsday the average Queens home sold in July 2007 went for 20% less than asking price. The average nassau home went for 87% of asking and the average Suffolk home went for 89% of asking.
That is a big deal, just two years ago houses went for asking price and sometimes higher. The MLS asking prices may look like nothing changed since 2005 but a million dollar home in Queens is now going for $800,000 in 2007 and in 2005 a million dollar home went for a million.
Off-topic but Phil Rizzuto died. RIP Phil.
i believe that given the continuing unraveling, home prices will lose 30% minimum in the next 12 months. the horses are out of the barn.
Rizzuto is gone
#106 – I see you beat me to it. It’s the sound of my childhood.
“Off-topic but Phil Rizzuto died. RIP Phil.”
Amen.
Are they sure Phil is dead?
If it’s anything like his calls on the field, he might be tanning down in Miami right now.
Interesting Week in Homebuilding
“If you need to borrow money, now is not a good time.” — Donald J. Trump
Thank you, Captain Obvious. One would think that with all of the negative news in the
market recently and this week specifically that homebuilders would have been in the
dumps. Obviously, some sense of short covering and buying into obviously cheap paper
drove some of the price action in the bond market. Given that the high-yield equities
were up as much as 48%, we wonder if the stock guys and gals are busting out the book
value analysis again. Frankly, the pricing does not correspond to what is happening at a
fundamental level and once again shows how technical the market has become.
At a company level, the early part of the week brought us stories of a credit crunch at
Standard Pacific (SPF). The release of the company’s 10-Q revealed that SPF was in
compliance with its credit agreement at quarter’s end but would not likely make the
cut by the end of the third quarter. To that end, the company is renegotiating its line
(similar to what the other high-yield homebuilders have done).
Toll Brothers (TOL) also reported miserable preliminary fiscal third-quarter
numbers — nothing surprising and certainly consistent with everything we heard
from the other builders. The company’s CEO also hosted an entertaining conference
call complete with a colorful evaluation of the various housing markets across the
country. Among the highlights were “flunk” and “flunk-minus” grades across Florida
and, our personal favorite, an F-minus minus for the Las Vegas market. For now,
count us an attendee of the next several TOL conference calls (even though it is
investment grade). Unfortunately, Mr. Toll had no comment on “Pacman” Jones’s
decision to become a pro wrestler.
If the fundamental company news was not discouraging enough (and apparently it
was not), then the mortgage news should have nailed the coffin. When wellcapitalized
mortgage lenders are jacking the rates on jumbo prime mortgages to 8%,
something is up. Simply stated, mortgage originators have no ability to off-load
inventory. When this is the case, rates must rise in order to manage the balance sheet.
At this point, originators can only manage the pipeline by making it unattractive to
take on a mortgage. Countrywide confirmed this condition with commentary in its
10-Q. In addition, AIG in its quarterly earnings confirmed that that delinquencies
were spreading beyond subprime, which will, no doubt, make mortgage lenders even
less bullish about lending.
From Smithbarney
Fortress, the first U.S. private equity and hedge fund company to go public, reported a net loss of $55 million, or 66 cents per Class A share, for the second quarter, compared with a year-earlier loss of $42 million.
http://biz.yahoo.com/rb/070814/fortress_results.html?.v=2
ThrilledRenter fka Possiblebuyer Says:
August 14th, 2007 at 11:26 am
Off-topic but Phil Rizzuto died. RIP Phil.
So is the Money Store
103 Joey: “We currently rent and will be paying significantly less living back home (we’ll be back home Sept 30 2007). We’ll be prepared to buy at pretty much any time because we don’t own anything. It’s a pretty good feeling.”
Us, too. Well, we moved in with my folks by accident. Broke our lease and then the house we were under contract on fell through.
Still, my FI wants to kill me because, although I’m not perfectly happy staying here another 6 months, helping my parents out and putting an extra 30k in the bank sounds pretty good to me…
#109 Mine too. I loved listening to the west coast games when I was a kid on my transistor radio under the covers when I was supposed to be sleeping.
Us, too. Well, we moved in with my folks by accident. Broke our lease and then the house we were under contract on fell through.
Still, my FI wants to kill me because, although I’m not perfectly happy staying here another 6 months, helping my parents out and putting an extra 30k in the bank sounds pretty good to me…
We’re in the same situation. I had to pay $500 to break our lease early when we renewed it. We thought we were buying a house this summer but soon realized we’d have made a HUGE mistake. We’ll be getting the full finished basement which has a full second kitchen (eat in) full bathroom and a living room that is big enough for a bed. not the biggest place we’ve ever lived but we also have the rest of the house when we want to be out of the basement. We’re calling it our “SOHO Loft” :)
“Blood in the water” in Florida property market
By Tom Brown
CAPE CORAL, Florida (Reuters) – Phone books that were delivered but never opened rot away next to empty driveways and overgrown lawns, telltale signs that once-booming southwest Florida is now the center of the U.S. housing storm.
Until two years ago, middle-class retirees vied with property speculators for houses and apartments in Cape Coral, a town near Fort Myers on Florida’s sun-drenched Gulf Coast. Now almost every other house on some of its streets has a for-sale sign outside.
More at: http://www.reuters.com/article/domesticNews/idUSN1230248820070814?src=081407_1145_DOUBLEFEATURE_bracing_for_flossie
#115 RayC
That combination of Scooter with Bill White and Frank Messer (John Gordon on the postgame) was an incredible group of announcers. White and Messer were top notch play-by-play guys, and Rizzuto added that great down home color. I’d love to get my hands on some old recordings (the particular ballgame doesn’t matter – I’d just love to hear those voices).
Rizzuto.
His call on the hedgies, IB’s and central banks;
“Holy Cow, White, what a bunch of huckleberries. They may even put a damper on the stock market. What happened to my cannoli?”
#119
That sounds right.
John Sterling on the RE bubble: “IT IS HIGH! IT IS FAR! IT IS……..caught.”
“I’ll never forget September sixth nineteen-fifty. I got a letter threatening me, Hank Bauer, Yogi Berra and Johnny Mize. It said if I showed up in uniform against the Red Sox I’d be shot. I turned the letter over to the FBI and told my manager Casey Stengel about it. You know what Casey did? He gave me a different uniform and gave mine to Billy Martin. Can you imagine that! Guess Casey thought it’d be better if Billy got shot.”
The Labor Department reported that wholesale prices rose by 0.6 percent in July. That was far above the 0.1 percent that analysts had expected and reflected a big jump in energy costs.
But core wholesale inflation, which excludes volatile food and energy costs, rose by a much more moderate 0.1 percent, even better than the 0.2 percent gain analysts had expected
Rate cut in the offing? Seems unlikely.
#118 njpatient – click on “watch the pregame show”. So much for productivity at work today. I’ll work twice as hard tomorrow.
http://newyork.yankees.mlb.com/mlb/baseballs_best/mlb_bb_gamepage.jsp?story_page=bb_78aleast_playoff_nyybos
From MarketWatch:
Credit fears knock Beazer’s shares
Shares of Beazer Homes USA Inc. were off more than 9% Tuesday morning after credit ratings agencies raised more concerns about the struggling home builder’s future.
Fitch Ratings further downgraded its issuer default rating on Beazer after the company failed to file a quarterly financial report on time due to accounting problems. Another ratings agency, Moody’s, said it has placed Beazer on review for downgrade.
Atlanta-based Beazer, the nation’s sixth-largest home builder measured by 2005 deliveries, after Friday’s closing bell said it was delaying its Form 10-Q because an internal investigation of the company’s mortgage origination business found potential accounting irregularities.
Beazer said its previous chief accounting officer, whom the company terminated in June, “may have caused reserves and other accrued liabilities, relating primarily to land development costs and costs to complete houses, to have been recorded in prior accounting periods in excess of amounts that would have been appropriate under generally accepted accounting principles.”
From Reuters:
Sentinel management seeks to halt redemptions: report
– Sentinel, a money market mutual fund firm for commodities, has asked the U.S. Commodities Futures Trading Commission to allow it to halt client redemptions until it can conduct them in an orderly fashion, CNBC television reported on Tuesday.
“We had previously thought the market would return to some semblance of order and that our clients would not join in the panic,” Sentinel wrote in a letter to clients CNBC said it had obtained. “Unfortunately this has not been the case.”
Halting redemptions on a money market mutual fund?
Ouch..
jb
anybody who can access mls please help me to find history for this 2 family property. i am going to rent one out. thanks
MLS ID# 2431886
494 S 19TH ST
LP: $129,900
DOM: 13
2 Units
5Rm/3Br/1Ba
6Rm/3Br/1Ba
REM: Great Potential. Owner has cleaned out property and started rehab. Ready for you to finish the job! Sold as is, buyer responsible for applying
Vacant, bring flashlight. Combo lockbox npd
Copy of the Sentinel letter, hat tip to Mr. Ritholtz at Big Picture.
http://www.thestreet.com/tsc/pdfs/LETTERTOCLIENT.pdf
jb
thank you JB. from map, i guess it is in safer part of newark and close to NJIT campus.
#123
Thanks, Ray
“I don’t know if it’s good for baseball, but it sure beats the hell out of rooming with Phil Rizzuto.” – Berra, on hearing teammate Joe DiMaggio was to marry Marilyn Monroe
Anyone with MLS access, could someone please provide address and details (prior and current listing history, sales, etc.) on the following 4 bed, 3.5 bath in Ridgewood asking $1,049,000.00.
As always, thanks much,
Eagle
From Bloomberg:
Moody’s, S&P Lose Some Credibility With New Credit Derivatives
Moody’s Investors Service and Standard & Poor’s, the arbiters of creditworthiness, are losing their credibility in the fastest growing part of the bond market.
The New York-based ratings firms last month gave a new breed of credit derivatives triple-A ratings, indicating they were as safe as U.S. Treasuries. Now, investors are being offered as little as 70 cents on the dollar for the constant proportion debt obligations, securities that use credit-default swaps to speculate that companies with investment-grade ratings will be able to repay their debt.
“The rating doesn’t tell me anything,” said Bas Kragten, who helps manage the equivalent of about $380 billion as head of asset-backed securities at ING Investment Management in The Hague. “The chance that a CPDO won’t be triple-A tomorrow is a lot greater than it is for the government of Germany.”
…
Ratings firms “used to be seen as good, objective folks dressed in white, who you could count on to give reliable opinions,” said Christopher Whalen, an analyst at Institutional Risk Analytics, a research firm in Hawthorne, California, that writes software for auditors to determine if banks are accurately valuing their assets. “But when they got involved in structuring and pricing these deals, I think they crossed the line. They have lost a lot of credibility.”
wife talked to a stock broker yesterday. He gave her the elevator speech about what’s happening and then he said he had a tip that the fed will lower rates either by or at their next meeting. Definition of insanity please?
134#, it is not insane. whether it will actually happen is a seperate issue. but fed fund futures and other bond indexes are already priced in 100% rate cut in the next meeting and perhaps some time this week.
today will be a goldilocks day again. bonds erased early losses and put more pressure for fed to cut rate…
Bi,
PLEASE stop predicting goldilocks days. Last time you predicted a goldilocks day and a “positive finish” (8/3) the Dow dropped 281 points.
There are two companies named Sentinel. The mutual fund company in Vermont has a notice on its Web site – that it’s the Sentinel Management Group of Illinois that has the problem.
The company in VT must be having a fun day!
136#, ok it will drop goldilocks in my prediction since everyday is goldilocks day to me.
No NAHB/Wells HMI?
jb
Anyone with MLS access, could someone please provide address and details (prior and current listing history, sales, etc.) on the following 4 bed, 3.5 bath in Ridgewood asking $1,049,000.00.
SOLD 1/12/2001 $525,000
148 CLAREMONT RD
ACTIVE $1,049,000 5/16/2007
WITHDRAWN 5/22/2007
BACK ON MARKET $1,049,000 8/11/2007
Taxes: $16,038
Lot Dimensions: 112X112X73X109
WONDERFUL NEWER KITCHEN OPENS TO FAMILY ROOM. STAINLESS APPLIANCES, CORIAN COUNTERS, LARGE MARBLE TOP ISLAND, AND DINING AREA. CHARMING FORMAL LIVING ROOM WITH BRICK FIREPLACE, SPACIOUS DINING ROOM, OFFICE, PLUS A COZY DEN. TERRIFIC MUDROOM WITH CUSTOM BUILT-INS, LAUNDRY AND FULL BATH COMPLETE THE FIRST FLOOR. BEAUTIFUL MASTER BEDROOM/BATH ADDITION WITH WALK-IN CLOSET AND TREY CEILING. OTHER UPDATES/AMENITIES INCLUDE, CENTRAL AIR, UNDERGROUND SPRINKLERS, SECURITY SYSTEM, INVISIBLE DOG FENCE, FAMILY ROOM WIRED FOR SS, MUDROOM ADDITION, PICKET FENCE AND PROFESSIONAL LANDSCAPING, NEW DRIVEWAY(2006) WITH BELGIAN BLOCK BORDER, ROOF (2001 SINGLE LAYER), 2-CAR GARAGE, MIELE DW (2007) AND FULL WALK-UP ATTIC STORAGE
Every time he mentions Goldilocks, it just reminds me of the version of the story where she ends up eaten by the bears…
117- hoodafa Says:
August 14th, 2007 at 12:01 pm
“Blood in the water” in Florida property market
My in-laws live in Naples and I send them these types of articles. They always say that Ft Myers is not as nice as Naples and it won’t happen to Naples. Then when I send articles about stuff on Naples they say their community is nicer than just regular Naples and their developer would never lower prices on the new sections that are being built. This may be true (at least to some level), but what about resellers? And when resellers are selling so low that the developer can’t sell without lowering his price, what do you think will happen then? He’ll lower too, maybe he’ll throw in a free pool or something, but it will be lowered in some fashion.
I love the argument that “my area is immune.” NO AREA IS IMMUNE!!! Some places may hold out longer than others, but everyone has a breaking point. Let’s say I want to move to Saddle River (prestigious area that some may say is immune) and I have plenty of money to do so. Even if prices don’t drop there right away, at some point I have to say “I can either buy a house in SR for $5M where prices haven’t dropped or I can buy the same house in USR for $4M where prices have dropped.” Eventually demand in SR drops as people are buying in USR, etc and people have to lower to sell. Swap out any two towns where you think one is “immune” if one goes down, so does everyone else eventually. If Newark goes down, eventually Maplewood goes down, which triggers Millburn, which triggers Short Hills, etc.
NO ONE IS IMMUNE!!!
Well we’ve saved up a stash of cash to buy our first home and are desperate to get out of our two bedroom apartment. Unfortunately, we haven’t found anything yet that makes me want to commit. I’ve read on this blog and others about how real estate prices and rents are not in line. With the renting providing a cost benefit. But how do you find an affordable 3 bdrm rental? I’ve seen ridiculous POS capes that landlords are looking for $2000 + a month. Any suggestions?
prtraders2000 Says:
August 14th, 2007 at 1:30 pm
Well we’ve saved up a stash of cash to buy our first home and are desperate to get out of our two bedroom apartment. Unfortunately, we haven’t found anything yet that makes me want to commit. I’ve read on this blog and others about how real estate prices and rents are not in line. With the renting providing a cost benefit. But how do you find an affordable 3 bdrm rental? I’ve seen ridiculous POS capes that landlords are looking for $2000 + a month. Any suggestions?
Get your pile of cash, and by SFH somewhere in midwest. With no mortgage and low taxes you will get ahead even if you make 1/2 of what you are making now. imagine no stress, driving or NJ taxes.
There are tons of beautiful cheap places in US.
However if you can not get job anywhere but NYC – well than stop complaining.
Also, you can always offer 1500 to landlord and see what would they answr – do nto forget include one mnoth penalty if landlord breaks the lease before it is up.
prtraders2000:
Have you tried negotiating the rent with a landlord who has been sitting on a vacant apartment for many months. Your good credit (I’m assuming this since you are sitting on a cash stash) should go a long way in your negotiations. I own a 2-family and chose my tenants since I knew they were saving for a home. They’ve stayed 3 years already and has not once paid late. I did offer them $100/month discount for signing a 2-year lease. Perhaps you should do the same. My guess is that RE won’t hit bottom for 2 more years anyhow. Mr. Toll said the same thing last week.
>>Richard’s RSF is down another 12% today, following yesterday’s 16% decline. Richard aka RSF, please let us know when you plan to dollar-cost average. The yield must be feeling pretty good now, eh?
actually i’m doing very well overall. maybe you can wrap your little mind around the fact that not all picks are winners and not all are losers. it’ll come back i’m not worried at all.
bergenbuyer,
there are those that will say that hudson county is immune. Specifically, jersey city and hoboken. Denial is bee-otch.
Denial – in-laws and the like
Anger – kannekt (upgraded from last quarter where thye were solidly in denail.)
Bargaining – price-reduced crowd
Depression – A good mix of Foreclosure Victims-Sentinel-Defaulters-Builders-Lenders-Realtors
Acceptance – Lots of vacancy.
I smell fear in the air.
I know someone who is trying to refinance their home and was told by the bank that their is a lien on the property from 2005, when the owner did the purchase in 2005 there were no tax liens from previous owner. Is the present owner responsible for the lien?
I just took a peak at RSF. Man that is one steeply falling knife. Richard, they could very well go bankrupt. What goes up must come down and what goes down does not always come back up. You are truly an investment gambler. I would love to hear about your winners.
by the way it might be getting close to buy time on RSF once they announce the dividend adjustment which i think is why it’s getting hammered. no stu they aren’t going bankrupt.
Yeah. I just earned my first $1,000 (paper gain) from shorting the RE market. If I got in yesterday I would have been up 6% for a $1,500 gain.
I’ll let you all know when I get to $5,000.
The bad news is, that I did not hedge enough and am actually down $600 overall today ;)
Can’t wait for my stupid 401k mutual funds to tally. Should be another -$4,000 day.
The recession is coming folks.
gambler? hardly. some fund winners:
HFOBX
IGNBX
GSXBX
LAGWX
#153
Yeah. Whatever. I bought Google at $67.
The ex dividend day is today which means if you held it today, you would qualify for a whopping .12 per share. Hardly worth losing the 12% today for. You have broken rule # 1 for investing. Don’t fall in love with a stock. To hold this falling knife is suicidal. To deny this fact is insane.
Anyone company shopping mortgage debt is doomed!
Domi ..no he will not be responcible. He will however have to prove that the obligation is not his!!!
From Morningstar:
‘Money Market Substitutes’ Get Hit by Subprime Woes
Russel Kinnel | 08-14-07
So much for money market substitutes. There have been a number of articles over the years about using short- or ultrashort-term bonds as money market substitutes. Yields on money market funds are typically low so it’s understandable that you might want to boost income by moving to ultrashort- or short-term bond funds, which sometimes have a higher yield.
However, the subprime mess may forever dispel investors of that notion. Ultrashort is supposed to be the most conservative, low-risk bond fund around, yet a number of funds are in the red for the trailing four months and even the year. Consider that ultrashort has been about the worst place to be for the past four weeks. Through Friday, the average ultrashort fund is down 0.36%, versus gains of 0.37% for short-term bond funds, 0.37% for intermediate, and 0.16% for long bond funds. Only high-yield, emerging markets, and bank-loan funds have fared worse.
The category truly has the lowest risk when it comes to interest-rate risk as its funds have the lowest duration of any taxable funds around. We define ultrashort bond funds as those with durations of less than a year. Because they are naturally owned by investors with pretty short-time horizons most of the funds don’t take on much credit risk. However, ultrashort bond funds are allowed to take on more credit risk than money market funds, and some do so. Moreover much of the subprime bonds these funds own are actually rated AA or AAA, so the risks didn’t seem like all that much until now.
http://advisor.morningstar.com/articles/doc.asp?docId=13356&email=i0814A1
You gave us 3 international plays and a small cap fund. So why go from ultra conservative to a super high risk play? Inquiring minds want to know your logic?
Oops!
03. [$INDU] Dow Jones Industrial Average up 150 points at 13,085
2:00 PM ET, Aug 14, 2007 – 2 minutes ago
Stu, with folks like Bi and Richard, it’s impossible to tell whether their unconfirmed claims of past success on an anonymous message board are true, but I think we can safely be sure that they will never beat the market on any concrete predictions they make here. That’s why they’ll stop making predictions, and only tout past successes.
On the big prediction that is the topic of this board, Richard’s been fighting a rearguard action as to whether there is even a RE bubble.
That’s another 10 points against.
Agreed NJPatient.
I’ve been investing for 20+ years and never have I witnessed so much negative market impetus. If China’s bubble bursts, we are all dead.
I expect the curbs on the markets to kick in momentarily. Wouldn’t be surprised to see more FED money lending as well. Goldilocks left the building on July 19th.
As for the Russian denial mob (BI, Richard and sometimes ChicagoFinance who I respect greatly) I guess I’ll just try to ignore their maniacal denials.
If you are wondering why $ is not tanking
http://www.bloomberg.com/apps/news?pid=20601083&sid=aTutdoFgAwGY&refer=currency
Short-Lived
The dollar’s surge may be short-lived if credit concerns abate, analysts said. In that case, investors’ focus is likely to return to a weakening American economic outlook and concern about reliance on foreign funds to finance record U.S. current-account deficits.
…
Kobe Earthquake
A similar pattern occurred in Japan after the January 1995 Kobe earthquake, which devastated the port located near Kyoto and killed 6,434 people. Japan’s currency climbed more than 18 percent against the dollar in the three months following the disaster, boosted by Japanese investors and insurance companies bringing home foreign investments.
Hmm DOW below 13000??? Today???
From the WSJ:
August 14, 2007, 12:31 pm
And Now, These Commercial (Paper) Messages
Posted by David Gaffen
What the credit markets have in mind, or are hoping for, is what Warren G. Harding called a “return to normalcy.” That entails a situation where key overnight lending rates are in-line with various targets, instead of at prohibitively expensive levels, so banks can lend more easily to each other and to others.
Canadian rating agency DBRS reported that 17 Canadian asset backed commercial paper issuers are looking for back-up financing from banks, and that’s reignited the concerns about the scope of this credit crunch. Rates on asset-backed commercial paper, which spiked higher last week, have remained high as other rates have come down
“These things are gapping up and haven’t come off,” says George Concalves, Treasury and agency strategist at Morgan Stanley. “They’re in a seized up mode.”
Rates on ssset-backed commercial paper — which is used to offer lower-cost financing to companies that can’t use the more popular commercial paper market (a type of short-term lending) — are sharply higher than where they’ve been all year. Of late, the rate on one-month asset-backed commercial paper was at 5.73%, according to Bloomberg, down a bit from 5.77% yesterday, according to the Federal Reserve, but still markedly higher than any time this year before the middle of last week.
Generally, this rate trades at just a few hundreths of a percentage point above the Fed’s target for the federal-funds rate. By contrast, the overnight federal-funds rate has dropped after cascading to 6% last week, and of late was around 5%, below the Fed’s target of 5.25%, which suggests the Fed is still flooding the financial system with liquidity.
http://blogs.wsj.com/marketbeat/
No NAHB/Wells HMI?
Nevermind, I believe Econoday had the date wrong. Looks like tomorrow is the day.
jb
richard, 153#, it is no gain to talk to these folks about your stock investments.they attack you if you have awrong pick and they takes all profits if you have some good picks. so i start to look at investment property in newark. it should have more fun and fit the main topic of this blog
njpatient you’re a tool and i don’t waste my time on such things so you’re officially ignored.
Ok back to business. Many of the funds with any exposure to subprime holdings are getting unfairly hammered. This is exacerbating the situation we’re seeing. For example RSF has only a 5% exposure to subprime. Morgan Keegan runs the fund and is a well respected name on the street and as such I wouldn’t expect anything funky going on. The recent downward movement could be a combination of factors I guess we’ll see what shakes out. This is the time to look for opportunities not hiding the barn with your mattress stuffed with $.
what made you think it would be a good investment to talk to us folks about your picks?
Dow down 160 points!!
Run and Hide homeowners!!
Bargain the hell out of asking prices and rents.
Yes, Rents also!!
Landlords and homesellers are bleeding.
JB – just emailed you.
i know bi but i must admit there’s personal interest in observing the various reactions to anything i say just because i don’t believe housing will crash. i throw out some investment picks and opinions because i believe this blog needs a dose of something other than the sky is falling.
“i throw out some investment picks and opinions because i believe this blog needs a dose of something other than the sky is falling”
At least that’s one success for you: now, something other than the sky is falling – your picks.
lot of fear out there. wall street is a confidence game and right now there ain’t much of it.
From Dow Jones:
Xceed Mortgage Links Stk-Price Drop To Coventree News
2:42 PM EDT August 14, 2007
DOW JONES NEWSWIRES
Toronto’s Xceed Mortgage Corp. (XMC.T) said its share price declined sharply on Monday, “in apparent reaction to the Coventree announcement.”
As reported, Coventree Inc. (COF.T) said Monday that it has been forced to extend some notes and call on liquidity arrangements for others after being unable to place new notes due to the global credit squeeze.
Xceed said Coventree is one of the sources Xceed uses to fund its mortgage portfolio, noting that short-term funding is provided by Xceed’s warehouse facility; medium-term funding is provided by the ABCP market; and longer-term funding is provided by the term market.
Xceed said that, given that a portion of Xceed’s portfolio is funded by extended-term ABCP and wider market credit spreads prevail, these are expected to have a negative impact on Xceed’s profitability and cash flows.
The effect will depend on the size of the increase in market spreads and for how long such conditions last. However, Xceed expects its warehouse facility will adequately provide funding for new mortgage originations for several months.
Xceed is a non-traditional mortgage lender. Its shares are trading at C$3.90 in Toronto Tuesday, down 13% from Monday’s close and down 30% from Friday’s close.
It’s funny – the word “con”, as in “con man”, is short for “confidence”.
Hence, I agree with you at #173, Richard.
Housing has crashed. It just takes prices time to catch up to the underlying fundamentals. They will. Once the technicals, fundamentals and psychology all align, you have one very powerful trend. It will be a very interesting fall/winter. Who will be the 1st Home Builder to go under? Beazer?
Has this been posted yet? from Marketwatch
U.S. agencies propose clear explanation of ARM features
12:53 PM EDT August 14, 2007
CHICAGO (MarketWatch) — Consumers get straight talk about adjustable-rate mortgage features in new illustrations proposed Tuesday by federal financial regulatory agencies.
The previously released “Statement on Subprime Mortgage Lending” recommended clear communication by institutions to ensure their borrowers have balanced and timely information about the benefits and risks of certain ARM products, according to a news release issued by the Federal Reserve Board. The new illustrations would be a tool to help lenders educate consumers on these mortgages so that they’re not shocked by increased payments.
The information addresses risks and consumer-protection concerns prompted by ARMs typically offered to subprime borrowers, but prime borrowers also might benefit from a read.
One illustration, aptly named “Important Facts About Your Adjustable Rate Mortgage,” urges consumers not to sign any loan contracts and to consider other loans if they don’t understand how the ARM they’re considering works. It goes on to explain that the interest rate on an ARM is not fixed, but changes over time according to a formula.
Other ARM specifics touched on in the illustration include:
Explanation that some ARMs have a reduced interest rate for a period of time before increasing — the start rate might last for the first two years of the loan, for instance. Using that example, “This means that your interest rate and monthly payments will be lower than normal for the first two years,” it reads.
Sometimes the monthly payment includes principal and interest as well as funds to cover real-estate taxes and home insurance. Sometimes, however, consumers are responsible for paying real-estate taxes and insurance premiums on their own. That’s why, when comparing mortgages, it’s important to understand exactly what a monthly payment includes.
Some ARMs have a prepayment penalty if the borrower sells or refinances during the first few years of the loan — a feature that can make it difficult or very expensive to sell or refinance when the interest rate adjusts.
Explanation of balloon payments are also discussed, as is the fact that reduced documentation or stated-income loans usually have higher interest rates or costs compared with loans acquired with full documentation. The full illustration is on page 8 of the proposal. View the proposal.
A second illustration offers a sample mortgage comparison between the monthly payments on a 30-year fixed-rate mortgage with a 7.5% interest rate and a “2/28” ARM that begins with a 7% rate, then adjusts in the third year.
The joint news release came from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
The agencies are requesting public comment on the proposed illustrations. Instructions on how to submit feedback begin on the bottom of the proposal’s first page.
“U.S. agencies propose clear explanation of ARM features
12:53 PM EDT August 14, 2007”
The horse has bolted…why even bother?
Hedgies phones are ringing off the hooks. Tomorrow is notice day, 45 days, for the 3rd quarter redemptions. I want to sell out my position. Sell? To whom?
BC Bob,
housing is ‘crashing’ not ‘has crashed’. we will only know the bottom when prices start to trend the other way…as far as i can see, the prices, especially in the BC area, have moved little. it will take time to first start the move downward…this can only be done when one seller sells for less and thus starting the comps for other sellers and so on……
maybe this group can speculate on what the bottom is? 20% off todays prices? 30%off? that seems too much to me!
comments?
CAIBC,
Read my post again, regarding prices. 30-40% off 2005, peak to trough.
Bost,
When institutions make investments in hedge funds, do they make a commitment to a specific period of time like 3 years, 5 years, etc.?
I’m realizing that I don’t know much about how the redemption process is supposed to work.
I just always assumed that the hedge funds were more illiquid and had institutional investors who were supposedly invested for longer periods of time (?).
BC bob, any idea how far have we come down from peak 2005 prices in BC? i only ask because i have only been looking for about a year now…
thanks
For example RSF has only a 5% exposure to subprime. Morgan Keegan runs the fund”
Richard aka RSF, did you read this commentary posted by your portfolio manager on August 10?
http://tinyurl.com/yw9se2
“In my opinion, the de-leveraging, or sell-off of securities, by hedge funds and other financial institutions has created an excessive supply of all types of fixed income securities. This oversupply has pressured the balance sheets of all of Wall Street such that bid/offer spreads have
widened and liquidity has dramatically declined over the last 30 to 60 days. Not only is supply higher than demand, but it exceeds the capacity to take these fixed income securities. Additionally, the rating agencies’ sudden and drastic actions in downgrading securities have exacerbated these problems by triggering covenant violations and margin calls and creating even more supply in a very thin market.”
“The lower valuations are no longer just showing up in the sub-prime mortgage securities as we have seen the pressure move further up the credit ladder to impact even AAA-rated bonds. Every fixed income security is subject to being devalued in this market, without regard to credit quality. Even bonds which continue to meet their payment schedules are under pricing pressure now.
Commercial and corporate credit are feeling the crunch, and it is even beginning to touch stock values.”
Rich,
THanks as always for the MLS infor.
Eagle
scribe [182],
Depends on the fund. There are some with a “hard cap”, regarding redemtions, other a “soft cap”. The hard cap will stipulate what term, 1, 2 , 3 years before redemptions. A soft cap will allow redemptions, outside their stipulated time period, with a penalty. Maybe a 2-5% penalty.
OK, you just lost 20-40%, you pay a 2-4% management fee for that exceptional service. Now, to kick you when you are down, you are required to pay an additional 2-5% to withdraw your money. Remember, there is always an open door to get in. To get out?
Bost,
Wow
From Realtytrac:
STOCKTON, DETROIT, LAS VEGAS POST TOP METRO FORECLOSURE RATES
MSA Foreclosure Rankings
Rank – MSA
32 EDISON, NJ
37 CAMDEN, NJ
50 NEWARK, NJ
57 SUFFOLK/NASSAU, NY
67 PHILADALPHIA, PA
82 NEW YORK/WAYNE/WHITE PLAINS, NY
94 ALLENTOWN/BETHLEHEM/EASTON, PA
From this week’s New York magazine, Cramer’s latest column:
Bloody and Bloodier
The subprime-lending crisis is worse than you think, and could crush financial and real-estate markets for years.
* By James J. Cramer
You’re losing money right now. This very minute. You’re losing money if you own an apartment. You’re losing money if you own a country home. You’re losing money if you own a stock or bond mutual fund. You’re losing money if you have a pension plan. You’re probably losing money here or there, you’re probably losing money everywhere (except maybe from your savings account and wallet). But this is no Dr. Seuss story. It’s more of a John Steinbeck tale, and we are the victims, a new generation of Tom Joads, and it’s the damn bankermen who broke us. No, there won’t be a police officer to investigate, and the government, at least this federal government, won’t save us.
http://nymag.com/news/businessfinance/bottomline/35813/
When did this become a real estate investment let alone a stock market investment blog?
And personally, I could give a rat’s ass what people are or aren’t investing in and how much they’ve made or lost on a daily basis.
You sound like a bunch of six year olds yelling “look what I did, look what I did”. If you’re proud of an investment print it out and stick it up on your refrigerator for your family to see as they may care. I don’t think anyone here does.
Rich
Domi Says:
August 14th, 2007 at 1:42 pm
I smell fear in the air.
I know someone who is trying to refinance their home and was told by the bank that their is a lien on the property from 2005, when the owner did the purchase in 2005 there were no tax liens from previous owner. Is the present owner responsible for the lien?
When you buy a house, you are required to buy title insurance. That title insurance guarantees you that there are, or will be, no existing liens on the property. If a lender from the previous owner comes to you and says we have a lien on that property, then the title insurance company will eat the cost of paying that lien off.
My dad was given a small piece of property in Tennessee some time ago in repayment of some family debt. He got title insurance when he took title. Sometime later, the town or county said there were some old tax liens on the property that had to be paid. Since he had the title insurance, they had to eat the cost of paying off those liens. The title company was basically asleep at the wheel when they issued the policy without checking for the tax liens, but that was their problem.
housing is ‘crashing’ not ‘has crashed’.
Generally agree. Everything but prices have pretty much crashed at this point; sales way down, inventory way up, buyer sentiment changed, lending tightening by the day etc.
I like the Road Runner analogy. Wile E. Coyote, preoccupied with cathing the Road Runner, runs off a cliff, the ground drops out from under Coyote, but the Wile E. Coyote doesn’t realize it right away. He just keeps running like nothing is wrong for a short time before he realized the ground in about a 1,000 feet below him and he drops like a rock.
This is where sellers are today. The floor is gone, they just don’t know it yet.
maybe this group can speculate on what the bottom is? 20% off todays prices? 30%off? that seems too much to me!
30% is what it would take to restore the historic relationship between incomes and home prices. Since bubbles always return to the mean, this is completely reasonable.
FYI. 30% is in real terms, not nominal. Depending on how long this takes, inflation could play a large role in the correction.
From 1988 – 1997, real housing prices in the NY metro area fell by about 30%. Prices fell for a about 3 years and then stayed flat for another 5 years. When adjusted for inflation, prices fell about 30% overall.
thanks x-underwriter. that’s really helpful advice. good to know…
OT:
Eat your heart out…
http://www.oldhouses.com/cf/displaylisting.cfm?q_listingid=2541&searchlist=2568,155,2496,1609,2571,2504,1384,1860,2526,2448,2541,2502,2471,2058,2560,2561,2157,1642,2555,2518,1825,1767,2583,2551,2525,2320,2483,2574,2057,2164,2578,2539,2492,2498,2482,1478,2528&searchname=Featured%20Listings&searchdest=%2Fcf%2Flistinglist%2Ecfm%3Ffeatured%3Dyes%26searchname%3DFeatured%2BListings%26startrow%3D1%26maxrows%3D25
“U.S. agencies propose clear explanation of ARM features
12:53 PM EDT August 14, 2007″
This will be like “plain english” proxy regulations.
Worthless.
Housing is toast for a while – atleast 2 to 3 years as the excesses wear off, followed by a few years of water torture. As far as recovery when the cycle eventually turns, a big wildcard IMO is gas prices this time around.
The previous RE upturn took place amidst record low gas prices and accounted for a very small portion of a household budget. People will come to realize that they are shelling out so much for gas in the form of transportation and utilities, thus leaving less money in their pockets when they buy a house. If peak oil continues or there is a substantial dollar decline, (and feeds through to the inflation numbers), expect house prices to take a bigger beating in real terms.
#194
If that is not a haunted house I don’t know what is. 45 miles outside of Indy? I think I will pass.
Interesting stuff.
NASA Revises Climate Data; 1934 Ousts 1998 as Hottest U.S. Year
ASA has revised climate data to show 1934 as the hottest U.S. year on record, ousting 1998 and challenging the argument that national temperatures are reaching new highs amid global warming.
According to the figures released last week, four of America’s 10 warmest years are now in the 1930s, during the Dust Bowl era. Just three years from the past decade remain among the top 10, with 2001 having dropped off entirely.
A flaw in U.S. National Aeronautics and Space Administration data, brought to light by a Canadian researcher, led the Goddard Institute for Space Studies to cut mean “temperature anomalies,” or deviations from the 30-year average, by 0.15 degree Celsius (0.27 degree Fahrenheit) from 2000 to 2006.
apparently Cramer just now said “I would not buy a house right now, I would only sell”
From Reuters:
July home sales in southern California hit 12-yr low
July home sales in southern California sank to the month’s lowest level in 12 years as potential buyers held back, anticipating prices would ease amid the broad national housing downturn, according to a report released on Tuesday.
A total of 17,867 new and resale homes sold last month in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties, marking an 11.4 percent decline from June and down 27.4 percent from a year earlier, according to DataQuick Information Systems.
Home sales in the region posted 22 months of consecutive declines from year-earlier levels, according to the La Jolla, California-based real estate information service,
From Investment News’ daily email:
Deadline may prompt hedge withdrawals
By Darla Mercado
August 14, 2007
Skittish investors may begin pulling their money back from hedge funds tomorrow.
As investors run away from risk, fund managers expect to see a pile of redemption notices tomorrow, the bailout deadline for those who want out by the end of the third quarter, Reuters reported.
That’s because managers typically require an exit notice at least 45 days ahead of time before returning cash to investors.
Market-neutral strategies, which hold long positions in undervalued securities and short overvalued stocks, are now seeing losses amidst and up-and-down stock market, prompting managers’ expectations for redemption calls.
However, the volume of the hedge fund exit depends on an investor’s exposure to the funds, according to Stefan Greenberg, a certified financial planner and managing director at Lenox Advisors Inc., a New York wealth advisory firm.
“We haven’t had any calls to liquidate from hedge funds unless they’re close to reaching their time goal,” he said.
“There’s a specific type of investor who goes into hedge funds, and they make up only a portion of our asset allocation.”
Investors may want to hang in through the losses for now, too.
“Certain sectors do well in certain times of the year, but throughout the long-term, if you stay with that investment, it’ll bring positive returns,” he added.
DOW: 13,026.73 -209.80
Anyone watching TMA?
jb
“The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.”
“With the looming retirement of baby boomers, spiralling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks,” said Mr Walker, a former senior executive at PwC auditing firm.
http://www.ft.com/cms/s/80fa0a2c-49ef-11dc-9ffe-0000779fd2ac.html
Folks,
My cousin closed today. He’s a proud homeowner. 2 mortgages, taxes and insurance
equals $4150 per month. He get’s $950 from his rental.
He’s a manager at a catering hall in staten island. Including tips and salary he brings home from $5500-$6500 per month.
He’s wife is a student which means no income. He doesn’t have any student loans due to the fact that he never went to college. Small creditcard debt. Zero savings.(After DP).
Instead of being afraid of the mortgage pmnt he is remodeling the bathroom and throwing 8K in it.(borrowed money).
American Consumerism at it’s best.
Seems they are having some difficulties making the dividend payment..
From PR Newswire:
Thornburg Mortgage Announces Change of Second Quarter Dividend Payment Date to September 17
Thornburg Mortgage, Inc. (NYSE: TMA – News), a leading single-family prime residential mortgage lender focused principally on the jumbo segment of the adjustable rate mortgage market, announced today that its Board of Directors has rescheduled the payment date of the company’s second quarter common dividend of $0.68 per share to September 17, 2007. By September 17, the company will receive its scheduled monthly mortgage payments for August and will have had more opportunity to manage through this difficult environment. The dividend was originally scheduled to be paid on August 15, 2007 to shareholders of record on August 3, 2007, as previously noted in the company’s second quarter earnings announcement on July 19, 2007.
The Board of Directors said it took this action in response to significant disruptions in the mortgage market which resulted in the sudden and unprecedented decline in the market prices of its AAA-rated mortgage securities that began on August 9, 2007 and subsequent increase in margin calls related to its repurchase agreement financings on those securities. There have also been disruptions in the company’s ability to fund its mortgage assets in the commercial paper and the asset-backed securities markets. To date, the company has successfully met all of its commercial paper obligations. Finally, the company has also experienced delays in its ability to fund mortgage loans to its lending partners.
Commenting on the Board’s decision, Larry Goldstone, the company’s president and chief operating officer, said, “After extensive deliberation, and acknowledging the severity of the situation, the Board determined that the best way to preserve shareholder value in the near term and grow it over time is to retain our cash to enhance our ability to work with our lenders and weather this tumultuous environment. We will continue to monitor the situation.”
“Anyone watching TMA?”
JB,
It fell off the cliff at such speed, I’ve lost it.
always remember: “The Titanic Had A Band”
>>Richard aka RSF, did you read this commentary posted by your portfolio manager on August 10?
cya my friend. it goes deeper but that’s the public disclosure.
The Dow’s next stop is about 12,800
It better hold. if not,,,,
we go to the Feb. lows,
Hold on, cause you ain’t seen nothing yet
can you say “Margin Calls”
This is what may finally have a profound
effect on Bergen County Housing Costs.
You may find a few sellers who will have
seen the light, or Mark just can’t handle
the payments. House,Benz,CC, etc.
OT:
Kiplinger’s Jump-Start Your Retirement Plan Days. From 9 a.m. to 6 p.m. eastern time on Friday, August 17, and Thursday, August 30, NAPFA members across the U.S. will be standing by to answer your questions.
Normally, these fee-only planners, who are well versed in investments, taxes, insurance, estate planning and saving for college and retirement, charge clients $100 to $250 an hour. But on Jump-Start Days, you don’t pay a cent — not even for the phone call. Just dial 888-919-2345 and a NAPFA adviser will respond to your question. Or, if you prefer, you can e-mail your question in advance starting August 1 to jumpstart@kiplinger.com and a NAPFA adviser will reply on one of the Jump-Start dates.
The web site for Schwab is showing a whole bunch of headlines for TMA, including this one, which is the latest, but no story yet:
Thornburg Mtge Exploring Options, Including Sale Of Mtge Assets
4:10 PM EDT August 14, 2007
(MORE TO FOLLOW) Dow Jones Newswires
08-14-07 1609ET
Copyright (c) 2007 Dow Jones & Company, Inc.
bi (139)-
Wellbutrin dosage calibrated again.
?
reech (151)-
Get long when they announce a cut dividend?
JB – can you unmoderate 216 and 217? I know I said some bad words, but they’re not THAT bad.
oh – and 215?
200#, here is full report from dq data:
http://www.dqnews.com/RRSCA0807.shtm
and not all negatives:
“The median price paid for a Southland home was $505,000 last month, the same as the record high recorded in March, April and May. It was up 0.6 percent from $502,000 for June, and up 3.7 percent from $487,000 for July last year. ”
“When adjusted for shifts in market mix (i.e. fewer lower-cost homes selling now), year-over-year price changes went negative in January and are now roughly three percent below year-ago levels. The declines are in the lower half of the market, while prices are flat or even increasing in the upper half of the market.”
njpatient,
It would probably be better if we didn’t unmoderate those. No offense, I’d just rather not push my luck.
jb
LOL
Clot,
What is the sentiment of your sellers/buyers? Are they wired in to the recent market events?
Thornburg Mortgage (down $6.67 to $7.61, Charts) slumped 40 percent on multiple analyst downgrades amid worries that it will have to cut its dividend because of the tough environment.
AHM redux – Anyhow Thornburg is set to pay its JUICY dividend on 8-15-07. They have to wire the money tonight. Remember AMH something like 10pm the night before payable date they announced they were not paying and the broker dealers had to rush around and cancel the payment before it hit the accounts in the morning. Something tells me Thornburg is going to hit their little investors with a middle of the night press release and little or no dividend will hit their ac in the morning. The Wall Street Journal should be good reading on Thornburg and housing in the morning, I am buying a nice big cup of joe and a fresh WSJ for the train tommorrow!!!
Rich (190)-
C’mon…we’re all just milling around, waiting for intermission to end.
Just killing time, itching for the real action to start.
from the WSJ’s recap of today’s action:
Financial-services and mortgage firms suffered again Tuesday, especially after the Sentinel news. Shares of Goldman Sachs fell 4.4%, and Lehman Brothers Holdings declined 6.3%. Countrywide Financial lost 8.1%, and Accredited Home Lenders Holding retreated 5.5%.
Late in the day, trading was suspended in real-estate investment trust Thornburg Mortgage, in the wake of analyst downgrades. Shares were down 47% when halted.
BC (222)-
Oh, yeah. Sellers starting to wake up…just in time to fall out of bed.
Buyers: drooling like rabid jackals.
bi,
#219: Not what I would call positive
“Last month’s sales were the slowest for any July since 1995, when 16,225 homes sold, the lowest for any July in DataQuick’s statistics, which go back to 1988. The strongest July was in 2003, when 38,996 homes sold. The July sales average is 26,829.”
Grim (203)-
Youch! I had TMA on my “Subprime Survivor” list early on.
Nowhere to run, nowhere to hide…
Clot,
Do you and your guys still have a lot of prospective sellers who are waiting for 9/1?
clotpoll, i dont know if i am ‘drooling like rabid jackals’ – right now its probably more like ‘sigh of relief’ that my offer on a POS house didnt go through about 11 months ago! gave 20K below asking and they wanted asking…it did sell though for 10K below asking! if i went 10K more, i would have really had a bad stomach ache now….
the drooling will be coming pretty soon though
btw…i only found this blog about 8 months ago and thank God for that!
Impac Suspends Alt-A Loans
http://biz.yahoo.com/prnews/070814/latu123.html?.v=101
“cya my friend. it goes deeper but that’s the public disclosure.”
Yeah, Richard aka RSF, you’re privy to inside information so you bought just before 1/3rd got knocked off in a week.
Am not trying to be a pain; it’s just irresponsible when you spout off ticker symbols of companies that you think folks should be investing their down payment in. It’s best to keep your hits and misses to yourself.
Clot (224)-
I was feeling cantankerous (lack of sleep) and had to get that off my chest.
It was fun and I feel better.
I could still give a rat’s ass, but I feel better.
Rich
219#, that was i said all time: the higher end will hold better than lower end. the volume was down significant (i feel ur pain) but the price did not – at least for july. i am also looking at newark area if anybody throw thing away and i can pick up tax tab.
dream [232],
Right on. Everybody should be more concerned with the return of their dp rather than the return on.
76: No, bi, we bash you. And with good reason!
234#, with demand dropping off you don’t think that’ll effect pricing?
234#, never mind, kudlow & company is on and i’m sure you’re busy watching
“kudlow & company is on”
Rich [238],
And Jim Jones is serving Kool-Aid.
237#, true if supply doesn’t drop. the problem is sellers can hold if they don’t have to sell. if price must drop if demand dropped then the price is already dropped but you did not see that in that report. again we can expect some change in august, september, october… especially time bomd is set for sept 1. howvever my sense is it will be defused before that… the rate cut is almost certain now and it will eventually change the psychology of the market.
Is This a Run on the Bank?
What Sentinel Management’s Redemption Halt Really Means
Kevin Depew Aug 14, 2007 12:59 pm
Now we have a standoff… between those demading fairness, and those willing to take a chance on extending a little charity in honor of it.
This morning it was reported that Sentinel Management Group, a cash manager for institutions, corporations and accredited investors founded in 1980, sent a letter to investors saying, “We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.” (For more on why liquidity has dried up, see this morning’s Five Things.)
What is Sentinel Management Group? According to Frequently Asked Questions posted on the firm’s Web site, “Sentinel acts as an agent for its clients. Clients sign an Investment Management Agreement appointing Sentinel as a discretionary investment advisor to supervise and direct the investment of assets in the account on behalf of the client in accordance with the risk parameters agreed upon.”
The firm is open only to corporations, institutions and accredited investors. Accredited investors must have a financial net worth of at least $1 million or income in excess of $200,000 annually for the past two years. If you think about it, income in excess of $200,000 as a couple is not a particularly high bar.
http://www.minyanville.com/articles/sentinel-gs-equity-cash-market-money-fund/index/a/13704
Fave Scooterism, from the MSG booth a few years back: “And today is Father’s Day, so to all you dads out there, happy birthday, pop!” Wish I had had TiVo back then, because I still cannot believe what I heard…
1950 AL MVP. On that team? With all the great players in the League at that time? Scooter was a man.
someone earlier asked this but I didn’t see a response…
How low will we go? Earlier on, I’ve heard % off Peak 05 prices…
OK, it’s summer 07, how much have we come down, and how much more will it drop from this summer?
Just askin…I’m looking around now and waiting til Jan 1.
re: 188
Grim: What market is S. Ocean county in?
for ordinally people, there are 5 classes of assets to invest: CDs, Stocks, bonds, real estate and small businesses. i would expect small business boom in next 5 years. the next would be RE, which most people here don’t agree.
bi: CDs? Pffft. Kids these days only want MP3s
Does selling bootlegged cds count as a small business?
Thank You #156 and 191.
How low will we go? Earlier on, I’ve heard % off Peak 05 prices…
My prediction has always been 20-30% off peak prices, adjusted for inflation.
jb
JB,
I’ve been telling most who ask the same range as you predict (20-30% drop). People need to realize that the RE market will probably stay flat for a number of years afterwards as well.
RE is not a good investment. The best return is that you get a place to live and can deduct the mortgage interest as long as you are not in AMT. The carry cost (insurance, maintenance, property taxes) makes it a really tough match for the 15% tax paid on stock market gains.
As I pursue a second home and plan to rent out my current 2-family home, I only feel it will be a decent investment since I really need the tax write off and I live within a 5-minute walk from a NJT commuter rail station with one-seat access to NY Penn. From a rental standpoint, this is invaluable. Especially considering the potential long term effects of peak oil and the horrific amounts of traffic in North Jersey.
Otherwise, I would sell it and just invest the rest in the markets yielding a significantly better return, with the 15% taxes and all.
“My prediction has always been 20-30% off peak prices, adjusted for inflation”
Even at 15% off 05 tops… its going to hurt many, many people.
If 30%, wow… look out.
I am calling for 30%. Blokes I know are calling over 50%. I wouldn’t be surprized about that.
Sure is getting fun though…
Everytime I see a “For Sale” sign I just get a bigger and bigger smile. Especially, when I see about 5 on the same block.
A major market correction and seeing hot shots lose it all is always fun.
SAS
rich #190 – rat’s ass stock blog thing
…just wait ’til it becomes a college football blog
hill watch 20 days!
“I pursue a second home and plan to rent out my current 2-family home, I only feel it will be a decent investment”
what do you do when rents go down?
what makes you think you are going to get a tenent?
Check the inventory stats, alot of people renting houses they can’t sell. Also, people can’t even rent their houses.
SAS
While 30% sounds impressive, realize that a slowly declining market, roughly 2-3% nominal price drops, along with elevated inflation over roughly 5 years will do it.
jb
better yet,
what are you going to do when someone take a piss on the carpet and throws dung on the walls, and you will never track that person down again to collect…?
oh yes, these things can & do happen all the time.
SAS
Do you really want to live in NJ in 5 years?
I can only imagine what the taxes will like… yikes!!
The 50 billion pension problem ain’t going away.
That 50+ billion is going to come out of our hides.
I ain’t going to be the last one to turn out the lights in this state. Lets leave that to Stu and his rented out house ;)
yup,
SAS
SAS:
I live in Montclair and the current level of rent should help to curtail the dung throwers and carpet tossers. Currently, I have a wonderful tenant family. I plan to thoroughly interview all tenants as I feel this is the most important part of the process. No management company or realtor for me. We’ll see what happens I guess ;)
But, on the flip side…
I still think their is a good amount of racketeering going on by Power Corp of Montreal, AXA-BNP Paribas with Mindbox software in the subprime markets.
SAS
thats good Stu..
Btw everyone–
The gold coast has lost its glitter.
SAS
sas 259
Does that mean the troll slipped into the sea?
http://www.reuters.com/article/newsOne/idUSN1230248820070814
This maybe the best of times ever for me.
BOOOOOOOOOOOOOYAAAAAAAAAAAAAAA
Bob
I am going to kick around the show & tellers like dogs.
You can count on it young buyers. I will do it for you. You have been screwed and abused for to long.
I am going to pick some bones.
bababababababa
Bob
per Bloomberg:
Thornburg announced it is delaying by one month the payment of its dividend.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUEoI8jrdhtU&refer=home
Alot of smart@$$ ego’s have been stomped into the ground
If it looks like a POS It is a POS!
BOOOOOOOOOOOOYAAAAAAAAAAAA
Bob
re: post 249 — mortgage interest deduction and AMT.
I always thought that if you are in AMT category, you only could not deduct property taxes, or mortgage interest on secondary/investment properties (or interest on a HELOC not related to home improvement.)
In other words, even if subject to AMT, could still deduct “basic” mortgage interest- the interest on primary residence paid in connection with purchase.
Jamey Says:
August 14th, 2007 at 5:08 pm
Fave Scooterism, from the MSG booth a few years back:
J: when I was in Chicago, Harry Carey couldn’t pronounce Moises Alou….it came out “moses a-SAM-loe”
Let’s not forget Ralph Kiner in his prime…master malaprop. I wish I could remember the best.
http://www.geocities.com/baseball_humor/kinersims.html
“August 3, 2007 — Prudential Financial Inc. said it’s still buying securities backed by subprime mortgages and expects turmoil in the market to cost the company no more than $150 million over five years.”
http://www.nypost.com/seven/08032007/business/prudential_financial_still_likes_subprime_business_.htm
243
I’ve always been the 1999 reversion girl.
Still am.
“If it looks like a POS It is a POS!”
Thats a good one ;)
sas
“Prudential Financial Inc”
These guys a smoking that green stuff the Rastas smoke in Jamacia. Or those mushrooms that they always want you to eat.
If you work for Prudential Financial Inc., you better update your resume… ASAP!!
;)
SAS
especially some of you sissys in Summit.
sas
And poor CF. I laughingly call him a moderate. Someone else calls him a Russian denial mobster.
He just can’t break free of his ingrained educational shackles. “Never, ever break free of the plane of calm moderation. Always weight the socially-expected with greater probability.”
He secretly he wants to channel Roubini like the leper touches the robe.
Now, CF, you know I’m just bustin’ on you as an example, right?
From MarketWatch:
Dominion Homes quarterly loss widens as revenue falls
Dominion Homes Inc. late Tuesday reported a second-quarter net loss of $29.7 million, or $3.63 a share, compared with a net loss of $5.93 million, or 73 cents a share, during the year-ago period. The current results include a non-cash charge of $17.2 million related to real estate inventory impairments, the company said. The Dublin, Ohio-based home builder said revenue for the three months ended June 30 fell to $38.8 million, from the delivery of 206 homes, versus $75.8 million, from the delivery of 398 homes. The quarterly loss is a result of fewer home deliveries, higher sales discounts to meet competition and non-cash impairment charges, Dominion Homes noted. The company also said it’s not in compliance with certain financial covenants as of June 30, and is in discussions with its lenders to modify the credit facility.
Hey Bernake…
raise the rate next time.
Forget Goldman & Sterns (paper anyone?)
Go suck your thumbs mad money Cramer… you damn baby.
sas
malinvestment has to be liquidated… he he..
sas
I’ll add that blog to the front-page links once I see it has some content and is updated regularly.
jb
[272],
Selles are setting their #ss on fire? Just one example of a ton;
$540000 JUST REDUCED!! Beautiful 1320 sq. ft. 2 bed 2 bath
http://newjersey.craigslist.org/rfs/396106036.html
Greenbrook Rd, North Caldwell – There was a house listed in the high 800s for about a year or so. It just went up to 929K. Someone, please explain.
Eagle,
You’re right even if you are subject to the AMT you still get the mortgage interest deduction; and in the first years of a mortgage its a pretty large deduction considering almost your entire payment is interest.
“Founded in 1993, based in Santa Fe, New Mexico, and built on a foundation of quality, innovation, and discipline, Thornburg Mortgage has rapidly grown to become a nationwide mortgage lender with over $45 billion in assets.”
“As an investor in mortgages, Thornburg Mortgage does not sell the loans we originate or purchase. Due to this, we have the ability to enhance our loans with flexible options. The Thornburg Mortgage Exchange Program, the Loan Assumption Program and the Pledged Asset Loan Program have each been designed to give our clients greater control over the terms of their mortgages.”
“Our goal is to provide a specific type of mortgage product, Jumbo Adjustable Rate Mortgages, to a specific type of client, “A” quality borrowers”
http://www.thornburgmortgage.com/thornburg/Home/AboutUs/tabid/171/Default.aspx
Bost,
Re: PRU
Me, my brother, and my uncle got freebie shares from the IPO by virtue of being long-term policy holders. A very nice bonus – until now :)
Tomorrow’s “Heard on the Street” in the WSJ:
When Buyers Snub Sellers
Valuing Debt Holdings
Turns Tricky as Funds
Struggle to Find Market
By IAN MCDONALD, CARRICK MOLLENKAMP and DAVID REILLY
August 15, 2007
The seizing up of some debt markets because of the subprime-mortgage shakeout has left some investment funds wondering how to value their holdings.
Last week, France’s BNP Paribas SA said it would stop the flow of money into and out of three of its investment funds because it couldn’t “fairly” value securities in the funds. That, the bank said, made it impossible to come up with a net asset value for the funds that would allow investors to get in or out.
When the bank, for example, recently tried to sell about $60 million of bonds backed by U.S. mortgages, it couldn’t find any buyers. Among the brokers it called, “some of them weren’t even answering the phone,” says Alain Papiasse, head of BNP’s asset-management and services division.
Similarly frustrated with shaky market prices last month, French insurer AXA SA opened its wallet to cash out investors of two funds rather than sell securities at fire-sale prices.
The oft-repeated problem is that the funds, and even some companies, can’t get prices for many debt securities and derivatives with direct or indirect links to loans made to homeowners with spotty credit histories. Given that, they ask, how are they supposed to mark holdings to market when there is no market?
http://online.wsj.com/article/SB118713803111597956.html?mod=hps_us_whats_news
I just tried to post 2 stories from tomorrow’s WSJ and both posts disappeared into the ozone?
JB, stuck in moderation.
Someone sent this to me, thought I would share:
For his birthday, little Joseph asked for a 10-speed bicycle. His father said, “Son, we’d give you one, but the mortgage on this house is $280,000 & your mother just lost her job. There’s no way we can afford it.”
The next day the father saw little Joseph heading out the front door with a suitcase. So he asked, “Son, where are you going?”
Little Joseph told him “I was walking past your room last night and heard you telling mom you were pulling out. Then I heard her tell you to wait because she was coming too. And I’ll be damned if I’m staying here by myself with a $280,000 mortgage & no bike.
WP: U.S. to Designate Iran’s Revolutionary Guard as Terrorists
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/14/AR2007081401662_pf.html
apparently Cramer just now said “I would not buy a house right now, I would only sell”
He mentioned something the other day about enjoying the swimming pool in his rented house.
DataQuick analyst John Karevoll interpreted the prices and sales as a sign that San Diego real estate may be nearing the bottom of the post-boom period.
“Most of the declines in San Diego have happened,” Karevoll said. “Now it appears to be re-establishing a balance that we have yet to see for the (Southern California) region.”
http://www.signonsandiego.com/news/metro/20070814-9999-1n14prices.html
#280,
Except that this place is worth $250.
While 30% sounds impressive, realize that a slowly declining market, roughly 2-3% nominal price drops, along with elevated inflation over roughly 5 years will do it.
Jb
And there is precedent. It’s happened in North Jersey before.
According the OFHEO housing price index for the Newark-Union MSA:
The HPI for the 2nd qtr 1988 = 109.7
The HPI for the 2nd qtr 1997 = 104.8
A nominal drop of 4.5%.
When you factor in a decade of inflation (bring the 1988 HPI to 1997 dollars to get a real 1998 HPI of 149.22), the real price drop is 29.7%
Thought you’d all get a kick out of this:
http://fsbo.com/list/93719?search=1&search=1&search=1&search=TRUE&state=NJ&search_x=13&search_y=6&zipcode=07003&range=25&type=&county=&sprice_min=&sprice_max=320000&Action=Get+Listings&&&&start=0
Who says BC is untouchable?
Thought you’d all get a kick out of this:
http://fsbo.com/list/93719?search=1&search=1&search=1&search=TRUE&state=NJ&search_x=13&search_y=6&zipcode=07003&range=25&type=&county=&sprice_min=&sprice_max=320000&Action=Get+Listings&&&&start=0
Who says BC is untouchable?
“I’d buy that for a dollar!”
A year ago we were debating if it was going to be a soft landing or hard landing (both housing and economy)
How quickly things have changed! don’t you think?
BC Bob,
And Jim Jones is serving Kool-Aid.
Bwah-ha-ha-ha-ha-ha!!!
re 280
5th and Jefferson is not a great location for commuting, no parking, and 2br/2b rentals nearby with parking were going at 2700 a month or two ago.
Heads rolling in the financial district are going to be the stake in the supposedly infallible NY metro housing market.
You’ve been warned.
Japans stocks are down almost 300 points.
http://www.marketwatch.com/quotes/jp/1804610
“Asian, European Markets Slide Over Credit Crunch Started by Problems in U.S. Credit Sector ”
http://biz.yahoo.com/ap/070815/world_markets.html?.v=17
sas
Housing collapse will be worse than Nasdaq collapse of 2000. BTW, check out
http://www.newjerseylegalforums.com
what are you going to do when someone take a piss on the carpet and throws dung on the walls, and you will never track that person down again to collect…?
Sounds like a movie to me!
/Abide…
hi nice post, i enjoyed it