From the Record:
Home sales in N.J. take another hit
The two-year-old housing slump continues.
The National Association of Realtors reported Wednesday that sales of homes and condos in New Jersey declined 6.2 percent in the second quarter, compared with the same period in 2006.
Meanwhile, the New Jersey Multiple Listing Service reported average prices in Bergen and Passaic counties declined slightly over that period.
Existing houses and condos sold at an annual rate of 148,100 units in the state, down from 157,900 in the second quarter of 2006 – and well below the 180,000-plus sold in 2004 and 2005, the NAR said.
Nationally, the drop in sales was even larger – down 10.8 percent, to an annual rate of 5.9 million.
Real estate agents say many potential buyers are staying on the sidelines. Some can’t get a mortgage, because lending standards have tightened in response to trouble in the subprime mortgage market.
Other potential buyers are in no rush because they believe prices are unlikely to rise soon.
…
One of her clients, Chris Leible of Secaucus, was unfazed when his recent offer on a Secaucus condo was rejected.“I’m in a position of power right now,” said Leible, a sports agent. “With any kind of deal, you’ve got to be able to walk away, and that’s why I feel I’m in a good position.”
The lack of buyer interest has flattened prices, which rose by double-digit percentages in the region almost every year from 2000 to 2005.
Nationally, the median price of an existing single-family home declined 1.5 percent. In the New York metropolitan area, which includes North Jersey, prices were up 1.7 percent.
In Bergen County, the average sale price in the second quarter was $583,980, down from $595,108 a year earlier, according to the MLS. In Passaic County, the average sale price was $406,029, down from $411,987.
In the Newark area, which includes Morris County, prices for single-family homes declined 6.4 percent, the NAR said.
Several North Jersey real estate agents estimated that prices in the area have come down around 7 or 8 percent from their peaks in mid-2005.
“The one word you can use to describe the market today is ‘stabilizing,’ ” said David Fanale of Century 21 Eudan Realty in Hasbrouck Heights, Wood-Ridge and Washington Township.
“Buyers are negotiating harder than they were two years ago,” said Mark DeLuca of Mark DeLuca Realtors in Teaneck and Secaucus. “Then, they were just buying; they knew that if they waited a month, they might have to pay 1 or 2 percent more. Now they’re taking their time and finding some nice deals.”
As a result of tightening mortgage lending standards, many young people are finding it more difficult to buy that first house, especially if they have mediocre credit scores and little savings for a down payment.
“A mortgage lender told me, ‘If you don’t have a client with a good credit score, don’t even bother,’ ” said Dennis Jaye of Re/Max Real Estate Limited in Oradell.
From MarketWatch:
E.C. may probe rating agencies over subprime
The European Commission will investigate the role played by credit-rating agencies in the recent crisis over subprime U.S. mortgages amid growing concern that they should have warned investors sooner of the dangers of investing in mortgage-backed securities, according to a published report.
The Commission will review the current voluntary code used by agencies such as Moody’s and Standard & Poor’s as it worries they were too slow in warning about problems in the $1.1 trillion U.S. subprime market, according to the report in the Financial Times.
The voluntary code was designed to tackle conflicts of interest as rating agencies are paid by the firms they rate. It was set up after the collapse of energy trader Enron.
“If the rating agencies believe this is going to be business as usual, they are very wrong,” an unnamed Commission official was quoted as saying.
According to the FT, Internal Market Commissioner Charlie McCreevy had said he wanted to give the code time to prove itself but the U.S. subprime meltdown has highlighted some weaknesses. He’s expected to decide on whether to propose new legislation sometime in 2008.
In the U.S., the Securities and Exchange Commission introduced rules for agencies in June.
Credit rating agencies have so far been relatively immune to the blame game as investors look for the culprits of the current meltdown.
While lenders have been criticized for making lenient loans, homebuyers for seeking easy mortgages and Wall Street underwriters for making a bundle turning them into securities, the credit ratings agencies have so far emerged relatively unscathed.
But their responsibility for the current crisis is now being questioned.
The various agencies indeed gave top ratings to many securities built on the questionable loans, making them appear as safe as a U.S. Treasury bond.
From Bloomberg:
Hedge-Fund Guy Atones for His Subprime Bond Sins: Mark Gilbert
Dear investor, we’d like to take this opportunity to update you on the recent performance of our hedge fund, Short-Term Capital Mismanagement LLP.
As you know, market selection for the entire fund is guided by a proprietary investing tool we like to call “a dartboard.” Once the asset classes are decided, individual security selections are generated by digitizing our unique hexagonal cuboid models.
Unfortunately, it transpires that our hexagonal cuboids are not as unique as we thought. Hundreds of other hedge funds possess identical dice. The technical term for this is a “crowded trade.” You may also see it referred to as “climbing on a bandwagon already headed for the wall.”
As our alpha generation collapses, our beta has turned negative, our delta hedging has gone toxic and, trust me, you do not want to hear about our gamma. We can’t even find our epsilons in the dark with both hands.
You will appreciate that accurate pricing is essential for evaluating our investment strategies. This has proven to be extremely challenging in recent days. Previously, we have relied on Bob, the sales guy at Hokey-Cokey Bank. Bob assured us the securities were still worth 100 percent of face value, so everything was cool. Bob sold the collateralized debt obligations to us in the first place, so he knows what he’s talking about.
Bob, however, appears to have had a nervous breakdown, judging by the maniacal laughter that greeted our requests for price verification this week. Our efforts to implement an in- house CDO valuation framework, using a technique the ancients knew as “making things up,” proved unsatisfactory.
Currently, all of the portfolios we manage are undergoing a rigorous screening known as “crossing our fingers and praying that we don’t have to try and find a bid in the market.” This is supplemented by a cross-market statistical analysis originally developed by the U.S. military called “don’t ask, don’t tell.” This “unmarking-to-unmarket” procedure has been the benchmark for the hedge-fund industry for the past, ooh, 72 hours.
We have, of course, been in touch with the rating companies to update our default-probability scenarios, particularly on the AAA rated investments we own. They recommended a forecasting method using stochastics to regress the drift-to-downgrade timescales for the past 100 years and throw them forward for the next five minutes. The technical term for this is “induction,” though those of you of a less quantitative bent may know it as “guessing.”
…
Speaking of crazy prices, we know you’ll be thrilled to learn that we’ve invited a bunch of our rich pals into the fund to participate in this once-in-a-lifetime opportunity. But this is not a rescue. Do not even think the word rescue. This is an opportunity. Not a rescue. An opportunity.
In fact, we think this is such a fantastic opportunity, we’ve agreed to forgo our usual management fee, and we’ll only take half our usual slice of the profits. Provided there are any profits to slice. You, of course, are absolutely invited to participate in this offer by sending us yet more of your money on exactly the same revised terms as our rich pals.
For some reason, I never connected the housing market (mania?) with the concept of a crowded trade. I don’t know why it hadn’t dawned on me, in retrospect it seems to make perfect sense.
jb
From the Star Ledger:
Softer landing
The busy spring real estate season is now officially over and the results are in: The housing market is still in a funk.
Across the country, sales of existing homes, as well as the median home price, fell during the second quarter as lenders tightened their borrowing standards amid fears delinquencies and foreclosures will rise further, according to an industry trade group.
The National Association of Realtors said yesterday that, nationally, existing home sales — which generally account for 85 percent of all home sales — dropped nearly 11 percent in the quarter from April through June, while the median price of a home dipped 1.5 percent, to $223,800.
In New Jersey, the housing market saw a 6.2 percent drop in existing home sales compared to the second quarter of 2006, while the median price of a single-family home in the Northeast fell 0.7 percent, to $298,000.
So, why are real estate brokers like Pat Hoferkamp, president of Parsippany-based Burgdorff ERA, smiling?
“Last year was the third best year in Burgdorff’s history in terms of homes sold and, quite honestly, I feel very good about this market,” Hoferkamp said. “Things are happening. People are buying homes. We’ve got busy open houses. I expect to do what we did last year, if not increase our business.”
Is Hoferkamp talking about the same New Jersey housing market?
The answer is yes and no.
That’s because when it comes to real estate, New Jersey has a split personality.
Talk to real estate agents who sell homes along the state’s commuter rail lines — where 12 of Burgdorff’s 14 offices are located — and the news is all good.
Talk to agents anywhere else, and, well, the news is predictably glum.
Consider this statistic: The inventory of unsold homes in all of New Jersey has soared to a record 72,000 homes, compared to only 39,000 in June 2005, said Jeffrey Otteau, president of East Brunswick-based Otteau Valuation Group.
That represents an 8.5-month supply — which means if homes continue selling at their current pace, it would take that long for demand to catch up.
But in towns like South Orange, Summit, Montclair and Morristown, which are along the main branch of New Jersey Transit’s Morris and Essex line, it’s another story.
For example, Montclair has just a three-month supply of unsold homes on the market, according to Otteau. Chatham, only two months.
The number of homes contracted for sale in prime markets in Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Somerset and Union counties declined by only 1.7 percent from May to June, compared to 5 percent statewide, Otteau said.
Most notable in this group are places like Jersey City and Hoboken in Hudson County, where year-to-date sales activity is running 12 percent ahead of last year, he said.
Looking ahead, Otteau expects this trend will only accelerate, with communities near direct-to-Manhattan rail lines seeing the strongest price increases once the market recovers.
…
But the broader housing market — both nationally and across New Jersey — still appears to be limping along, and experts are predicting the current slump will drag on at least until mid-2008 and possibly longer.
Perhaps the biggest unknown: Whether foreclosures in the “subprime” mortgage market and the wider credit crisis will worsen or level off in the coming quarters.
“The fact that credit has tightened considerably, that affordability is expected to stabilize at a substantially lower level than a year ago, and that inventories remain high, there is little in the way of upward pressure on house prices,” said Celia Chen, an economist with Moody’s Economy.com, a West Chester, Pa.-based research firm. “Markets that are currently weak will likely stay so for another year.”
Indeed, sales of previously owned homes were down in all sections of the country, the National Association of Realtors reported yesterday.
The hardest hit region was the West, where existing home sales fell 16.9 percent, followed by the South, where sales fell 10.7 percent, and then the Midwest, where home sales dropped 8.4 percent.
Star Ledger: Softer landing
“Otteau also sees a ray of light.
Although the housing market took a giant step backwards last week in response to lenders turning off the credit spigot, he said the inventory of unsold homes is increasing at a slower pace. ”
http://www.nj.com/business/ledger/index.ssf?/base/business-7/1187240579302040.xml&coll=1&thispage=3
i still cannot figure out there are two areas with 6% to 8% price increase in the midst of worst housing recession. i thought every place would be down over 7% from last year.
bi Says:
August 15th, 2007 at 12:49 pm
comarades: RE crash justed started. look at Newark-Union area…
Metropolitan Area Median home price %Change
New York-Northern New Jersey-Long Island, NY-NJ-PA $482,300 1.7%
New York-Wayne-White Plains, NY-NJ $557,500 6.3%
NY: Edison, NJ $385,100 -0.1%
NY: Nassau-Suffolk, NY $479,800 0.2%
NY: Newark-Union, NJ-PA $416,000 -6.4%
Trenton-Ewing, NJ $313,900 8.1%
he said the inventory of unsold homes is increasing at a slower pace.
Inventory still increasing, but at a slower pace? So, while we were hemorrhaging before, it’s OK now because we’re only slowly bleeding to death.
jb
If a developer gets his way in Highlands there will be another 400 residences. I guess he doesn’t care about the market because he submitted his request 4 months ago…….. He’s banking on the fact that in 24 months time the market will be ready for them. It will probably take him 18 months to relocate all the trailer park residents.
bi,
New York-Wayne-White Plains, NY-NJ
Includes the following counties:
Kings County, NY
Queens County, NY
New York County, NY
Bronx County, NY
Westchester County, NY
Bergen County, NJ
Hudson County, NJ
Passaic County, NJ
Richmond County, NY
Rockland County, NY
Putnam County, NY
jb
9#, thanks JB. which counties are in
Trenton-Ewing, NJ?
i know only one township (princeton) was selling crazing. other places were flat or slightly up or down. i cannot figure out 8% incrase comes from.
“he said the inventory of unsold homes is increasing at a slower pace.”
The good news first, your cancer is not spreading rapidly. The bad news, it’s terminal.
“i still cannot figure out there are two areas with 6% to 8% price increase in the midst of worst housing recession. i thought every place would be down over 7% from last year”
In my view the reason the reason that the median price has not dropped yet is that more high end homes are being sold than low end homes.
The credit crunch first effected First time home buyers as lending standards were tightened early this year. This is reducing sales of lower end homes,
We are now seeing tightening standards in the Jumbo market which will most likely slow sales in that market over the next several months.
Once this occurs you will see a dramatic drop in the median prices of homes sold
BREAKING NEWS
Countrywide shares down 17% in premarket trading after mortgage lender draws on $11.5B credit line. More soon.
How are the housewives in Japan faring? Carry me or cover me?
“Yen Rises to Highest Since 2006 as Investors Exit Carry Trades ”
“Two key factors required to make carry trades work, steady or depreciating funding currencies and low volatility, are no longer there.”
“We are at a tipping point,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “Investors that had been short the yen for more than a year and a half have fully squared those positions. The question now is whether they are starting to build long positions.”
“We’re biting our nails here,” said Tobias Davis, senior currency dealer at Custom House Global Foreign Exchange in Sydney.
“The yen is overbought on the charts,” said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aC5YzTs9aVTk&refer=home
“he said the inventory of unsold homes is increasing at a slower pace.”
Couldn’t it just be people are deciding not to list or pulling their listings after they sit with no action because the market sucks?
Trenton-Ewing, NJ
I believe only Mercer county. The Trenton-Ewing metropolitan division is very small, with approximately 370k residents. Contrast that with the New York-White Plains-Wayne division, which has roughly 11.5m residents.
jb
My bud said he found another mortgage lender at a better rate. We’ll see, those dudes are full of as much bs as the realtors.
In my view the reason the reason that the median price has not dropped yet is that more high end homes are being sold than low end homes.
You could argue that a slowdown in sales of the lower-price (or less desirable) areas is enough to push the MSA median upwards.
jb
The one word you can use to describe the market today is ’stabilizing,’ ” said David Fanale of Century 21 Eudan Realty in Hasbrouck Heights, Wood-Ridge and Washington Township.
Is stabilizing a code word for Free Fall. Kinda like a cape that needs TLC is a code word for rat infested pig stye?
HOw about this one – If fed cut’s rates – s it time to buy, since fed will obviosly abandon fighting inflation tune??
I was in Newark yesterday, it amazes me all of the new construction townhomes that were put up 10 yrs ago now have broken out windows and grafitti.
Anyone ever take notice of the abandoned factories on 21? NJ’s manufacturing past.
Ohh and one more – do you see markets going loower?? – let’s say to low 12000-high 11000??
Believe it or not 21 isn’t the only place for abandoned factories – they are all over NJ – in the past 20 years US manufacturing declined very steadilly. I believe we are about to see the effects of it.
Are we in for another terrible day on the stock market? In pre-market trading, apple is down to 119, the lowest in two months.
Can’t the housing industry burn, and not take the entire stock market with it?
And question … wasn’t the rule of thumb that when the housing market was up, the stock market was down and vice versa?
Do the inventory numbers capture FSBO?
“Ohh and one more – do you see markets going loower?? – let’s say to low 12000-high 11000??”
My buddy had a great line the other day. He said the market is standing at the edge of the cliff looking down trying to time the waves, like one of those divers in Acapulco.
he said the inventory of unsold homes is increasing at a slower pace.
Common sense could also say Summer is almost over and inventory is likely to scale down a bit this tme of year.
Ohh and one more – do you see markets going loower?? – let’s say to low 12000-high 11000??
I’m not one to try and even time the market but i’ve taken my retirement and moved half to cash and half to a Money Market account because i feel that it will drop to these numbers. When the smoke clears i’ll go back.
Bloodbath in Winter 2007 Says: wasn’t the rule of thumb that when the housing market was up, the stock market was down and vice versa?
———————————————-
That was the case before every financial company felt insane amounts of leverage were necessary. In the 80s leverage was accomplished through short term corporate IOUs. Today, so much leverage was obtained from creative products that emerged out of the massive amounts of mortgage debt created by low interest rates. Now when you invest in any fund (hedge, money market, ETF, Ultra) that uses derivatives to obtain greater leverage, you are tied to RE. Hence the cause of this market crash/potential recession/depression.
I should see my first $5,000 from my Ultra Short RE ETF today. Three days and a +10% gain. Not to bad. The funny thing is that I am getting leverage in this short RE fund through RE mortgage debt leverage. Depending on the bloodshed today (I predict it will be the worst day so far since European and Asian markets imploded overnight and as predicted the FED said they wouldn’t help), I will probably pull completely out of all of my remaining long holdings.
I smell a major recession.
But don’t worry. I won’t say I told you so.
Too late!
Welcome back vol. Where have you been?
Stu,
Many are short and have been. No need to advertise gains.
From MarketWatch:
U.S. July building permits fall 2.8% to 1.373 mln rate
U.S. July housing starts lowest since Jan. 1997
U.S. July building permits lowest since Oct. 1996
U.S. housing starts down 20.9% in past year
U.S. building permits down 22.6% in past year
U.S. July single-family housing starts fall 7.3% to 1.070mln
“The one word you can use to describe the market today is ’stabilizing,’ ” said David Fanale of Century 21 Eudan Realty in Hasbrouck Heights, Wood-Ridge and Washington Township.
John noted this little nugget.
What an imperial jacka55 realtor!
From MarketWatch:
Housing starts fall to 10-year low in July
U.S. home builders cut back again in July, starting construction on the fewest number of new homes in more than 10 years, the Commerce Department reported Thursday.
Housing starts fell 6.1% in July to a seasonally adjusted annual rate of 1.381 million, the lowest since January 1997. The decline was larger than the expected fall to 1.40 million.
Authorized building permits dropped 2.8% in July to a seasonally adjusted annual rate of 1.373 million, the lowest since October 1996 and less than the 1.40 million pace expected by economists surveyed by MarketWatch.
Housing starts are down 21% in the past year, while permits have fallen 23%.
The data show builders are still struggling to bring supply and demand back into balance.
The decline in building was more pronounced for single-family homes. Single-family starts fell 7.3% to a 1.070 million annual rate, while single-family permits fell 1.6% to 1.003 million, the lowest since June 1995.
…
Starts fell in three of four regions, with the Midwest showing a 2.6% rise reflecting robust construction of apartment buildings. Starts dropped 11% in the South, 3.7% in the West and 1.3% in the Northeast.
Housing completions fell 0.1% in July to a 1.512 million annual rate, the lowest in six years.
BC Bob Says:
August 16th, 2007 at 8:31 am
Stu, Many are short and have been. No need to advertise gains.
Bost: it’s like playing “Do Not Pass” on a cold table. Just take your money and save the first pumping for down below where your scotch is.
Chi,
LOL.
Dollar Yen @ 114 – Also Fitch may cut IndyMac ratings – Should be an interesting day.
Also, Fannie Mae says they’re expecting an increase in deliquencies and credit losses through 2k7. No surprise there.
Fed adding 5Bil in 14 day repo.
Does Ben continue to to cook with his recipe? Is it easier to discard his recipe and open the Greenspan cookbook?
grim:
do you want to post?
http://online.wsj.com/documents/sorry-all.pdf
i still cannot figure out there are two areas with 6% to 8% price increase in the midst of worst housing recession. i thought every place would be down over 7% from last year.
Bi,
Figuring out where home prices are based on homes sold is like trying to figure out how much a Toyota car costs by asking the dealer the average price of all cars sold at the end of the month. Unfortunately for houses, it’s the best we can do.
If the average price goes up, does it mean the dealer raised prices? Or, does it mean that the dealer sold fewer Corollas and more Land Cruisers?
What happened to defending 5.25%?
http://newyorkfed.org/markets/omo/dmm/fedfundsdata.cfm
By chosing not to defend 5.25, the Fed has already cut rates.
jb
The one word you can use to describe the market today is ’stabilizing,’
Sure, The housing market has been “stabilizing” for 1 1/2 years now
#19 and 33
yes, the housing market is stabilizing.
stablizing = all 4 legs of the chair being cut off simultaneously. we’ll be stable on the floor.
supply — up
demand — down
credit — failing
employment — layoffs coming to a neighborhood near you
HOw about this one – If fed cut’s rates – s it time to buy, since fed will obviosly abandon fighting inflation tune??
It may cushion the fall of the housing market, but I don’t think it would reigning the bubble. In the early 1990’s rates fell and housing prices still dropped. In Japan, rates went to zero and housing prices still dropped.
From Bloomberg:
Fed Has Already Introduced `Temporary’ Easing
The U.S. Federal Reserve has already introduced a “temporary” reduction in interest rates by driving the four-week Treasury bill below the Fed funds target, says Charles Diebel, a strategist at Nomura International in London.
“It is clear that a `temporary’ easing has been put in place by the Fed,” Diebel wrote in a research note today. “This is what has really spooked markets overnight.”
The chart of the day shows the four-week bill rate has declined to 4 percent, below the Fed target of 5.25 percent and the actual rate, which dropped to as low as 1 percent last week and rebounded to 5.25 percent yesterday from 5 percent the day before.
“If this artificial suppression of short-term rates has to be maintained, which we suspect it will, then the Fed will eventually formalize the de facto ease with a move lower in the official target,” Diebel wrote. “It is likely to be at least a 50 basis-point move if and when it comes.”
The mortgage party is over.
A cut by the Fed isn’t going to drop mortgage rates significantly. Why? Because the lenders are dying for some spread to raise margins. They aren’t going to be so quick to pass that savings on to the consumer. Given the liquidity issues in the mortgage market, it seems to me that there is a very high possibility we’re in a situation where mortgage rates will be “sticky downward”. Not to mention the risk premium that has been added to lower quality mortgages. Unless we are facing Poole’s “calamity”, the Fed would need to ease significantly to compensate for this new found risk.
jb
Since Countrywide will likely be the story of the day..
From MarketWatch:
Fitch lowers Countrywide IDR to ‘BBB+’ from ‘A’
From Reuters:
Fannie bulked up on risky loans in 2006-statement
Fannie Mae, the nation’s largest source of home loan funding, increased its share of risky subprime loans through 2006 although to a smaller degree than other institutions, the company said on Thursday.
As the share of higher risk subprime loans increased from 2003 through mid-2006 “our purchase and securitization of loans that pose a higher credit risk… also increased, although to a lesser degree than many other institutions,” the company said in a securities filing.
About 12 percent of the company’s single-family book of business was higher risk Alt-A mortgages as of the end of June, the company stated. About 2.2 percent of its book was subprime as of the end of June, the company stated.
# 48,
A cut will not help the housing market, the spread will bail out banks. Make no mistake about it, lending standards have changed dramatically. By the way, if there is a cut, I agree with the post above, #47, it will be a 50 point basis move.
JB,
I’m not sure if its hit marketwatch yet but Fannie Mae has some interesting disclosures this morning on its holdings.
“We’re in the eye of the cyclone,” said Salah Seddik, who helps oversee about $5 billion at Richelieu Finance in Paris. “There’s now the question of what will happen with economic growth. It’s too early to come back to the stock market.”
That’s a 50 basis point move.
No one wants to buy the debt. Period. Fed easing does not solve this. Watch the Fed ease and then the problem still remains. Then people will really flip out.
3 weeks ago when i predicted that fed had no choice but cutting rates. people on this blog laughed at me. now you guys said 50 bps or 100 pbs cut in horrizon…
From Fannie..
Discussion of Credit Book of Business
7) What is your credit exposure assuming a 5 percent immediate drop in home prices?
We estimate that, as of December 31, 2006, our loss sensitivity to an immediate 5 percent decline in home prices is $1.96 billion, after the effect of credit enhancement. This represents the additional expected losses, over the life of existing mortgages, which would result from the one-time home price decline relative to expectations.
Peter Lynch and Burton Malkiel(random walk down wall street) are on odd on how to invest in stock market. but they both agree on one thing: buy a POS cape before buy a POS stock. Now sky is falling and where to hide? a pos cape
No one wants to buy the debt. Period. Fed easing does not solve this. Watch the Fed ease and then the problem still remains. Then people will really flip out.
I still hold my position that a loss of confidence in the Fed to fight inflation could send the long end of the curve significantly higher. These folks shouldn’t be so quick to wish for a cut, a cut might just have the opposite effect.
Greenspan’s Conundrum Part 2.
jb
I am starting to smell blood, maybe this February I can buy a nice little hampton house for cash. Too early to buy, let the 2/28 resets do the rest of the damage. Rate cuts won’t help. Short Sales won’t, Loan Modification won’t help, zero % loans won’t help. Banks can’t and won’t modify negative equity homes. My old girlfriend was underwater in the eary 90’s on a coop with a high rate and when rates fell in 1993 the bank said ok, we will flip to a low fixed rate for 80% of current value. She had to give the bank 20% of its current value to refinance, mind you when she bought the place in 1989 she also put down 20%. I don’t see how those subprime suckers in the WSJ can come up with even enough cash to even take a 100% loan, their house is 50K underwater and closing can’t be rolled. The good news is low rates will help us finance these nice homes with 20% down and bank financing from the friendly REO departments of our local neighborhood banks.
business and consumer spending remain buoyant. if either of those shoes drop, we’re in deep doo doo.
Too early to buy, let the 2/28 resets do the rest of the damage.
The housing market will continue to be pressured by ARM resets for at least the next 12 months.
jb
56 BI:
3 weeks ago when i predicted that fed had no choice but cutting rates. people on this blog laughed at me. now you guys said 50 bps or 100 pbs cut in horrizon…
———————————————-
I’m still laughing at you. An interesting article in this weeks Barrons explained the theory that JB (59) just pointed out. It is because of this and the fact that the FED doesn’t bail out the market that I think they will not make the cut. And even if they do, I doubt it will have any affect on economic growth resulting in lost jobs and a major slowdown to the overall economy. Optimism is great, but it doesn’t move markets.
Moodys downgrades Countrywide 3 notches
Cuts ResCap to “junk”.
#60
I read the subprime sob story in the WSJ today as well. I feel sorry for the kids, but have no sympathy for the parents. They made their bet and lost.
When you sign a contract you are pledging that you read it, understand it and agree to be bound by force of law. If you do not understand or agree, do not sign. It’s very simple.
These people are not children and are playing with large sums of money. I am certain every single one of these debtors would hold their creditors to the letter of the contract if it were in their favor, but for some reason they think it should not be reciprocal. Bailing these people out does not just encourage moral hazard; it erodes the very basis for contracts in the first place. Lenders will surely charge more if they cannot be certain that their contracts will be enforced as written.
At this point the economy does not require a rate cut. I feel it will be a mistake. It will send the wrong “long term” signal to the markets. They would be bailing out lenders asleep at the wheel and idiotic investors. However, if they move, the cut will probably be aggressive. Effect on RE? Only prime buyers with a dp will benefit.
I just spoke with a Portuguese pressman here at work. He said that some of his friends bought homes in Newark with 0% down IO loans. They waited 2 years and took out $80-$100K home equity loans. With this money in hand, they then fled the country to return to Portugal.
I feel no sympathy for the banks and the mortgage lenders nor the Stearns, Lynches or Sachs of this world. They knew exactly what they were doing and will pay the price in massive layoffs. Some will probably collapse of get bought out.
What ever happened to 20% down and PMI if you didn’t have the full 20%?
Finally, the smart and conservative guy wins!!!
people said unless a calamity strikes they aren’t going to cut rates. even the term calamity is up for interpretation.
Why am I arguing with trolls? I should know better ;)
I think a continued rout on Wall Street will be the silver dagger to the heart of the tri-state area RE bubble vampire. No question in my mind if the selling keeps up, even some larger players/owners will be feeling the pressure, even if they manage to hang onto their jobs. Not to mention capital gains receipts evaporating for state and federal tax authorities.
BC Bob Says:
August 16th, 2007 at 9:27 am
At this point the economy does not require a rate cut. I feel it will be a mistake. It will send the wrong “long term” signal to the markets.
Bost: the only good thing that has happened recently is that the Fed DID NOT cut. Given all of this chaos, it is the only beacon of order. If they fold, it’s telling everyone’s “shit’s broke”, run for high ground.
I think a continued rout on Wall Street will be the silver dagger to the heart of the tri-state area RE bubble vampire.
We may get the opportunity to test the “NJ homes are expensive because of Wall Street incomes” hypothesis.
I totally agree with you CF. Plus it would probably accelerate the foreign redemptions of our treasury bills.
Glen Rock
SLD HILLMAN AVE $530,000 2/17/2006
ACT HILLMAN AVE $599,900 7/3/2006
PCH HILLMAN AVE $489,000 9/14/2006
EXT HILLMAN AVE $489,000 1/2/2007
EXT HILLMAN AVE $489,000 3/28/2007
W-U HILLMAN AVE $489,000 4/26/2007
ACT HILLMAN AVE $454,900 8/14/2007
Falling stock prices = more transaction volume
More transaction volume = higher sales commissions
Higher sales commissions = record brokerage profits
Record brokerage profits = record Wall St bonuses
Record Wall St. bonuses = salvation for the RE markets!
Better living through syllogism.
Fed won’t cut for for a while, unless things get much uglier, imho. This is their chance to get leverage out of the system. Look at the Yen, rallying big time. The free money trade is getting unwound.
Rich In NNJ, 240 paramus? any news?
sl
bi: (56) People laughed at you three weeks ago, sure.
But it had nothing to do with your [lack of] prognostication skills: You’re just funny.
>>Fed won’t cut for for a while, unless things get much uglier, imho
they’re getting uglier. this rout is way overblown IMO but fear rules the roost.
Chi [70],
I agree. They should not act unless it spills into the economy.
this rout is way overblown.
Hey, this is not a recession yet..
“this rout is way overblown IMO but fear rules the roost.”
Richard [78],
How about the move up being distorted by cheap credit,liquidity, stock buybacks,increase of money supply, carry, etc.. If fear rules now what was greed’s role on the move up?
From MarketWatch:
Freddie Mac: 1-year ARM averages 5.67% vs 5.65%
Freddie Mac: 15-year mortgage averages 6.3% vs 6.25%
Freddie Mac: 30-year mortgage averages 6.62% vs 6.59%
Loving it!!!! The stock exchanges, DTCC OCC, Schwab etc. make money on pure volume, it transaction volume which is juiced by volatlity that brings in the cash, any firm doing options also is reeling in the cash!!!! Hedge Funds and Priv Equity are getting slaughtered but not everyone!!
Falling stock prices = more transaction volume
More transaction volume = higher sales commissions
Higher sales commissions = record brokerage profits
Record brokerage profits = record Wall St bonuses
Record Wall St. bonuses = salvation for the RE markets!
John [83],
I guess you don’t work for an IB?
there you go Initial Jobless Claims (Aug 11) 322K vs 312K
BC, CF,
Assuming it will eventually spill into the economy and it slows consumer spending, which in turn hurts bussines earnings then is it best to wait until it actually happens or act now and hope for a softer landing in 12-18 months?
Your thoughts?
Moodys is just chock-full o’ good news today.
They’re warning about the possible collapse of a major hedge… No article yet, just headlines on my Kobra.
Love this Rich. (Bad pun alert) Prestigious Glen Rock, falling like … a rock!
Do you have an address on this place? Just curious cause it’s probably a place we’ve looked at a few times. Remember when i said places that were asking 600k will be 400k this winter? This one is close. Shit, we may start looking at houses at 700k … they’re going to be falling into the 400/450 range by this winter.
ACT HILLMAN AVE $599,900 7/3/2006
PCH HILLMAN AVE $489,000 9/14/2006
EXT HILLMAN AVE $489,000 1/2/2007
EXT HILLMAN AVE $489,000 3/28/2007
W-U HILLMAN AVE $489,000 4/26/2007
ACT HILLMAN AVE $454,900 8/14/2007
My elementary math tells me asking price is down 24% from 2006.
>>How about the move up being distorted by cheap credit,liquidity, stock buybacks,increase of money supply, carry, etc.. If fear rules now what was greed’s role on the move up?
i’m not arguing cause i’m saying the market reaction is overblown. where has all the liquidity gone under the mattress or has the over leveraging reduced liquidity back into the ether?
>>we may start looking at houses at 700k … they’re going to be falling into the 400/450 range by this winter.
um, you pick one house of which we have zero idea how close to reality the original asking price was and trying to paint a broad picture? silly rabbit.
From the IHT:
German bank KfW makes €2.5 billion provision for IKB losses in subprime crisis
Germany’s KfW Bankengruppe, which stepped in to rescue mortgage bank IKB Deutsche Industriebank AG from in the growing U.S. subprime mortgage crisis, said Thursday it has set aside €2.5 billion (US$3.4 billion) to help cover its exposure to possible losses.
In a filing made to the U.S. Securities and Exchange Commission on Wednesday, state-owned KfW said it had estimated that its exposure to helping IKB with its risk protection could “be up to €2.5 billion.”
KfW is IKB’s biggest shareholder, with a 37.8 percent stake. It stepped in to help IKB at the end of July, assuming obligations of €8.1 billion (US$10.9 billion).
IKB’s problems sprang from its Rhineland Funding investment vehicle’s apparent inability to cover its funding needs due to exposure to U.S. subprime real estate loans, made to borrowers with weak credit histories.
where has all the liquidity gone under the mattress or has the over leveraging reduced liquidity back into the ether?
Liquidity was predicated on perfection.
jb
Jamey Says:
August 16th, 2007 at 9:59 am
Falling stock prices = more transaction volume
More transaction volume = higher sales commissions
Higher sales commissions = record brokerage profits
Record brokerage profits = record Wall St bonuses
Record Wall St. bonuses = salvation for the RE markets!
Better living through syllogism.
J: brokerage is pennies. Haven’t you seen the breakdown of IB revenue? Bonuses at several institutions have been incinerated.
the liquidity was based on overvalued collateral and rising asset prices. it was a ponzi scheme
Bonus points to anyone that can rewrite Redemption Song by Bob Marley into a tune about Hedge Fund redemptions.
Old pirates, yes, they rob I;
Sold I to the merchant ships,
Minutes after they took I
From the bottomless pit.
But my hand was made strong
By the ‘and of the Almighty.
We forward in this generation
Triumphantly.
Won’t you help to sing
These songs of freedom? –
‘Cause all I ever have:
Redemption songs;
Redemption songs.
The first line looks just about right as is.
jb
make money Says:
August 16th, 2007 at 10:23 am
BC, CF,Assuming it will eventually spill into the economy and it slows consumer spending, which in turn hurts bussines earnings then is it best to wait until it actually happens or act now and hope for a softer landing in 12-18 months?Your thoughts?
albani: I would not answer that question in a vacuum. Look at your whole pie. Also, how much is your ante? If you are messing around with goof money, go crazy. If you are making a serious play, then take a step back.
Remember, there are millions of people thinking the same thing you are, there is no embedded advantage to anything you do. Also, some of the best companies available at attractive prices might be based in the US, but they make their honey in beehives abroad.
That said, if the dust settles this month, you can bet that there is going to be wholesale buying in September by a bunch of financial folks with killer suntans. That is for those that haven’t been laid off.
Bonus points to anyone that can rewrite Redemption Song by Bob Marley into a tune about Hedge Fund redemptions.
Not a whole minute after I write this, I Google “Hedge fund redemptions Bob Marley” only to find that Jim Cramer beat me to it.
jb
96 Grim
You’re asking for blasphemy. Leave Bob alone.
The decision by the Fed is in. Back door rate cuts.
Once again the fed sides with big business.
They would rather throw people out of their houses and let Real Estate prices crumble then let the bankers lose their jobs.
This is what you would expect from this group.
We as a public are bailing out the banks yet again.
Last week I proposed some solutions thah might actually help consumers and was laughed off the board.
Today we see the Fed is making more back room deals to keep the bankers in business and what do we as consumers get:
Lower Real Estate prices, lower stock prices, higher debt service, higher taxes, higher energy costs and higher health care costs.
We need some creative programs coming out of the federal Government to help consumers not bankers.
They need to do something to help people who are being forclosed on. Help them in some way to make payments.
Stop bailing out the banks. Let the investment bankers suffer. They are the ones we should not bailout. They are the ones who created the mess.
Actually Richard, I think you’re wrong. We probably won’t be able to find data on this anywhere, but my guess is that most people who priced their homes to sell in 2006/2007 did so by looking at comps in the area, and setting an asking price for slightly more or slightly less.
# Richard Says:
August 16th, 2007 at 10:39 am
>>we may start looking at houses at 700k … they’re going to be falling into the 400/450 range by this winter.
um, you pick one house of which we have zero idea how close to reality the original asking price was and trying to paint a broad picture? silly rabbit.
grim:
get out of my WSJ link! I want to use it.
Banks make money on consulting/underwriting fees not brokerage business.
CF,
I’ve been out since early morning. I can’t get to the wsj.com site now, doesn’t seem to be responding from here.
jb
I check with Murdoch….I’ll be back
People, who are the real loosers here…remember money cannot be created out of thin air, the saying on the street is ‘someone has to loose money for you to make money’
are you telling me that the banks and brokers didnt know 4 years ago that the folks they were issuing these loans to wouldnt be able to make their payments? did they think that the were going to have some sudden surge in income that would allow them to pay at the reset rates? lets be serious now, the banks and brokers knew the whole time, and i am surprised that they didnt cash out and declare bankruptcy and long time ago! maybe thats whats going on now….
its all a scam folks, always been a scam and always will be….who is really loosing the money now…its us, the individual investors that have pumped money into the market (stock and RE)- most of the scammers took what the could and will now cry that the market is crashing but think about it, they have made so much money with this ‘scam’ over the past few years that is downturn isnt probably going to affect them any!!!
the realtors, banks, brokers… scammed the people on the ‘great american dream’ of home ownership and got away with this scam!
nobody should bail anybody out…let this one shake itself out…the fed should keep out of it just like they werent around to regulate any of the scams going on for the past 5 years
CAIBC
btw, i (individual investor) am now watching all my investments, assets, stocks, 401K slowing devalue away!
People, who are the real loosers here…remember money cannot be created out of thin air, the saying on the street is ‘someone has to loose money for you to make money’
are you telling me that the banks and brokers didnt know 4 years ago that the folks they were issuing these loans to wouldnt be able to make their payments? did they think that the were going to have some sudden surge in income that would allow them to pay at the reset rates? lets be serious now, the banks and brokers knew the whole time, and i am surprised that they didnt cash out and declare bankruptcy and long time ago! maybe thats whats going on now….
its all a scam folks, always been a scam and always will be….who is really loosing the money now…its us, the individual investors that have pumped money into the market (stock and RE)- most of the scammers took what the could and will now cry that the market is crashing but think about it, they have made so much money with this ‘scam’ over the past few years that is downturn isnt probably going to affect them any!!!
the realtors, banks, brokers… scammed the people on the ‘great american dream’ of home ownership and got away with this scam!
nobody should bail anybody out…let this one shake itself out…the fed should keep out of it just like they werent around to regulate any of the scams going on for the past 5 years
CAIBC
btw, i (individual investor) am now watching all my investments, assets, stocks, 401K slowing devalue away!
#100
IB’s did not hold a gun to anyone’s head to get them to sign a mortgage. There was plenty of greed to go around. The only right course to let everyone who bet wrongly lose. No one is owed a $800,000 POS cape.
Old Stearns, yes, they rob I;
Give me bad financial tips,
Minutes after they took I
They decide to leverage it.
So after not to long
Paper gain percentage of ninety.
We take pricey vacation
Triumphantly.
Register I ring
These gains I need ’em? –
‘Cause bills I ever have:
(They say) redemptions wrong.
Redemptions gone.
From MarketWatch:
Moody’s says it may cut Countrywide below investment grade
Moody’s Investors Service downgraded the senior debt ratings of Countrywide Financial on Thursday and said that it may lower them again to below investment grade. Moody’s, a leading rating agency, said it downgraded Countrywide Financial’s senior debt ratings to Baa3 from A3. Baa3 is the lowest investment-grade rating. All of Countrywide’s ratings remain under review for further downgrade, Moody’s noted. “The downgrade of Countrywide’s ratings reflects significant diminution in the company’s liquidity and debt market access due to the stresses being experienced in a wide array of single-family mortgage markets — stresses that have caused Countrywide to fully draw its committed back-up bank lines,” Philip Kibel, a Moody’s analyst, said. Difficult financial markets also create potential challenges to Countrywide’s franchise and leadership in the mortgage banking business, he added.
My own instinct tell me to buy if you had the cash…..but most people do not. The creativity afforded the average consumer gave them enough rope to hang by.
#107
all of the people you mentioned (the banks, the brokers and consumers) were buyers during this boom. they were all long on housing. No one in that group was taking from anyone else– they were all making the same bet. And now they are all losing.
112…so what happened to all the commissions the banks, brokers, RE agents made? did all that disappear? homeowners made payments for the past few years right? where did all that go? basically they paid someone right?
CAIBC
Songs?
100% gains, I/O’s, 80/20, neg amort,liar loans, ninja loans, underwriting standards, lending standards, RE appraisers, goldilocks,
yield chasers, structured products, monte carlo, 2/20, credit rating agencies, carry trade, analysts, fed accepting mbs as collateral?, etc…
http://www.youtube.com/watch?v=zeo0_3gN190
Grim (48)-
Spot on. Fed easing- either via liquidity injections and/or rate cuts- will not influence mortgage markets one iota at this point.
In fact, I feel strongly that there will be, if anything, a decoupling that will see mortgage rates rise…even in the conforming classes.
skep-tic Says:
August 16th, 2007 at 10:54 am
#100
IB’s did not hold a gun to anyone’s head to get them to sign a mortgage.
I agree with you but the same goes for the IB’s Now that the IB’s deals are going south why should we let the fed bail their butts out.
Let them go to congress just like the rest of us have to do to get relief legislation passed.
If there was an earthquake or a hurricane our elected officials would at least vote to send releif aid in.
Not with this system the fed just decides to give low interest loans out to the companies they choose.
No debate, no discussion.
bi (56)-
We’re laughing at you, because it appears you seem to think this cut is a bullish indicator.
Is Bill Gross’ January prediction going to come true (FFR in the 3’s)?
Eerie.
#70
Not sure what you mean by a ‘rout on wall st’??
This is a blip to long term investors who are properly diversified…
Moody’s Warns of Potential for LTCM-Style Hedge Fund Collapse
By John Glover
Aug. 16 (Bloomberg) — Moody’s Investors Service warned t
global credit rout may cause a major hedge fund to collapse,
along similar lines to the demise of Long-Term Capital
Management LP in 1998.
Hedge funds face potential losses on collateralized debt
obligations, securities packaging other assets, Chris Mahoney,
vice chairman of Moody’s said on a conference call today.
“A possible consequence of the repricing of risk assets
would be the failure and disorderly liquidation of a hedge fun
or other institution of sufficient size as to disrupt markets,
as LTCM threatened to do in 1998,” Mahoney said.
reply to post #59 James Bednar Says:
August 16th, 2007 at 9:15 am
No one wants to buy the debt. Period. Fed easing does not solve this. Watch the Fed ease and then the problem still remains. Then people will really flip out.
I still hold my position that a loss of confidence in the Fed to fight inflation could send the long end of the curve significantly higher. These folks shouldn’t be so quick to wish for a cut, a cut might just have the opposite effect.
Greenspan’s Conundrum Part 2.
jb
To say the same in a different way –INFLATION EXPECTATIONS determine 30 years home mortgages rates as Home is non-productive asset – which america seemed to forget in the last 5 years. It does not grow, pay dividents or produce goods.
Home is: a wooden box sitting on a piece of land and slowly rotting away.
CAIBC Says:
August 16th, 2007 at 11:07 am
112…so what happened to all the commissions the banks, brokers, RE agents made? did all that disappear? homeowners made payments for the past few years right? where did all that go? basically they paid someone right?
CAIBC
Where did it all go -china crappy goods and led-poisoned toys, Was in Iraq, tainted dog and now lead containing Baby food, blowing out oif proportions residential construction – I would not be surprised if we have overabandace of homes/TH/Condos as of now, since vacant homes for sale are at all times high and that is SFH – not even looking at condos..
Economical Mania’s always lead to increased waste.
ChiFi (71)-
Agreed.
Home Seller Says:
August 16th, 2007 at 11:16 am
#70
Not sure what you mean by a ‘rout on wall st’??
This is a blip to long term investors who are properly diversified…
And more importantly – my mutual fund was up 12% in 6 month this year – even after this market drop I am still up 4.9%… Or almost 10% for a year?? Why is people panicking??
Even if it will drop another 6% – thats only what…. 2% loss YoY. For a long term investment that is nothing.
Can’t do a song. Only have time for a limerick.
There once was a man named Bernanke
He watched as investors got panicky
It’s not like he’s playing his fiddle
He’s just trying to hide in the middle
As markets drown in no liquidity
I’m not for a rate cut, but I needed a rhyme. Well, sort of a rhyme.
Was my song THAT bad?
Pangloss (100)-
You’re killing me. Assuming that you’re an adult over the age of 30, SINCE WHEN DOES THE GOVERNMENT HELP AVERAGE INDIVIDUALS?
Government is controlled by- and run for the benefit of- corporate America. Learn how to play the game and work it to your benefit, or face the doom of a lifelong rage against the machine.
126 Agree. Clot you’re suprising me lately with your postings/observations.
The thing that is bothering me is that to trade up or buy a summer home on the cheap, you have to assume it is 1991 again. Which means, you have to buy that new place with 20% down, assume you can’t sell your old place and not touch your stock so you aren’t selling at a bottom. That and you can’t get a mortgage over 417K.
Back in 1991 many one bedroom coop owners with a kid on the way had to buy a new home and rent out the coop all the while their stock investment were Kaput, they had to save the downpayment the old fashioned way month by month in the money market. No quick RE, STK gains or zero down deals or rollover cash from the prior house. So if you want to buy that 1.4 million dollar home in one year for one million and you can only get a 417k loan and maybe a 100K home equity you will need almost 500K CASH to do it. Good luck finding buyers for seven figure homes with that kind of change under the sofa.
People with most of their net worth tied up in housing should be the ones concerned in the current turmoil in the markets. They cannot de-leverage fast enough during a downturn. The fact is that most people who bought recently really stretched, so I doubt they have extra cash lying around to pay down their mortgage.
At least the folks with a margin account can sell quickly, write off the interest paid for magin as investment expenses, and take a capital loss. Or recharacterize their Roth IRAs.
Folks looking to refinance will soon get a nice slap across the face when they realize how little equity they actually have in their homes, and the exorbitant carying costs going forward.
I have seen in listing descriptions lately the phrase “low taxes” and when I look at the taxes they are over 10k a yr. that is not low!
Correct me if I am wrong, but based on what I see, the housing downturn is going to get MUCH worse before it gets better. Here’s why: we have been in a two-year period of decline, which showed no sign of improving, and now the availability of credit has very recently become severely curtailed, (and this will also hit the high end as Fannie Mae and Freddie Mac can’t buy jumbo loans). It seems that this latest market driver, severely tightened credit, is going to wreak much more havoc than the other negatives that have been pulling the market down. So to say the market is stabilizing seems very, very optimistic to me, no?
all I can say is that not too many people complained about the fees when house prices were rising.
I bet you there are millions of hosed debtors who would gladly agree to a hefty fee if some bank would allow them to roll over their IO 2/28 loan (and roll the fee in as well).
The point is that NOW all of these people (and the vast majority of them are NOT on Wall St) who for the last 5-10 yrs were jumping over one another to buy overpriced crap houses and condos based on the belief that RE never goes down and they’d all become rich simply by signing the dotted line– NOW they are mad because they have been make to realize what fools they are and so NOW they are looking for someone to blame.
Well, look in the mirror.
#119,
Feel free to treat the market action of the past month as a blip, or hiccup. I’ll call it a correction, so far, and a nasty one at that. Diversification won’t cushion losses when all asset classes are tanking. Everything is down in tandem, domestic/international, metals/commodities, large cap, small and mid cap. And the financials have been cut in half. And hey, real estate looks punk too.
One should always keep a long-term perspective, I agree, and most of this is short-term noise, probably overdone, but it’s getting louder.
#126 an # 127
You guys are right.
Why bring up the fact that .
1. The Feds just let IB banks raise rates on consmurer loans and mortgages.
2. They let the IB’s wipe out most of the mortgage competion by placing margin calls on most private mortgage companies. Forcing many of them out of business
3. Let them buy up mortgage companies so that when the dust settles they will now have a retail outlet to originate loans.
4. Just cut their cost of funds by effectively reducing the Fed funds rates and not telling the general public about it.
You guys are right. We should just be good little peasants and let these things go unnoticed and say nothing.
#134
We don’t live in the USSR. The Fed does not control the economy. Read a book.
#100 “They would rather throw people out of their houses and let Real Estate prices crumble then let the bankers lose their jobs.”
Keep in mind that most of these folks shouldn’t be in those homes in the first place. They’ll just have to go back to renting.
RE post 14:
BC, why don’t I believe that all the yen-carry trades have been unwound?
“I’m in a position of power right now,”
Back to the article;
Deal from a position of strength.
It all comes back to greed/fear. Fear of missing out on a windfall[everybody’s making $ in RE], fueled by cheap/cheaper credit and the adjoining greed to “buy” multiple properties induced the herd. My ship has come in. Load the boat, take no prisoners. BAM, the market stops on a dime and slowly starts to unravel. It then becomes self perpetuating. Now the pendulum has swung. Buyers become greedy, if I wait I can buy for less. In addition to this fear permeates throughout. Who wants to buy a depreciating asset, catch a falling knife. The herd has moved/been carried to the sidelines. That boat is coming back to shore. Where are all the passengers?
#134 MO,
You’re mostly delusional but you make a good point on IB margin calls. I think HSBC was this first to start this mess. They’re probably laughing now as they rang the register last year.
Mortgage Observer Says:
August 16th, 2007 at 11:51 am
#126 an # 127
You guys are right.
Why bring up the fact that .
You guys are right. We should just be good little peasants and let these things go unnoticed and say nothing.
MO: we are getting a view into your soul more than a commentary on the facts in the current marketplace
It all comes back to greed/fear. Fear of missing out on a windfall[everybody’s making $ in RE], fueled by cheap/cheaper credit and the adjoining greed to “buy” multiple properties induced the herd. My ship has come in. Load the boat, take no prisoners. BAM, the market stops on a dime and slowly starts to unravel. It then becomes self perpetuating. Now the pendulum has swung. Buyers become greedy, if I wait I can buy for less. In addition to this fear permeates throughout. Who wants to buy a depreciating asset, catch a falling knife. The herd has moved/been carried to the sidelines. That boat is coming back to shore. Where are all the passengers?
to add to this.
When the tide goes out we’ll see who’s swimming naked.
#134 said:
We don’t live in the USSR. The Fed does not control the economy
You are right they don’t control it.
But interst rate and regulatory policy sure does influence it.
Keeping rates low for years after 9/11 surely helped create this bubble.
Now we are paying the price in falling stock, bonds and real estate prices.
I find it hard to believe that people are supposed to just sit on their hands and not say anything about this.
I for one question anything they do and am just giving you some reasons for my concerns.
The track record for the group in charge now is not so great.
Look at where the stock market averages were on 1/20/2001 and see where they are today.
Was the perfomance outstanding?
#136 Next Year
“Keep in mind that most of these folks shouldn’t be in those homes in the first place. They’ll just have to go back to renting.”
Exactly.
#100 “They would rather throw people out of their houses and let Real Estate prices crumble then let the bankers lose their jobs.”
Not me. I’m renting while those people who greedily bid up those prices get what they deserve.
Lindsey [137],
I agree, I doubt they have “all” been unwound. That said, there is massive pain. The size of the move/time frame is incredible. Not only that, when you are leveraged 100-1, you don’t have any choice, your margin clerk takes care of your position. I imagine the sake is not going down too easily.
“Now we are paying the price in falling stock, bonds and real estate prices.”
Sorry – I don’t view falling real estate prices as being inherently worse than falling milk, bread or clothing prices.
Still Looking,
240 Paramus is still under contract…
BCBob, it’s been a fascinating 24 hours for the Yen…unbelievable. What are the chances the BOJ might ‘intervene’? :)
Re posts 4&5:
Having read the article in the Star Ledger, there seems to be an awful lot left unsaid.
The idea that the areas close to trains are “safe” is laughable if not ludicrous. The downturn in real estate is well under way, but the rest of the economy has hardly budged off its extreme highs, and that (as the recent drop in the stock market indicates) seems to be starting.
Otteau’s may be an objective observer, but I don’t think he’s considering the larger factors at play. This isn’t a real estate story anymore, it’s an economic story, and its classified as a thriller with a very scary ending.
The train may have been able to pull some areas against the tide of the real estate downturn, but the power of the flow is growing and I don’t see how that little engine is going to keep all those places safe from being dragged down like everywhere else.
#142
Not everyone is “paying the price.” Some of us saw this coming.
This could be bad:
• The cash positions in mutual funds stand at 3.8%, slightly below the 3.9% low established in 1972.
• Margin debt as a percentage of the S&P market cap has climbed to 2.4%, an all-time high. The previous peak? Early 2000, at the height of the Internet bubble.
http://bigpicture.typepad.com/comments/2007/08/the-negativity-.html
dream,
Massive. In % terms almost double the move of the Dow.
It would not surprise me. That said, intervention is a band aid. It only works when the fundamentals and technicals align. The Japanese day traders, not sleeping too well now, are getting a rude lesson. What’s old becomes new again.
Skeptic [149],
hear,hear.
Skeptic (149) and BC Bob (152)
Hear, hear, hear.
CF (94): Thanks for the stockbrokerin’ lesson, Captain Obvious ;)
(You DO know what syllogism is, right? Sure, mine’s not set up A=B; B=C; A/=C, but it’s the same idea…)
Mine was a response to all the posters hereabouts who posited that Wall St. bonuses were and are the salvation of the shore RE markets…
(Unless, CF, the “J” you were responding to was John [in #84)]
>>One should always keep a long-term perspective, I agree, and most of this is short-term noise, probably overdone, but it’s getting louder.
well said twice shy. you typically provide a balanced viewpoint.
the diamonds and the qqq’s are starting to look attractive for a long term play.
Yen @ 112 – wow…. Countrywide now down 25%, DJUSHB below 400…
IGM reporting First Magnus funding is out of the mortgage business. This has been one hell of a day so far.
In case you are wondering who’s getting massacred today. barclay’s should change it’s name to bagholders.
http://moneycentral.msn.com/ownership?Symbol=CFC
>>Today we see the Fed is making more back room deals to keep the bankers in business and what do we as consumers get:
the fed’s primary concern is the health of the banking system. everything else is a distant second.
at a time like this i can’t help but think about President Bush and his brilliant plan for people to be able to invest their social security monies in the stock market.
What does this mean for NFI?
http://biz.yahoo.com/prnews/070816/aqth053.html?.v=23
More news, National City halts its home eq. originations, folds some of the division into the mortgage company, fires eveyone else.
Glad I pulled out of the stock market when I did.
BSC, great action today, at least up until now. WB, China buying?
thatBIGwindow Says:(post #21)
August 16th, 2007 at 8:08 am
“…I was in Newark yesterday, it amazes me all of the new construction townhomes that were put up 10 yrs ago now have broken out windows and grafitti.
Anyone ever take notice of the abandoned factories on 21? NJ’s manufacturing past…”
_____________________________________________
Commanderbob sez: Yes, I had noticed that too Mr.’BIGwindow’–
First,In the 1960’s: “Very good and concerned-for-others people” said that the so-called ‘poor’ shouldn’t be living in sub-standard row houses or 4/5 story Very old walk-up buildings; (You know the ones—Eh, Like the ‘very old’ buildings that were RECLAIMED during the past 20-30 years in Hoboken)
Then,some of these ‘sub-standard’ buildings were demolished, The areas were bulldozed Flat and then Very large concrete/brick high rise buildings were constructed in their place.”community” centers built. Playgrounds created, etc..Everything,when finished would be just ‘Peachy-Keen’ !!
Next:– Then about 30/35 years later these SELF-DESTROYED (built-to-last 125 years) high-rises were themselves torn down because NEW GENERATION even-greater-concern-for-the-‘poor’-GOOD-people said that this “packed-in-a-box” atmosphere BREEDS crime and lawlessness—Want proof of this ? HAH—-Just look at the playground: Broken see-saws (no wood-just pipe) no swings (just pipe).No benches (Broken concrete remnants-no wood) and LOOK—No grass or trees (just broken glass bits,dusty wind-blown dirt and twisted little tree stumps)-And there !—LOOK AGAIN!-Drug pushers hanging around by the bulding’s entrance !!–What the ‘poor’ need are individual attached town homes where they can have pride of ownership,have greater control of their kids and crime will diminish or hopefully go-away !
Well, These nice homes were constructed and ‘BIGwindow’ has described the result of that latest BOONDOGGLE and waste of the Taxpayer/U.S.Citizen’s Money
The deeper you go into Newark,It always reminds me of the night scenes where Kurt Russell (Snake) and the taxi driver have to ‘deal’ with the street people in the movie: ESCAPE FROM NEW YORK (1981)—–When this country finally goes into recession,I think that the side streets off route 21 will be greatly reminiscent of that movie—-I personally would not really ‘mind’ passing through there if that other actress in the movie- Adrienne Barbeau (Maggie)would hang around with ME for a few days..WOW !.(Sorry–Just dreaming….)
[The scary “people” living underground in the movie however are another thing —Especially when ‘SNAKE’ (Russell)’loses’ a perfectly-good new girlfriend to those filthy TROLLS –what a waste !!]
Commanderbob
Bost: re market…in a word…”f—“
Human nature makes me sick. It was clear years ago that there is only one way for all this housing boom to end yet everyone kept feeding it and making it bigger. Housing boom should have subsided end 2003. Blame Greenspan first, but quickly point to Wall Street. They’ll eagerly sacrifice the future to get their record bonuses. Now it’s time to pay up. How much will their bonus be this year?
I just bought a secondary home and am closing end of month. Got over $40k off on new construction listed over $200k. It is that bad that builders are willing to concede 20% off original price. Yet sellers in NJ think reducing their overpriced 900k house by $10k entitles them to a bidding war.
#162 Richard
had the same thought
Question: it seems too obvious to think that NOBODY will be able to afford a 900k house because .01 % of the population has 500k cash sitting around.
There have to be other creative ways for people to purchase expensive houses … right?
You mean without having 500K or borrowing it?
#171
you don’t need $500k in cash. Just $180k in cash and $250k+ in income. These people exist, but not enough to absorb all of the 900k houses.
“I read the subprime sob story in the WSJ today as well. I feel sorry for the kids, but have no sympathy for the parents. They made their bet and lost.
When you sign a contract you are pledging that you read it, understand it and agree to be bound by force of law. If you do not understand or agree, do not sign. It’s very simple.
These people are not children and are playing with large sums of money. I am certain every single one of these debtors would hold their creditors to the letter of the contract if it were in their favor, but for some reason they think it should not be reciprocal. Bailing these people out does not just encourage moral hazard; it erodes the very basis for contracts in the first place. Lenders will surely charge more if they cannot be certain that their contracts will be enforced as written.”
What a great post by skeptic. I’ve felt this way for years now.
this correction is much needed….it will keep the rich from getting richer and the poor from getting poorer…besides, where would this country be without the middle class fueling all this! for the past few years, the middle class thought they were a little richer than they actually were (McMansions, BMWs…)now comes reality..
we are just the middle class and we need to come back to senses..why? there is another scam around the corner that needs us!
CAIBC….
on a seperate note…has anyone noticed any prices declines at all in the BC area?
“Human nature makes me sick. It was clear years ago that there is only one way for all this housing boom to end yet everyone kept feeding it and making it bigger. Housing boom should have subsided end 2003. Blame Greenspan first, but quickly point to Wall Street. They’ll eagerly sacrifice the future to get their record bonuses. Now it’s time to pay up. How much will their bonus be this year?”
Wait a second. I work on the street, in mortgages no less. Honestly, Im tired of hearing this “Wall St greed” BS. People wanted loans, and there were people out there willing to buy the bonds that they backed. We simply provided a service matching these two groups. Works the same way with equities too. Because people wanted more house than they could afford and hedge funds got drunk w subprime revenue is not the issuers fault.
To post 174
– price declined in BC? no way, not in Westfield.
As a matter of fact – there were some price declines this spring all over in asking prices, (very small ones, but during summer asking prices did no change. Unfortunatelly I can not report any selling prices since I am looking at starter homes in Central Jersey and literally nothing sold. I have about 60 houses being monitored and may be 2 sold – UC. more listings expired.
For the first time I am noticing realtor does not relist thouse homes right away – are they getting tired of listing houses which have no chace to sell or are they waiting for 30 days to pass so they can re-list them an new listings??
#175 chong
It is to laugh.
Chong,#175
You mean to tell me that Wall street didn’t push these products. That Wall Street wasn’t in on it with the rating agencies. That wall Street didn’t tell a lie and then believed it themselves and went back and bought these products themselves.
Come on buddy…look in the mirror. I know it’s hard. The food on my table is bought with this “blood money” aka poor fool bagholders and their families.
173 –
I’m sorry. I meant to avoid the jumbo mortgage. Because if you’re getting a jumbo, the rates will be monster.
Sorry, let me rephrase: isn’t there a way around a jumbo mortgage? If you want a 900k house and you DON’T have 500k to put down … there are other ‘creative financing opps, right?’
I just wonder that if NOBODY is getting jumbo mortgages, and there aren’t ways around the jumob … uh, bagholders in the 700k and up range are really, really screwed. Far worse than I previously thought.
From MarketWatch:
First Magnus says it’s no longer funding mortgages
First Magnus says it no longer taking mortgage applications
Take a peek at the site:
http://www.firstmagnus.com/
#179
let’s put it into perspective. my impression is that jumbos are available; the rates have just gone up. They’re still not that bad (less than 8% for people with good credit and a downpayment). They problem is that the prices of houses are too high– everyone was accustomed to low rates to keep their monthly payments low. Now that money is going to have to come out of the price.
Chong (175)
“Here he comes, he’s all dressed in black
P.R. shoes and and big straw hat”
The financial guru Lou Reed
“Waiting for The Man”
http://www.youtube.com/watch?v=1UpFGoJHwLI
Chong–
Couldn’t agree more. Everyone likes to blame Wall St. But last time I checked, only adults can take out a mortgage and we live in a free country.
RE – skep-tic Says:
August 16th, 2007 at 1:29 pm
#171 you don’t need $500k in cash. Just $180k in cash and $250k+ in income. These people exist, but not enough to absorb all of the 900k houses.
No matter what your income, if the mortgage is above 417K the whole thing is a Jumbo at 8%. Jumbos were 5.25 not long ago. On a 30 year million dollar jumbo that is the difference between $5,250 a month and $8,000 a month.
Rents have not risen much at all in the last two years. It becomes much cheaper to rent, so why stick your neck out. When rates are high for instance you see summer houses sales fall. Much cheaper to just rent for 40K for an extended summer than pay with taxes and insurance and upkeep $120K a year for a house that you can have for 40K each year.
Back in 2004 when you could lock in a 30 year at 5.25% and prices rose 50K every year renting looked stupid. Now buying looks stupid.
“You mean to tell me that Wall street didn’t push these products. That Wall Street wasn’t in on it with the rating agencies. That wall Street didn’t tell a lie and then believed it themselves and went back and bought these products themselves.”
No, we didnt “push” these products, we simply bought and securitized them if there was a market for them. In general, we have no interest in “pushing” any product over any other. And since we are not originators, the point is actually moot.
Maybe you should learn about what you’re talking about from a source other than the 11 o’clock news.
Real Estate Seen by
Check out the link and select next
http://www.cnbc.com/id/20298696/site/14081545/
chicagofinance Says:
August 16th, 2007 at 1:06 pm
Bost: re market…in a word…”f—”
Bost: re market…in a word…boing
“there were people out there willing to buy the bonds that they backed.”
[175],
Backed? Charmin has better backing.
Backed by a wing and a prayer. The greatest scam ws has perpetuated on the worldwide investing community. PT Barnum is rolling in his grave. When free $ is available all the pigs get dirty, ratings agencies, ws pushers, yield chasers, greedy buyers.
#185 Chong:
It could be worse. My source is the 10:00 news with Kaity Tong. Of course I could work from home and get my news from the morning daily shows. That would be really scary.
>>Not everyone is “paying the price.” Some of us saw this coming.
everyone suffers to some degree whether directly or indirectly when the whole ship takes a hit. maybe those new jobs employer X was going to create and you’d be interested in aren’t happening. or maybe your current job will be affected by offshoring/downsizing. maybe consumers buy less product from your company who is part of the supply chain somewhere and that crimps your next raise/bonus. nope this isn’t good for anyone.
Schwab’s Web site is down – “temporarily unavailable”.
Overload?
Chong Says:
August 16th, 2007 at 1:33 pm
Honestly, Im tired of hearing this “Wall St greed” BS.
Chong: If you are tired of hearing “Wall Street greed” that is fine, as long as you are merely tired of hearing it and not contesting its existence.
If you bristle at the constant whining of everyone not on the street, then I posit that you are not high enough on the food chain to have made enough money in the last 4 years.
Jealously is being spouted by those who don’t fully understand the opportunities available to people with the right skill set. The me use an analogy for the flip side……how does a professional athlete look when people complain about salaries and he says “…well don’t come to sporting events then…”
“Backed? Charmin has better backing.
Backed by a wing and a prayer. The greatest scam ws has perpetuated on the worldwide investing community. PT Barnum is rolling in his grave. When free $ is available all the pigs get dirty, ratings agencies, ws pushers, yield chasers, greedy buyers.”
For four year the investors made hundreds of millions on these bonds. If the credit ultimately wasnt good, then the buyer should read the offering better because its ALL in there. Caveat emptor.
Chi [187],
BSC?
#175; #183
I couldn’t agree less. “Wall Street” didn’t get rich in this business – it only temporarily appeared so. Now the piper needs to be paid because “Wall Street” screwed up (except for a handful of individuals who got in and got out at the right time) by trading in mortgage-backed securities with utterly inadequate risk premiums because they got fooled into thinking there was a “new paradigm”. I’m completely in cash, so as far as I’m concerned it’s funny. Now “Wall Street” is losing a mint, funds and companies are going belly up, “Wall Street” is begging the government to socialize their losses for them, and your greatest concern is that some folks have a negative perception of “Wall Street” as a result?!?
Pardon me while I quietly chuckle into my coffee.
Stu Says:
August 16th, 2007 at 1:57 pm
#185 Chong:
My source is the 10:00 news with Kaity Tong
Stu: I remember Kaity Tong when I was a kid maybe 25-30 years ago (at that time a more cute than hot version of Liz Cho). How is it possible that she looks EXACTLY the same. I mean even Ernie Anastos looks like a botoxed rubber blow-up doll with a jet black brillo pad on top. How does she do it? Dorian Gray?
“Chong: If you are tired of hearing “Wall Street greed” that is fine, as long as you are merely tired of hearing it and not contesting its existence.”
No more than the “greed” of a guy who makes $30,000 a year and thinks he should drive a BWM and live in an $800,000 house.
If you bristle at the constant whining of everyone not on the street, then I posit that you are not high enough on the food chain to have made enough money in the last 4 years.
When is enough enough? Im a greedy Wall Streeter afterall……..
Chong Says:
August 16th, 2007 at 2:10 pm
No more than the “greed” of a guy who makes $30,000 a year and thinks he should drive a BWM and live in an $800,000 house.
Dr. Park: that is not greed – it is patent idiocy
#193
The buyers seem to be going down with the sellers, no?
“For four year the investors made hundreds of millions on these bonds. If the credit ultimately wasnt good, then the buyer should read the offering better because its ALL in there. Caveat emptor.”
Perhaps caveat lector in these circumstances.
I agree that all the greedy folks buying houses with ridiculous mortgages, the greedy folks originating ridiculous mortgages, and all the greedy funds investing in securities backed by ridiculous mortgages are unsympathetic characters who should have “caveated”, but how that translates into sympathy for “Wall Street” is beyond me.
“I’m completely in cash, so as far as I’m concerned it’s funny.”
Of course you are. And of course, you were %100 long in REITs from 2001-2005, and just bailed out at the right moment.
Im laughing so hard now my Dom is coming out of my nose…..
Dr. Park: when ever you go to a closing dinner or work event, and watch the SMDs after they’ve had a few drinks……let that discourse sear an imprint on your memory…..
“the buyer should read the offering better because its ALL in there.”
[193],
Fitch, S&P, Moody’s ratings?
Chong,
If I was you I’d be mad too cause deep down inside you know that there is a good chance you’d be on the unemployment line come October.
MM
#190
“everyone suffers to some degree whether directly or indirectly when the whole ship takes a hit. ”
Define the “whole ship”. Those who are in cash and renting are ready to make a mint.
Regarding Wall Street: pay for performance with one year expiring call options (i.e. bonus) and you see the result
If you want to blame Wall Street, you start with the Board of Directors and the comp committee
make money Says:
August 16th, 2007 at 2:17 pm
Chong, If I was you I’d be mad too cause deep down inside you know that there is a good chance you’d be on the unemployment line come October.MM
albani: you assume we have a MBS/CDO guy whose at his desk effectively sitting on the beach…..after labor day…….poof
By the way, anybody in mbs probably should be spending their time on monster or hot jobs.
“the buyer should read the offering better because its ALL in there.”
[193],
Fitch, S&P, Moody’s ratings?”
I dont know how else to put this, but people who make statements like this clearly know nothing about the securitization process. The agencies make rating determinations by running the data (strats of which that are CONTAINED IN THE OFFERING) through their own proprietary models. If you have an issue with the agencies, criticize their models, not the data that is feeding it, which for the most part is available to everyone.
Kaity is 58 and still quite the looker ;)
I bet her plastic surgeon gets about 10% of her salary.
Pet Peeves about the broadcast:
1. The weatherman says bone-dry about 10 times a forecast. He also gives the forecast about 10 times in the hour.
2. That female sportscaster sprinkles her baseball report with silly Spanish sayings. I wonder if they put her up to it or if she does it for street credibility. I hope it does not spread to Kaity. “Yesterday, another 3 young men were shot in Newark. Kunichiwa!”
#200 Chong
It’s very difficult for you to conceive that someone else might be savvier and better positioned than you, isn’t it? If, for example, you’d been on this blog a little longer (as in, for a couple of years), you’d know that there are plenty of people who sniffed this out long in advance while you were busy digging your hole deeper and deeper.
You forgot the First Rule of Holes.
word to the wise….have your MBA applications finished by the middle of Ocotber…..
I dont know how else to put this, but people who make statements like this clearly know nothing about the securitization process. The agencies make rating determinations by running the data (strats of which that are CONTAINED IN THE OFFERING) through their own proprietary models. If you have an issue with the agencies, criticize their models, not the data that is feeding it, which for the most part is available to everyone.
This statement shows me that you’re a rookie, and know nothing on how the Sreet operates.
#205
Exactly right, chifi. Small performance horizons lead to big bubbles. Frankly, the same dynamic is at work in IB.
1. The weatherman says bone-dry about 10 times a forecast. He also gives the forecast about 10 times in the hour.
yeah and then a tornado hits.
“Chong, If I was you I’d be mad too cause deep down inside you know that there is a good chance you’d be on the unemployment line come October.MM
albani: you assume we have a MBS/CDO guy whose at his desk effectively sitting on the beach…..after labor day…….poof”
I just figured this out. I thought you guys would like the input of another housing bear who happened to work on the street. Now I find what this is really made up of is a bunch of guys pissed because they either missed out on the RE boom or because they dont draw a Wall St bonus.
At least Im secure enough to not to have to put my MBA school in my moniker for Gods sake.
As my parting shot for the day, even if I get a pink slip this year (which I wont as a run a department – I make those decisions), sleep well knowing that I have made enough in the last eleven years to never have to work another day in my life. Oh – and BTW, Im 39……
Later.
“This statement shows me that you’re a rookie, and know nothing on how the Sreet operates.”
Or to spell it for that matter…..
albani: you assume we have a MBS/CDO guy whose at his desk effectively sitting on the beach…..after labor day…….poof
I was being generous with the Oct predictions.
Ps.
One of my tennants said he’s closing next month. I haven’t lost any due to home purchase in a while.
Kaity Tong is 58? sick!
“either missed out on the RE boom or because they dont draw a Wall St bonus.”
Chong,
Guess you haven’t been on this site for long?
I just figured this out. I thought you guys would like the input of another housing bear who happened to work on the street.
Since you do work on the street (sorry, peeked at your IP), give us the real rundown. What does the secondary market really look like right now. What’s going on with new deals being floated? Is the media accurately reporting what is going on in the mortgage market?
Or, to sum it up. Are the players who are crying foul doing it because the market has gone to pot, or because they are looking to point fingers and assign blame for their own mistakes?
jb
#208 Chong says:
The agencies make rating determinations by running the data (strats of which that are CONTAINED IN THE OFFERING) through their own proprietary models. If you have an issue with the agencies, criticize their models, not the data that is feeding it, which for the most part is available to everyone.
——————————————–
Moody’s Corp. shares fell 6.5 percent today, while those of McGraw-Hill Cos., the parent of S&P, declined 4 percent. The New York companies face scrutiny after failing to cut their ratings on bonds backed by subprime mortgages until July, when some of the securities had already lost more than 50 cents on the dollar.
“We have to ask ourselves the exact role rating agencies should play in mapping risks,” Sarkozy said in a two-page letter dated yesterday and released today. “Their role, which allies the creation of these products and the risk assessment, should be submitted to a careful examination.”
U.S. Senate Banking Committee Chairman Christopher Dodd this month said regulators may need to ensure the rating services aren’t biased in their assessments because of fees they earn.
——————————————–
Hmmm. Anyone who receives a fee to rate a product will have an inherent bias to rate the product positively. If not, then they would soon be on the same unemployment line as the Street worker.
“I make those decisions”
Cute. So many think that right up until the moment they’re fired.
Since we’re on the topic.. From CNN/Money.
Wall Street: Jobs at risk
Job cuts have begun at Bear Stearns and that could mark the start of a broader wave of layoffs across Wall Street as firms survey the damage caused by the recent downturn in financial markets.
Some 100 employees at Bear’s subprime unit, Encore Credit, were laid off on Wednesday, according to a person close to the matter.
The pink slips come a little more than a month after two of the firm’s hedge funds blew up, ultimately costing Bear Stearns co-president Warren Spector his job.
The meltdown in financial markets is likely to lead to more job cuts on Wall Street, headhunters say.
“Certainly some departments are going to be hurt,” said Danny Sarch, president of Leitner Sarch Consultants, a New York firm which specializes in the financial services industry.
Chong:
As long as you are here, there are some seasoned professionals who need a job. BI for example. He still thinks the commodity market works just like it did for Valentine in Trading Places. “Should I smash another vase Mr. Duke?”
Guess you haven’t been on this site for long?
Actually – Ive been a lurker here for some time. I’ve really enjoyed this site, and most of its posters (Booyah Bob and ChiFinance believe it or not have been favorites until today.) Actually, I have been here long enough to remember when the format changed over.
“I have made enough in the last eleven years to never have to work another day in my life.”
Well I guess this will teach you not to go slumming.
Well welcome aboard Chong. The varying perspectives are what makes this blog click.
Hey JB, why not make your own Blog VIX. Can you compare the number of lurkers who post to the VIX? I bet the two lines would be in sync ;)
From HousingWire:
Fitch: $12.1B of U.S. Second-Lien RMBS on Rating Watch Negative
Fitch lowered an unprecedented boom today on second-lien RMBS, putting every single second-lien transaction rated by the agency since 2005 under negative ratings watch. So many classes were put on watch, in fact, that it took two press releases to list everything
So as 3pm approaches, do you see the markets tanking as usual? Isn’t tomorrow an options expiration day? I don’t play them so I’m not sure.
From Fitch (registration required):
Fitch Places $12.1B of U.S. Second-Lien RMBS on Rating Watch Negative (1 of 2)
Fitch Ratings-New York-16 August 2007: Fitch Ratings has placed all classes of 58 U.S. RMBS subprime transactions backed by pools of closed-end second-liens (CES) on Rating Watch Negative. This action includes all classes from these transactions previously placed on Rating Watch Negative. The 58 transactions have an aggregate outstanding balance of approximately $12.1 billion. 35 of the transactions were originated in 2005, 22 were originated in 2006, and one this year. These transactions comprise the entirety of Fitch’s rated portfolio of CES RMBS from those vintages.
Although the performance of individual transactions varies, the CES sector as a whole has significantly underperformed from original expectations. Ongoing pressure from the combination of a declining housing market, weak loan underwriting standards and interest rate resets on the associated adjustable-rate first liens, has led to high delinquencies, rising losses and a rapid deterioration of credit enhancement for these securities.
Fitch is adapting its surveillance criteria for recent vintage subprime to the CES sector. The criteria is described in Fitch’s Aug. 8, 2007 research report ‘Downgrade Criteria for Recent Vintage U.S. Subprime RMBS’, available on the Fitch Ratings web site at ‘www.fitchratings.com’. Fitch will resolve the Negative Rating Watch through the application of updated criteria for expected loss and loss coverage.
Stu – you’re good people.
Chong et al – Thanks for giving me something to read while I laze my day away not working.
I wish i could go back in the NJ RE REport time machine and find out who was the first to predict a recession. It’s TOTALLY coming.
Time to focus at work and back off posting on this blog so often!
Wow So Fitch is playing honest after the Moody’s debacle. There go the financials again ;)
Thanks njpatient.
I’m just some poor sap who was lucky enough to have parents who believed in saving and investing. I owe everything to them.
Well I am happy to say I’ve taken out about 50% of my $ out of the market by Monday before last so I missed most of this shellacking. BTW Schwab is still down.
I can access their home page. Is it after the login?
“Since you do work on the street (sorry, peeked at your IP), give us the real rundown. What does the secondary market really look like right now. What’s going on with new deals being floated? Is the media accurately reporting what is going on in the mortgage market?
Or, to sum it up. Are the players who are crying foul doing it because the market has gone to pot, or because they are looking to point fingers and assign blame for their own mistakes?”
Jim – to answer some of your questions the best I legally can. (Also – please keep my firm underwraps as there could be legal issues.)
My feeling right now is the mortgage market as we know it does not exist. The only product that is moving is GSEs and high FICO money down jumbos. Credit spreads continue to widen and I dont think anyone really knows where equilibrium is right now. As far as new deals – from what I just said, any deal that doesnt contain the above types of collateral is trading to a severe discount. (You can forget anything with 2nds.)
As far as the media – they are clueless in how the process works so they are trying to assign blame (like most politicians who were also asleep at the switch.)
For you last question, both the market has gone to pot, and everyone is looking for someone to blame. As is typical in our society, the blame typically lies with the richest participant. (Eg – the tobacco settlement against the cigarette companies.) If you want my honest opinion, no one and everyone is to blame. People wanted loans for houses they should buy, they failed to read the documentes; buyers bought bonds they shouldnt have bought, they failed to interpret the documents. The government lowered rates and looked the other way (froth??), and yes, the street and the agencies facilitated this. All were involved, and blame is shared amongst all. It just bristles me a bit when people jump on the main stream media bandwagon of blaming the people who made the most money without really understanding how the entire process worked.
https://njrereport.com/index.php/2006/07/25/recession-in-07
Gotta say I’ve had no problem accessing Schwab nor with logging in to my accounts. I think you may be having an issue on your end?
Yes the login says system temporarily unavailable.
! This system is temporarily unavailable. Please try again later. For urgent trade-related matters, please call Schwab at 1-800-435-4000. (9033)
This is what happens when you offshore stress testing.
“Actually, I have been here long enough to remember when the format changed over.”
Chong,
If that’s the case you wouldn’t make asinine statements like this;
“Now I find what this is really made up of is a bunch of guys pissed because they either missed out on the RE boom or because they dont draw a Wall St bonus.”
“As far as the media – they are clueless in how the process works so they are trying to assign blame (like most politicians who were also asleep at the switch.)”
“… everyone is to blame. People wanted loans for houses they should buy, they failed to read the documentes; buyers bought bonds they shouldnt have bought, they failed to interpret the documents. The government lowered rates and looked the other way (froth??), and yes, the street and the agencies facilitated this. All were involved, and blame is shared amongst all.”
Thanks for the news, Chong. The above I agree with. I had the impression in previous exchange that you were trying to exempt the street, which is what I was disagreeing with.
I am annoyed by the seemingly daily front page article about some “poor” family with a $90k income that bought a $700K house because they were “conned,” and don’t we all feel sorry for them. (No.)
Depending on your angle the RE boom is still booming…
UltraShort Real Estate ProShares – SRS
3 mo Return (Mkt) = 43.11%
WickedOrange… Has been my savior. All hail SRS!
Thanks for the news, Chong. The above I agree with. I had the impression in previous exchange that you were trying to exempt the street, which is what I was disagreeing with.
Media deserve their share of blame as well.. HGTV, etc..
jb
“Thanks for the news, Chong. The above I agree with. I had the impression in previous exchange that you were trying to exempt the street, which is what I was disagreeing with.”
I see. If I came off a little rough before (to anyone), I apologize, but I did feel that some here were trying to place all the blame on the street, which I dont agree with.
From Bloomberg:
ABN, Canada Pensions, Rescue Commercial Paper Funds
ABN Amro Holding NV, Deutsche Bank AG and eight other banks and money managers agreed to convert asset- backed commercial paper in Canada into longer-term notes to ease a credit crunch in the C$40 billion ($37 billion) market.
The group of lenders and investors, which also includes the Caisse de Depot et Placement du Quebec and Merrill Lynch & Co., signed an agreement in Montreal today, according to a statement.
The accord may lift a money-market freeze in Canada sparked by the meltdown in the U.S. subprime mortgage market. Commercial paper trusts in Canada have been unable to sell debt coming due this week, and banks such as Deutsche and Barclays Plc have declined to provide emergency funding.
“This is a bad precedent, it’s a form of bailout,” said Hans Black, chairman and chief investment officer at Interinvest Consulting Corp. in Montreal, which manages about $2.8 billion and doesn’t own commercial paper. “This is going to calm the markets down, but only temporarily.”
The banks hung the ratings agencies out to dry. If anyone says anything else they either are too lazy to understand the relationships and dynamics OR they have an agenda to disperse blame.
In terms of the bankers….give me a break. I am not even in the business and I could tell clearly what was happening. To feign innocence or to use the “full disclosure” argument strains credulity.
Bankers live a life of compromise. It’s not a big deal, they just shouldn’t get defensive about it.
Stop the blame game: everyone hase to be blamed:
Buyers – for buying without thinking about it or even worse – commiting crime by lying on their mortgage documents.
Apprsaisors – for making appraisals to fit loan officer requests.
Mortgage brockers – do not even start me on them – I think they are the ones who benefited the most, and most lying and encoraging of document falsification came from tehm.
Lenders – for not checking and not caring – everybody who lives in htis vountry knows what was going on. nobody lives in a bubble. But in lack of personal responsibility – thats what pissing me off.
nobody responsible for anything.
If something I’d say wall-street Finance Firms are the least guilty – thay are providing services – kind of like realtors – yes their models might have been not accurate (outright wrong) but they did not lie on those mortgage applications papers or changed their cliends IRS tax return forms.
If someone will come to me and says – hey do you want 100K for getting me a drink – I will get him a drink. It does not matter for me that two years later this person will go bankrupt. I did not lie – i just provided services.
In reality I’ say we only have ourselves to blame. In my personal close friends/co-workers and realtives circle I have 5 people who bought in late 2005-early 2006, and when I’d tell them that it is horrible time to buy I was laughed at and my wife’s family thought that I am stupid for renewing the lease and not buying.
I am pretty sure at the family gathering they were saying that education is not everything….
Also people who bought – live in bigger cities all over the country – starting with SEATTLE and ending with San-Francisco and NJ and NYC.
They all bough at the absolutely highest they can afford (that’s being very crappy starter homes they hope to sell in 4-5 years and buy bigger ones with all that equity which comes from appreciation), all with very little down and IO/ARMS.
When I would ask them – so what are you going to do IF home prices will drop by the time when you need to refinance – I was looked at as looser lunatic, who has no clue.
Schwab is back
By the way did you see this one:
http://www.msnbc.msn.com/id/20240769/
I think it is the third owner/CEO/Manager of Chinese company who kills himself inrecent month – and thats the ones which are publicized.
there was food person and I believe drug company as well. I wonder if they are really suicides at all. Or thats the way Chinese stockholders (generals, army and goverment) express their unsatisfaction with performance of the company??
Al – great post at #253. You’ve really nailed just how I feel about this mess.
In the end, if there’s a market, Wall Street will exploit it. That’s what they do best. I place most the blame on the people who bought the products from Wall St. They’re the ones who said I’ll give you $100 for that bag of sh*t. I don’t care what’s in it, I just want it. They did so without doing the necessary due diligence on their own to see what they were really buying. Anyone with any risk management experience could tell you that things didn’t smell right.
Whoever heard of an AAA rating on a portion of a pool of subprime mortgages before?
If the buyers weren’t buying them, Wall St wouldn’t be brokering them. If Wall St wasn’t brokering them, the banks wouldn’t be offering them either.
This whole thing is clear as sunshine today. The secondary market disappeared overnight and so did the reckless lending practices.
What are people’s opinions of the CFA designation?
It stands for Chartered Financial Analyst.
Blame? It’s one big circle;
-Greenspan
-BOJ
-Central Bankers [money supply]
-Bubble mania
-Delusional Buyers
-Yield chasing investors
-RE Appraisers
-Comatose Lenders
-Credit rating agencies
-Too much liquidity chasing too few opportunities
-Etc,etc…
No different than tulip bulbs, Fla RE 1925, dot com. A classic bubble of epic proportions. Sorry, biggest blame of all, those that sign on the dotted line. There comes a time when everyone has to be responsible for their own actions.
re star ledger article -softer landing
I don’t know where this slanted info is coming from (Realtors I assume) but I have been watching the Montclair-West Orange market for a couple of years and know for a fact that things are not moving. Also, you coulnd’t find anything but a shack under 400K and now there are quite a few under 400K and some decent places.
It’s hard not to get really pissed off reading bs like that!
That article is aimed to coddle new buyers. Hopefully some people have found this place and can get a glimpse of truth about the markets which screams:
BUYER BEWARE!
Chong
If you want my honest opinion, no one and everyone is to blame. People wanted loans for houses they should buy, they failed to read the documentes; buyers bought bonds they shouldnt have bought, they failed to interpret the documents. The government lowered rates and looked the other way (froth??), and yes, the street and the agencies facilitated this. All were involved, and blame is shared amongst all.
Agreed. Now let’s see if the govt bails out none, some or all. I’m hoping for none since I’m not in the group above and if free lunch is being handed out, I’d like some.
Maybe I’ll go buy an overpriced POS Cape in Westfield while wearing my $300 jeans and sunglasses and then cry foul once a bailout comes…nah, I’d rather just wait and buy at pre-bubble prices when the dust settles.
#249 JB
“Media deserve their share of blame as well.. HGTV, etc..”
Agreed – was why I excerpted Chong’s quote on the media and added my anecdote about the annoying media articles.
I get a kick out of HGTV, but for the naive it’s nothing more than another late-night Ponzi scheme commercial.
wow today’s stock market really looks like Rollercoaster…
http://moneycentral.msn.com/investor/charts/chartdl.aspx?IntraDay=1&Symbol=%24INDU
who needs Six Flags.
#263- DJI now UP on the day.
DJI intraday chart is almost a perfect W.
CFC is a V.
So, with all this blame to go around, I am assuming plaintiff’s lawyers won’t be suffering much. Someone has to benefit from the mess I suppose.
I wonder, however, what will happen to the big firms who are still increasing salaries and what not – their summer associate class numbers are back up to the dot com days…the year after the bust, they cut those numbers drastically and a lot my friends lost jobs. I guess they’ll see money from defending some lawsuits, but my guess is we’re also about to enter a legal cycle downturn.
Please, no one diss HGTV. How dare you?
My wife started watching it recently for some entertainment while baby is taking her afternoon nap. In 1 month, HGTV made her realize what a bunch of dodos in la-la land most of the people in their programmes are. So I profusely thank HGTV for making wifey realize in 1 month flat that RE is kaput for a long time. She appreciates renting even more these days, and the fact that she doesn’t have to go to work just to afford a ridiculous mortgage.
The lending mess happened because Americans want to spend more money than they have. I’ve said it here repeatedly, but this has been building up for decades in every kind of consumer credit imagineable.
Mortgage lenders (like credit card companies) understand that default levels aren’t severe enough to render deadbeat debtors unprofitable as a whole. Yes, they supply the money knowing some will default, but nobody is forcing anybody to spend. These are individual choices made by free thinking adults who CHOOSE to spend more than they can reasonably afford.
To me, lenders are no different than a car company that sells cars knowing that a certain percentage of its buyers are awful drivers who will get into accidents. Or beer companies who sell beer knowing that a certain percentage are alcoholics. Or McDonalds, which knows that a certain percentage are obese or have heart problems.
The point is that, short of their negligence or fraud, it is not the responsibility of any of these vendors to make sure that you personally can handle their product. Unfortunately, America has a large number of lazy, greedy, entitlement-minded slobs who don’t want to be told what to do and what to buy whatever they want indescriminately, but want to blame someone else when the bill comes and they can’t afford it.
There is the source of your problem.
When you put nothing down you don’t but a house the bank buys a house!!!! That idiot couple in the WSJ today with a 700 car payment and 70 dance lessons and dinner out two to three times a week are the poster childs for idiots everywhere. They should be kicked to the street, it is a shame we can’t stop them from reproducing.
So what housing related stuff should I buy tommorrow?
bergen (264)-
These are days we’ll be telling our grandkids about.
Fortunes are going to be MADE in the next few months, too.
Rich (146) Thanks… (betting it ain’t selling…)
sl
Damn, I’m opening the bar early. Thanks for wading in to the real action here on the blog, Chong. Nice to hear from someone with your perspective. We do mix it up occasionally, and for those of us who aren’t 100% cash with our mattresses stuffed, we might be a tad irritable.
The semi-pros out there like ChiFi and BC Bob can be irascible even when they’re making tons of money on the short side.
Make Money hasn’t been making money for awhile by his own admission, and would probably change his handle to “Not Making Money Right Now” if the blog didn’t frown on ID changes.
Me, I better open the Maker’s and calculate the butcher’s bill.
later all
Ha! The new investment. Lawsuit futures. Always goes up.
John (267)-
By my reckoning, that may be the first call for eugenics I’ve seen on this board.
…thank you!!! to all* who scared the crap outta me and got me to liquidate in jun/july
*you know who you are…
sl
too bad RE doesnt work like stocks….sell high, buy low – as many times as we want in a short period of time! just as long as we are willing to pay some broker to conduct the trade for us…
wait…that was probably what was happening in RE from 02 to 06! except no one will buy now when the price is too high…ok so its confirmed – RE doesnt work like the stock market!
also, question…historically, didnt the stock market go up when RE went down? investors move from stocks to RE and vice versa right? what happened here?
was this really the perfect storm?
Nice little rally at the end there. To the average joe on the street, they saw that stocks ended basically flat today! hahaha
“When you put nothing down you don’t but a house the bank buys a house!!!! ”
#267
One better – 0% down and with an IO is rent…..with risk!!!
From Marketwatch:
Shares of online financial services firm E-Trade Financial slumped 22% Thursday afternoon as investors grew increasingly wary of the company’s mortgage holdings and there was pressure on the stock from heavy negative sentiment in the options market.
Earlier this week, Citigroup analysts said, “We view the lack of any new meaningful disclosures around the composition and quality of the $28 billion mortgage portfolio as concerning.” The analysts estimated that net unrealized losses grew to an all-time high of $335 million at E-Trade.
It added that it would be difficult for E-Trade to refinance the portfolio without taking a meaningful earnings charge.
“Damn, I’m opening the bar early. Thanks for wading in to the real action here on the blog, Chong. Nice to hear from someone with your perspective. We do mix it up occasionally, and for those of us who aren’t 100% cash with our mattresses stuffed, we might be a tad irritable.”
twice – thats just it. Eventhough Im in the mtg industry, Ive been a housing bear since 2003. While many of my Wall St bretheren have bought houses and spent lavishly, Ive rented a one bedroom and saved roughly 70% of my take home for the last five years. In that vein, I feel a certain kinship to many here. When will I buy a house in NJ? My stock answer is when I can make a seller cry. My feeling is housing prices will revert back to their 2000 levels, plus the yearly increase in incomes. (Ie – revert to the mean.) Wheres that from where we are? Id say 30% in some areas. We’ll see….
“Al Says:
August 16th, 2007 at 3:27 pm
Stop the blame game: everyone has to be blamed.”
Not me!
Kind of reminds me of Monty Pythons Life of Brian. Brian tries to stop the multitude from following him claiming “You are all individuals!”
Small voice from the back cries “I’m not”.
Recession prediction:
https://njrereport.com/index.php/2006/05/24/new-home-sales-down-57-inventory-up-27
Chong [279],
I agree, 2001 prices with avg inflation gains included.
280:
“We are all individuals.”
283 – Even better. What an awesome movie.
Why, exactly, can’t we hang people here?
Pentagon Paid $998,798 to Ship Two 19-Cent Washers
A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to an Army base in Texas, U.S. officials said.
The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida, Pentagon records show.
The owners of C&D Distributors in Lexington, South Carolina — twin sisters — exploited a flaw in an automated Defense Department purchasing system: bills for shipping to combat areas or U.S. bases that were labeled “priority” were usually paid automatically, said Cynthia Stroot, a Pentagon investigator.
…
Dawn Dearden, a spokeswoman for the logistics agency, said finance and procurement officials immediately examined all billing records. Stroot said the review showed that fraudulent billing is “not a widespread problem.”
“C&D was a rogue contractor,” Stroot said. While other questionable billing has been uncovered, nothing came close to C&D’s, she said. The next-highest billing for questionable costs totaled $2 million, she said.
Stroot said the Pentagon hopes to recoup most of the $20.5 million by auctioning homes, beach property, jewelry and “high- end automobiles” that the sisters spent the money on.
“They took a lot of vacations,” she said.
“Anonymous Says:
July 28th, 2006 at 10:45 am
A little education to the Grubbers.
You think if interest rates go down you will be bailed out think again.
From 1990-1993 rates went from 9% to 6% and real estate TANKED!
A consumer led recession is here. Just the johnny come lately media is late to catch on.
Hehehehehe
Bababababa
Housing BUST!
Bob”
285 –
It’s scary to think how much money could be saved by the government with some solid accounting and stringent controls. The numbers are so big that they bandy about millions like I lose pennies.
“When will I buy a house in NJ? My stock answer is when I can make a seller cry.”
Sing it!!!!!!
#287 the numbers are so big that they bandy about millions like THEY lose assault rifles.
ETF’s came roaring back end of the day. thank god since i have a few. this carnage is overblown.
From MarketWatch:
Banks’ poorly timed loans to Countrywide
Call it unfortunate timing for bankers.
A group of 40 of the world’s largest banks lent Countrywide Financial Corp. $11.5 billion this week under credit agreements that they committed to as far back as 2006.
The loans may help relieve a credit market squeeze on the nation’s largest provider of home mortgages. But they come at a tough time for the banks involved.
Countrywide didn’t disclose which banks lent the money and a spokeswoman didn’t immediately respond to a request for a list of lenders.
…
Because these were so-called committed credit facilities, the banks couldn’t back out of the loans, as long as Countrywide complied with all the conditions of the agreements, Christopher Wolfe, an analyst at Fitch Ratings, said in an interview on Thursday.
…
“Most of the banks already have enough issues and concerns with mortgages,” Wolfe said. “I don’t think that they would be looking to increase their mortgage exposures at this point.”
woo hoo!
Larry King Live at 9:00 p.m. ET
on Thursday, August 16, 2007
CNN Tonight:
Mortgage worries had the stock
market in free-fall – is your money safe?
Financial experts Jean Chatzky, from ‘Oprah’s
Friends,’ and Robert Kiyosaki, friend and co-author
with Donald Trump, answer all your questions!
Tonight only on Larry King Live!
This is from an article at Bankrate.com today:
“The market is tightening up, and at the same time, borrowers are much more cognizant that these teaser-rate mortgages are not a free lunch,” says Lawrence Yun, senior economist with the National Association of Realtors.
But Yun disputes any suggestion that buyers are making larger down payments. Recent data suggests that while median home prices have dropped roughly 1 percent in the past year, today’s borrowers are bringing slightly less cash to the closing table, he says.
Last year, a home buyer typically put almost 24 percent down, says Yun, citing data from the Federal Housing Finance Board. This year, the average down payment is closer to 20 percent. “People are taking out a little larger loan,” Yun says.
At the same time, “there is a downward trend in adjustable-rate mortgages,” says Yun. “So in a sense, borrowers are being more cautious of these types of mortgages.”
With several lender bankruptcies coupled with tighter lending standards in the subprime market, “even if people wanted to take riskier subprime loans, they would have difficulty,” he says. “Funding is just not there.”
As a result, many low- to moderate-income households “will be moving into FHA government-backed mortgage products, which had traditionally been the choice of low- to moderate-income households,” he says.
Yun also predicts that buyers soon will be making larger down payments. Recently, there have been “so many disruptions in the mortgage market, I do anticipate that down payments will be increasing,” he says.
_____________
Can someone confirm if what this chameleon Yun is saying regarding 24% down payments is true? I thought the average guy put down 3%.
njpatient Says:
August 16th, 2007 at 4:46 pm
“When will I buy a house in NJ? My stock answer is when I can make a seller cry.”
Sing it!!!!!!
REVENGE FOR WANDA
60#, john, you cannot get bargain in hampton since a lot of smart people like you are lining up tons of cash for these desirable locations. only place you can find bargain is newark, where i am exploring but you need take risk beyond financial.
Cirrus Says:
August 16th, 2007 at 4:23 pm
Nice little rally at the end there. To the average joe on the street, they saw that stocks ended basically flat today! hahaha
C: the tide went out but when it came back, the water ended up in different places – check different sectors and you’ll see
John @ 267:
That is a sad state of affairs for that couple. If anybody is interested in the link:
http://online.wsj.com/article/SB118722072707499017.html?mod=hpp_us_pageone
I would think that at the end of the day wouldnt it be easier to just foreclose? My goodness they have just under 100k annual income, ~3600 monthly mortgage, college tuition, 700 car payment [plus] all other expenses Utilities, food, clothes etc., No way no how could one sleep at night.
I think i would sleep better with my credit destroyed but eating and going to that jazz club than freaking out in the house that is eating me alive.
From Schwab’s daily wrap-up:
Financials Flee the Bears’ Den
Financials issues pioneered a dramatic reversal in late-day action, overcoming concerns about a global subprime-induced slowdown to finish mixed.
Chi … but why?
Was it a flight to quality in terms of the big money center bank?
“financials” is a big category
“REVENGE FOR WANDA”
Another truly great flick!
http://www.bloomberg.com/apps/news?pid=20601103&sid=aRZscwZGX8RI&refer=us
From marketwatch:
Financials bounced back led by a nearly 13% in shares of Bear Stearns (BSC: ). The company, which heralded the recent credit market crisis when two of its hedge funds ran into trouble, has been talking with potential investors, including Chinese banks about new funding, said Richard Bove, analyst at Punk Ziegel & Co.
The firm is talking about selling as much as a 20% stake in the company, Bove said.
Also helping financials, a report by rating-agency Fitch said that U.S. brokerage firms are well funded and have sufficient capacity to absorb losses from marking their assets to market.
You guys caught it early in the day about BSC :)
Chi,
Thanks
78#, jamey,
How come i am lack of prognostication skills? 5 over 6 of my predictions(strategies) work:
a) long gold short oil;
b) long homebuilders short lenders;
c) long pph
d) 10 yr down to 4.5% by year-end (close enough now);
e) down under 13K before back to 14k+;
f) RE up 10% in certain nj towns by next spring (to be checked)
>bi: (56) People laughed at you three weeks ago, sure.
But it had nothing to do with your [lack of] prognostication skills: You’re just funny.
Jets, Giants Close $1.3 Billion in Stadium Financing
http://www.bloomberg.com/apps/news?pid=20601079&sid=aMFpxM2I7kWU&refer=home
Here’s “rally” news:
http://biz.yahoo.com/ap/070816/wall_street.html?.v=16
Thank God for the “Plung Protection Team”
er… Plunge
scribe (297)-
All the non-bank lenders are fried. CFC is hobbled to the point of extinction…or to the point where a BoA will buy them.
The mortgage market will come back, and the banks will lead the pack.
Doug Kass on Kudlow, disclosing he covered his giant short on CFC today.
That’s a bigger sign to me than a one-day pop in the banks.
Pink slips hit Wall St.; Bear Stearns pares 240
After years of record bonuses and strong hiring, it may be time for Wall Street professionals to hunker down for more trying times.
http://money.cnn.com/2007/08/16/markets/wall_street_bonuses_jobs/index.htm?postversion=2007081616
When did NAR last time addmit the thruth??
http://www.npr.org/templates/story/story.php?storyId=12779692
“His new book, The Economic Naturalist, tackles these questions — about everything from the birds and the bees, to the price of eggs…”
Comrades Rejoice!
China’s Communists Ready to Meet
Secrecy Surrounds
Gathering to Chart
Course for Nation
By JASON LEOW
August 17, 2007
BEIJING — Thousands of top Communist Party members soon will gather to lay out China’s development plans and decide the careers of many political hopefuls — among them an eventual successor to the party chief, Beijing’s most powerful figure.
This highly anticipated 17th National Congress of the Communist Party of China is scheduled to take place in September. Or possibly October. Or maybe November.
Actually, no one outside the party’s innermost circle knows for sure when it will get under way. It is an uncertainty that underscores the secrecy with which China is still run, even as its increasingly open economy is on track this year to become the world’s third largest behind those of the U.S. and Japan.
njrebear Says:
August 16th, 2007 at 6:23 pm
Pink slips hit Wall St.; Bear Stearns pares 240
After years of record bonuses and strong hiring, it may be time for Wall Street professionals to hunker down for more trying times.
njrb: not the Street..jobs in AZ & SoCal
To be clear…the 240 jobs are in a mort sub of Bear
njpatient wants to make a seller cry…..interesting. Perhaps you can show them your portfolio….wait, that would prolly make them laugh.
311 “Actually, no one outside the party’s innermost circle knows for sure when it will get under way.”
It’s November 11th.
It’s November 11th.
29#, stu,
haven’t got your update on srs. assume you flattened it out and went short in the morning.
#314
“njpatient wants to make a seller cry…..interesting. Perhaps you can show them your portfolio….wait, that would prolly make them laugh.”
(1) I was quoting Chong.
(2) What do you know about me?
From Moodys:
Moody’s downgrades 691 mortgage-backed securities
Moody’s Investors Service said on Thursday that it downgraded 691 mortgage-backed securities because of “dramatically poor overall performance.” These residential mortgage securities were originated in 2006 and backed by closed-end, second-lien home loans, Moody’s said. A closed-end second lien mortgage loan is a loan secured by a second priority mortgage lien on residential real estate, the rating agency explained. When closed simultaneously with a first-lien mortgage loan to purchase a home, these loans are often known as “piggyback loans,” Moody’s noted. The downgraded securities had an original face value of $19.4 billion, representing 76% of the dollar volume of securities rated by Moody’s in 2006 that were backed by subprime closed-end second lien loans, the agency said. Another 14 could be downgraded later, Moody’s added. “The actions reflect the extremely poor performance of closed-end second lien subprime mortgage loans securitized in 2006,” Moody’s said. “These loans are defaulting at a rate materially higher than original expectations.”
From MarketWatch:
Piggyback mortgage securities get the chop
Mortgage securities backed by so-called piggyback home loans were downgraded Thursday by a leading rating agency after what it called “dramatically poor overall performance.”
Moody’s Investors Service said it downgraded 691 residential-mortgage securities that were originated in 2006 and backed by closed-end, second-lien home loans.
A closed-end second lien mortgage is a loan secured by a second-priority mortgage lien on residential real estate, the rating agency explained. When closed simultaneously with a first-lien mortgage loan to purchase a home, they are often known as “piggyback loans,” Moody’s noted.
The downgraded securities had an original face value of $19.4 billion, representing 76% of the dollar volume of securities rated by Moody’s in 2006 that were backed by subprime closed-end second lien loans, the agency said. Another 14 could be downgraded later, Moody’s added.
“The actions reflect the extremely poor performance of closed-end second lien subprime mortgage loans securitized in 2006,” Moody’s said. “These loans are defaulting at a rate materially higher than original expectations.”
When people borrow money to buy a home, they usually need a down payment of at least 20% of the value of the property.
Without that, many home buyers had to buy private mortgage insurance. However, earlier this decade mortgage lenders began offering second or piggyback mortgages instead, helping people afford more expensive houses while avoiding private mortgage insurance.
Rating agencies and others thought that these piggyback loans wouldn’t perform much worse than first mortgages. However, losses have begun coming in much higher than expected, especially on mortgages offered in 2006.
#319,
This shows you what kings of monkeys work at Moodys. They run this fancy model of theirs and can’t even predict one year out. Imagine how wrong they are 10 year out. What a bunch of idiots.
#296,
Because of Mario and Leticia Montes and others alike I overpaid for my house. These people got what they deserved, foreclose, foreclose, foreclose!!!
njrb: not the Street..jobs in AZ & SoCal
Reuters is reporting the Bear cuts are in VA and PA.
http://www.reuters.com/article/mergersNews/idUSN1645973920070816
Bear Stearns said in a statement the two units had evaluated market conditions and staffing levels in an effort to eliminate redundancies and improve their efficiency.
“As a result we have made the decision to reduce our staffing levels and close two operation centers,” Bear said.
The centers are located in Glen Allen, Virginia and King of Prussia, Pennsylvania.
“Damn, I’m opening the bar early.”
“(2) What do you know about me?”
“Why, exactly, can’t we hang people here?”
“get out of my WSJ link”
“They should be kicked to the street, it is a shame we can’t stop them from reproducing.”
– – –
You know (munch, munch on my dinner roll), I love yous guys. But I picked a h#lluva day to tell a conservative, penna Dutch friend to check out this blog.
njpatient wants to make a seller cry…..interesting. Perhaps you can show them your portfolio….wait, that would prolly make them laugh.
Is this Necessary? No.
RE up 10% in certain nj towns by next spring (to be checked)
Saying this is like saying “i bet there are two people somwhere are totally doing it right now”
It’s too vague. What areas?
#162
Richard, unfortunately you’re not seeing the forest through the trees. Privatizing a part of your SS benefits CAN be a great idea.
AGAIN for the umpteenth time, if you are A LONG TERM INVESTOR with a diversified portfolio, today means nothing! NADA, just plain noise! The S&P is UP from 1 year ago. If anyone understands the markets, then they should know there will be wild swings UP and DOWN. If you can’t sleep at night you need to adjust your allocation, plain and simple.
Moodys, S&P & Co. can do all they want and cut ratings…the horse bolted a while back. Enron anyone? These folks were asleep at the switch again.
Too many conflicts of interest as usual on Wall St. Don’t bite the hand that feeds you, eh? Until the lawyers start licking their dirty lips and start surrounding you like vultures….then it’s time for damage control. Whatever happened to good ol’ common sense and due diligence on the part of investors?
This RE market needs to be decimated to drill some sense into all the folks ‘entitled’ to their McMansion.
“But I picked a h#lluva day to tell a conservative, penna Dutch friend to check out this blog.”
Pat,
LMAO.
While I feel bad for the family in the WSJ article, here’s one thing i ask:
how can your broker NOT tell you that you have a $12,000 prepayment fee if you refinance before the first three years? On a 2/28 loan … um, common sense says that you will have one year of ABSOLUTE CRAP payments …
I don’t care if that’s a business friend of the family … these people may want to have a lawyer looking at it.
Bottom line: they were living WAY outside their means. 90K? That’s absurd. We’re combining for about 200k and there’s no way we’d even look at a 550k house. Some of these people are nuts.
Me and my wife do 100K total right now(we’re actually just starting our careers) and sometimes i feel that 300k house is a stretch when we consider buying.
Anyone have any info on First Magnus operations in New Jersey? A quick search on the NJ DOBI site shows a number of NJ locations.
First Magnus Licensee Search
jb
#331
Welcome to the wonderful overpriced, overtaxed, world of Northern NJ.
#333
I hear ya brother, i hear ya.
Late-day reversal for the Nikkei?
jb
#334,
On a $100K income, $300K might not have been a stretch outside since you’ll are just starting your careers. Use the next few years to save up some serious down payment and you’ll be in the drivers seat. Importantly, enjoy life while you rent! You only live in your 20’s once!! You don’t want to spend your youth mowing lawns and shovelling snow.
NJ property taxes increases on average 7-11% a year is what makes the whole PITI amount a stretch for a house even 5 to 7 years out bought approx. 2.5-3x household income today. It would have been affordable outside of NJ. Couple of friends who bought in the last three of years are shocked at their escalating property tax bills But they bought with the premise that increasing house prices would negate the increasing property taxes. Hmm, aren’t just paying more just to stay in the same place??
#339
Its impossible to make an accurate assesment of Joey because there are many factors we don’t know.
Are they looking to have kids eventually? If so, you have to factor a considerable drop in income. Do they have debt? How much? How much do they pay in rent? etc..
Kids one day yes.
Other than $12,000 left to pay for wifes college no debt.
$1200 now but parents have hit finacial times so we are moving back home to help them out for the next year to year and a half. Rent will now be $700.
NJ property taxes increases on average 7-11% a year
This is what scares me the most. Do i want to pay $10,000 in property taxes after buying a $300,000 house in 5 years?
I just don’t know how the state can survive and keep people here when they are driving people out of the state every year because it’s unaffordable and taxes are too high. What happens when there is no one left here to pay these prices? I’ll either be really smart or really stupid for staying.
The other day, we decided to go to Niagara Falls for a few days. Well, I decided.
I called the hotel guy yesterday and said, “I’m calling back for the Nice Discount ’cause I’m nice.”
Canadian Guy, “Ooh, the ‘Nice Discount, eh? Ookay, I’ll do 10%.”
“Is that a really good view of the Falls? Floor to ceiling? Big window with a window seat?”
“Best.”
I said, “What if we want to stay a couple of days past our reservation?”
“Let me check that… Nooo problem!”
—-
Now, this is a two weeks away. Somebunny’s been canceling vacation plans. Or maybe nobody goes up there anymore but dorks like me?
financially it doesn’t make sense to stay in this area. There are other factors though that might keep you here (ie family)
Renting for now is a great hedge against the decline in RE and escalating property taxes. I won’t be surprised to see property taxes as % of house value sharply increase, as the state needs a certain dollar amount raised and extracted from residents, even though house prices decline.
Our decision to buy is primarily contingent on getting permanent residency in the US, which will considerably open up job opportunities elsewhere. I’ll give it another two to three years to see where NJ is affordability-wise. With a bigger down payment, I’ll analyze further if it’s worth buying in NJ or heading out to another state.
dream…haven’t you been here for like..years? Don’t you have a US citizen child?
I though if you had a US citizen child you could go work in any state?
oh, we’re definitely looking to possibly move out of the area. she has a good job where she can live just about anywhere … i’ll lose my salary but hopefully pickup a lot of freelance work.
the tradeoff is that we can get a sick house for like 400k in upstate NY, PA, NC, etc.
I’d rather stick it out, wait for prices to fall dramatically in the next 6 months-12 months and then scoop up something cheap and put down 30%.
How come Duck doesn’t have a pic of his house up over there?
If my property taxes increase by 10% every year my monthly PITI will be $165 higher in 5 years… $560 higher in 10 years.
Oops #346,
dream…haven’t you been here for like..years? Don’t you have a US citizen child?
I though if you had a US citizen child you could go work in any state?
If only immigration law were really that simple. It’s a convoluted and complicated mess with way too many gray areas. That’s one of the reasons all this talk about having cops do on-the-fly decisions of an individuals legal status makes me very nervous. I’m a US citizen myself but I’m painfully aware of the vagaries of USCIS regulations.
#346, Pat
I wish it was that easy. This August 19, it’ll be 6 years since I stepped foot on US soil, and have loved every minute of it. Our daughter was born here and is a ‘superpower’! A US citizen of Russian and Indian descent.
Wife and I have to go through the process of establishing employment-based permanent residency as opposed to family-based residency. It’s a process that long drawn out and goes through a lot of paperwork (and exorbitant legal bills) and bureaucracy – Immigration, Dept. of State, FBI, etc.
It does makes one appreciate the American Dream much more, if/when it eventually comes through.
348.
Upstate NY is a bargain. Spent several weeks in the Mohawk Valley this summer–near Utica, NY and Hamilton College–and could have lived like a king–grand, old victorians and stylish bugalows–for under 300k that would be 800-900k in Maplewood. It is always a reality check to go somewhere that is, in many ways, appealing and where guys and girls of middle class means can still shoot the moon.
Upstate NY is too damn cold.
#341
Joey, you want the honest truth? Whether you will have enough for a downpayment in a couple of years will mostly depend on you and your wife’s spending/saving habits.
If you are going to stay in the area, get rid of your debt, get on a budget and get serious about saving. Most 20 somethings in today’s world have an extremely difficult time sacrificing, however if you can do it, good luck.
#321….cry for me and post your bio…then show the world how you rulez.
I agree upstate is way too damn cold. What do you do up there if you hate shoveling snow and hate skiing? I like warm weather. Family is from the Caribbean.
I’d love to relocate to Fla … or I’d even settle for NC, but only if i were on a river/body of water. Cause NC is hardly the culture capital of the USA …
bath (357)-
Like NJ is?
Go check out Chapel Hill. Come back and tell us what a bunch of woodticks live there.
Not!
What’s so cultural about FL?
Chapel Hill RE is crazy expensive. Beautiful area, though.
#356
Not necessary. I’m not as insecure as you.
BI:
I said I wouldn’t argue with you, but I’m still up about $600 on SRS and that’s after buying some more yesterday. You can’t say the same for your gold investment. Just wait until the arms reset and CFC goes under. They borrowed the entire 11 billion available to them under an agreement signed with these banks a year ago. Ya think those banks want to invest 11 billion more on mortgage debt? I don’t listen to Kramer much, but he stated yesterday that he thinks a Wachovia or WaMu might collapse. He says we should all pray for a BAC to make it through this or else we’re all gonna get hammered. SRS is the place to be for the massive arms reset. Only Helen Keller does not see or hear this. But carry on with your silly get rich quick strategies. BTW, I am 100% honest. Perhaps the rest of this group would give you some respect if you didn’t lie so much. And one last piece of advice…rather than just blurting out stupid statements such as, “gold will rise/oil will fall or housing will go up 10% in certain parts of NJ!” It would go along way to improve your credibility if you made even the smallest argument for why you feel this way. Toodles.
Dow futures are down +100!
Looks like yesterday’s end of day rally was an excuse by many long institutional investors to get out while they still can. I heard the short covering was astronomical. I bet today sees the greatest amount of volatility than any other trading day in the last month. Day traders be wary.
Up $600? That wouldn’t even pay for a good lunch and a shoeshine.