From Bloomberg:
U.S. Existing Home Sales Fall More Than Forecast
Sales of previously owned U.S. homes fell more than forecast in September, signaling no letup in the real-estate slump that threatens to hobble economic growth.
Purchases declined 8 percent to an annual rate of 5.04 million, the fewest since record keeping began in 1999, from a 5.48 million August pace, the National Association of Realtors said in Washington. Sales were down 19 percent from September 2006 and the median home price dropped.
The collapse in subprime lending will limit access to credit and reduce sales even more in coming months, economists said. The drop in demand suggests home prices will keep falling, raising the risk consumer spending, which accounts for more than two-thirds of the economy, will slow.
“Housing still has a lot of weakness ahead of it,” Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said before the report. “Existing home sales are still not particularly low by historic standards.”
Resales were forecast to fall 4.5 percent to an annual rate of 5.25 million from a previously reported 5.5 million pace in August, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from 4.95 million to 5.8 million.
The median price fell 4.2 percent to $211,700, compared with September 2006.
From MarketWatch:
U.S. home sales fall 8% to 8-year low in September
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years, further evidence that the credit squeeze in mortgage markets is hurting home sales, the National Association of Realtors reported Wednesday. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
From CNN/Money:
Home Sales Plunge by 8 Percent
— Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years.
The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.
The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.
The 8 percent decline in sales was bigger than the 4.5 percent decline that had been expected.
From Bloomberg:
Merrill Charges Rise by $2.5 Billion, N.Y. Times Says
Merrill Lynch & Co., the U.S. securities firm that pushed into subprime lending last year, will add about $2.5 billion of writedowns to the $5 billion it disclosed earlier this month, the New York Times reported.
Merrill said Oct. 5 that it will post the first quarterly loss in six years after cutting the value of mortgages, asset- backed securities and loans for leveraged buyouts by about $5 billion. Analysts were estimating that New York-based Merrill would report a third-quarter loss of 45 cents a share later today, according to a survey by Bloomberg.
“It sends a very poor message to the marketplace that Merrill doesn’t have a good handle on their risk,” said William Fitzpatrick, a financial-services analyst at Johnson Asset Management in Racine, Wisconsin, which oversees $1.7 billion and doesn’t own Merrill shares.
Countrywide’s New Scare
‘Option ARM’ Delinquencies Bleed Into Profitable Prime Mortgages
http://online.wsj.com/article/SB119318489086669202.html
(snip)
By 2005, option ARMs accounted for $238 billion of loan volume, or about 8% of loans originated that year
(snip)
By 2005, option ARMs accounted for $238 billion of loan volume, or about 8% of loans originated that year, according to Inside Mortgage Finance, a trade publication. At Countrywide, these loans accounted for $93 billion, or 19%, of the company’s loan volume by 2005, making it the top option ARM lender that year.
These mortgages can be highly profitable. Once the short teaser-rate period ends, the interest rate typically is higher than on other types of loans for a similar borrower. Investors were willing to pay more for securities backed by option ARMs than for those backed by traditional mortgages and guaranteed by Fannie Mae and Freddie Mac.
Broker commissions on an option ARM ranged from 1.75% to 2.5% of the loan amount last year, estimates Tom LaMalfa, a managing director of Wholesale Access, a mortgage-research firm in Columbia, Md. That compares with 1.48% for standard fixed-rate mortgages and 1.88% on subprime mortgages.
(snip)
Mr. Mozilo told investors in September 2006 that he was “shocked” so many people were making the minimum payment.
(snip)
In one California branch office, employees could win prizes, such as a trip to Hawaii, for selling the most option ARMs, says Cindy Lau, who worked for the company for more than six years. Only a small portion of borrowers “understood the loan and knew what they were getting themselves into,” Ms. Lau adds. She says she was fired in August for low production.
(snip)
From the WSJ:
Merrill Loss May Be
Wider Than Projected
By RANDALL SMITH
October 24, 2007; Page A4
Merrill Lynch & Co. is expected to announce its third-quarter losses are more than $2 billion more than first projected, ratcheting up the pressure on Chief Executive Stan O’Neal to demonstrate he has a grip on the firm’s risk level.
Merrill announced on Oct. 5 that it expected to write down $5 billion for the quarter that ended in September, the biggest such loss of any Wall Street firm, based mainly on an over-exposure to risky mortgage-related securities.
But the actual write-down is expected to come in far above that initial estimate, with outsiders putting the level at $7 billion or higher. The result will be pressure on Mr. O’Neal, who ousted two top bond executives three weeks ago when the extent of the losses became apparent, to make further changes.
From MarketWatch:
Refinance applications rise 4% last week: MBA
The volume of mortgage applications filed last week rose just slightly, driven by an increase in refinance applications, the Mortgage Bankers Association said on Wednesday.
Total application volume was up a seasonally adjusted 0.03% last week, compared with the previous week. Volume was up 11.5% compared with the same week in 2006, according to the MBA’s weekly survey.
The volume of applications to refinance an existing loan increased 4.0% last week compared with the previous week. Mortgage applications to purchase a home decreased a seasonally adjusted 3.1% last week.
The four-week moving average for all loans was up 0.1%.
The share of mortgages for refinancing rose to 47.0% last week, up from 45.3% the week before. The share of adjustable-rate mortgages also rose, to 14.2% last week vs. 13.5%.
The average interest rate on the 30-year fixed-rate mortgage decreased last week to 6.21%, from 6.40% the previous week, according to the survey. The 15-year, fixed-rate mortgage averaged 5.86%, down from 6.09%. One-year adjustable-rate mortgages averaged 6.10%, down from 6.17%, according to the MBA.
Merrill Writedown – $7.9b.
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (Aug update)
http://www.ustreas.gov/tic/mfh.txt
Gold as investment (hedge against inflation, etc.)
I hesitate to buy into anything that seems near a high and gold seems to be in that kinda neighborhood.
http://www.investorsinsight.com/forecasts_va_print.aspx?EditionID=605
not selling anything here, just my 2 cents, I know a few here are bullish for gold, time will tell…
MER 67.12, +0.65, +1.0%) took a $7.9 billion write-down to the value of the subprime mortgages and collateralized debt obligations it holds, leading to a $2.3 billion loss from continuing operations during the third quarter.
The Merrill news – leaked in media reports — pulled the dollar lower vs. the risk-sensitive Japanese yen, though the greenback did advance against the euro. Shares in Merrill Lynch edged 0.4% lower in pre-open deals.
bb [8],
Yet the cheerleaders had the pom poms out in early Oct when the IB’s came out and alerted investors to a total of $20B in write offs. They gloated as the worst was over. They must be on some good drugs. Did they actually think there was a credit crisis over a mere $20B? The #’s continue to grow as the rating agencies continue to rate this crap lower. I asked a MD of a major house, recently, what were his biggest worries. He stated, “what we don’t know”.
#2- from this article:
“It now appears that many borrowers who moved into option ARMs were attracted by the low payments and may have been staving off other financial problems. More than 80% of borrowers who are current on these loans make only the minimum payment, according to UBS.”
So not only are delinquencies on the rise, 4 out 5 people that have this product are on the verge of delinquency.
#9 – He stated, “what we don’t know”.
But don’t they know what’s going on in their own house? Can’t they say, we held X% of these types of products and we’re facing $X in writedowns, if ABC bank held 2X% of these types of products, they should be facing $2X in writedowns, but they’ve only reported $1X so far, another $1X has to be coming soon?
Is this too simplistic?
Option ARM’ Delinquencies Bleed Into Profitable Prime Mortgages
The media likes to talk about the housing downturn as a “subprime” problem.
I think these option-ARMs (alt-A) are a ticking time-bomb and are even worse than subprime loans. At least with a subprime loan, at a minimum, you were paying all of the interest, even if it was based on a teaser rate. With an option ARM, you don’t even pay most of the interest (it just gets tacked onto the loan). If you could only afford the teaser, it will be impossible to do a workout.
I call these a ticking time bombs because most of the option-ARMs written during the peak (05/06) are still in their “teaser” periods and have yet to recast. Because payments are artificially low, there is no reason to default yet.
There are only 2 main reasons why one would get into an option ARM: 1) you didn’t understand what you were getting into or; 2) You expected to sell or refinance before the loan recast.
I am going to bet that most (>50%) of the Option-ARMs written in 2005 are in serious jeopardy.
This is also big trouble for the banks, because the “deferred interest” accumulated as a result of people making minimum payments is book as earnings. Most of this will never be realized.
The neg amort pushes people closer to the loan value greater than market value before prices dropped. So you may be upside down before prices even dropped a penny, throw in price drops and you’re going to be seeing lots of housese that have mortgages worth 125% or more of the market value. Why would anyone do anything but leave the keys for the bank.
CFC will go bankrupt and then others will buy their assets for pennies on the dollar.
I tend to agree. In fact, calling it a “subprime” crisis is a bit of a misnomner.
Mainly because there is no crisis in Fixed-Rate Subprime. Delinquencies in subprime fixed-rate are trending within expectations. How can this be a “Subprime Crisis” when only a subset of subprime is really in any kind of crisis.
Not to mention that it completely ignores the bulk of the riskiest loans, as you mention above.
bb [11],
There is no market for the crap. What is it worth? .50/.20/0 on the dollar? Also, as rating agencies continue to lower ratings, it changes constantly. They are trying desperately to keep it off the balance sheets, hence the new Enhanced Fund? What’s enhanced? There is only one buyer that will solve this mess, the US taxpayer. In addition to this, nobody really knows where the next shoe to drop is lurking.
Today’s solution. Record it, move it to the balance sheet and stop playing games. However, this is not WS’s game. It will come out in bits and pieces, for a long period of time.
Renting [12],
Exactly. How many prime borrowers decided to buy up and catch the wave. Maybe they could afford a 600k house. However, why not go with an option arm and buy the 1M house. Hey, if the market is up 20% next year, your profit is that much larger. In conjunction with this, how many prime borrowers sucked out equity and are now sitting with a empty condo in another part of the country. This bubble is not strictly subprime.
From MarketWatch:
National City profit falls 80%
Cleveland-based banking firm National City Corp. said Wednesday its third-quarter profit fell 80%, largely due to a big loss at its mortgage banking business.
The firm also said it is cutting 2,500 jobs.
The firm reported third-quarter net income of $106 million, or 18 cents a share, compared to $526 million, or 86 cents a share last year.
The firm reported a $152 million, or 25 cents a share loss in its mortgage-banking business.
“Higher loan loss provisions were taken on portfolio mortgage loans, reflecting recent delinquency and loss trends, and continued deterioration in the housing markets,” the firm said.
i think this option arm problem will take a long while to work out…i know folks that have 5 year and 10 year interest only and then the payments start to really kick in! they were expecting to unload the home before the options were up! well, guess what, they may not be able to do that in 5 years…10 maybe? from what i tell, this subprime, alt, option arm problems are going to take a long time (5+ years) before we can get back to fundamental lending/borrowing again!
also, i am wondering why all of a sudden, folks are ‘surprised’ that only the minimum payment could be made? did they all forget the affordability factor in all this? 2.5 to 3 times you income means that most of those who bought homes these past 5 years probably couldnt afford it…they bought at a highly speculated price – allowed the sellers to reach a little more and buy the even higher speculated 1M home and so on…
this is going to crash and crash bad…and i can bet my salary on it!
CAIBC
Merrill is “kitchen-sink-ing” this one. Yeah O’Neal et al. f’ed up, but they are upping the ante on the other guys. Remember there is a timing issue here. I said this a month ago. Merrill reports on a calendar quarter. They didn’t have June in there as the others did. July, Aug, Sep was 100% manure. Let’s see when the other guys have to report the Sep, Oct, Nov Q…..
#7 Johnny Boy
There are some good arguments that gold is not a universal hedge against inflation. Depending on the historical economic condition at any given time gold may or may not be a hedge against inflation, but gold has always been a very good hedge against a crisis, as gold always has been and always will be accepted as payment.
From the peak in 1980 the inflation rate declined but cumulative inflation climbed steadily upward. But rather than keeping up with inflation the price of Gold fell from the peak of $850 per ounce down to under $300 in 2001.
Am I the only one who watched the California fires story yesterday and wondered if a distressed homeowner or two took advantage of the situation to “take care of business”?
Why people from NYC-area are a different breed……NC can b— me….
http://www.nypost.com/seven/10242007/news/regionalnews/tiny_chop_keeper_kicks_gunmans.htm
bergen (10)-
Exactly. And here’s another thing I can confirm about these option ARMs that the media hasn’t dug up yet:
Many holders of option ARMs are flippers/investors. Starting in ’04, many lenders put multi-property owners into these products, in order to allow them to leverage as much as possible, to buy as many properties as possible. The number of borrowers who went straight from the teaser rate into negative amortization is staggering. Once the negative am adds 12-15% to the original balance, these loans have provisions barring further accrual. From that point, the borrowers payments must be of the “normal” variety.
I’ve done three deals in the last 18 months where the investor calls me 2-3 months before his negative am option comes off the table. Every sale has been a race to beat that deadline.
The puzzling thing about all this is that each of these properties ONLY generated the thinnest of positive cash flows for the investor when he made the minimum possible monthly payment.
How many thousands of these loans are still out there, waiting to detonate?
I was reading that Countrywide article on the train this morning and I was once again amazed at how reckless the lending got in 2005-06.
Close to 20% of loans were low doc option arms and almost all of these people make only the minimum payment!
Even if Countrywide was worse than most, almost 1 in 10 loans made overall during this period in the U.S. fit this description. And these were “prime” loans!
As others have said, the only reason you take an option ARM is because you are buying more house than you can reasonably afford. Period.
Does anyone know the % of the loan market Countrywide has in the NYC-area?
BC (15)-
“…It will come out in bits and pieces, for a long period of time.”
Bits and pieces.
Sausage.
Sausage in, sausage out.
On the final leg, though, it’s more of a gray, aged, loosely-formed, festering turd.
bc (16)-
Look at any subprime “heat map” for Hunterdon or Somerset Counties. They’re virtually all green.
So, why are all my clients here wading in a river of $hit?
i think this option arm problem will take a long while to work out…i know folks that have 5 year and 10 year interest only and then the payments start to really kick in!
While most of these loans have long minimum payment, they all include negative amortization ceilings. Once the ceiling is hit, they recast. The new payment becomes the payment necessary to amortize the loan over the remaining 30 years.
The $64k question is, how many will recast before 5 or 10 years?
For example, an $500k option-ARM with a 7% interest rate, 1.25% minimum rate and 10% neg. am cap would start with a payment of $1,666/month. After 3 years of minimum payments, it would trigger a recast and the new payment would more than double to $3,782.
From MarketWatch:
U.S. home sales fall 8% to 8-year low in September
Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years, further evidence that the credit squeeze in mortgage markets is hurting home sales, the National Association of Realtors reported Wednesday. Sales of existing homes and condos fell to a seasonally adjusted annual rate of 5.04 million, the lowest since 1999, when the real estate group began tracking combined single-family and condo sales. Inventories of unsold homes and condos rose to a 10.5-month supply, the largest in at least eight years. For single-family homes alone, sales fell 8.6% in September to a seasonally adjusted annual rate of 4.38 million, the lowest sales pace since January 1998.
4.5% estimated
8% actual
that’s quite a big difference
this is all the fault of the california wildfires!!!
On a seasonally adjusted basis, the largest decline in sales was seen in the Northeast.
http://www.realtor.org/Research.nsf/files/EHSreport.pdf/$FILE/EHSreport.pdf
What happened?
Wow 10.5 months of supply
grim (30)-
Here’s my guess:
-higher percentage of home sales in NE require jumbo mortgages.
-after jumbo market seized in August, loads of fall-throughs ensued.
-some of the August fall-throughs managed to close in Sept.
-Once the collapse of the jumbo market became widely understood in the public domain, many potential buyers and sellers in this category cancelled or deferred their plans to move.
“What happened?”
I guess we ran out of the welthy and intelligent people deciding to move to the area???
“Mortgage problems were peaking back in August when many of the September closings were being negotiated and that slowed sales notably in higher priced areas that rely more on jumbo loans,” said Lawrence Yun, senior economist for the Realtors.
He called the bottom (peak) of the mortgage crisis! It was back in August, mark that down.
off topic, but another piece of the puzzle that could increase housing inventory. How many older retiree’s in the lower tax bracket are waiting for Jan 1st,2008 to sell their home and avoid taxes? Think about how many people bought a house for $25K and now it’s worth $500K, if you’re married you’re not paying taxes anyway bc you’re below the $500K limit, but if you’re widowed, you only have $250K.
http://www.nysscpa.org/cpajournal/2006/1206/essentials/p40.htm
The current ordinary income tax rates for individuals are 10%, 15%, 25%, 28%, 33%, and 35%. Certain capital gains and qualified dividends (i.e., adjusted net capital gains) are taxed at 15%, or 5% for taxpayers in the 15% or 10% tax brackets. Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and extended by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), the 5% rate drops to 0% from 2008 to 2010. In 2011, these rates will sunset and revert to the pre-2001 rates of 15%, 28%, 31%, 36%, and 39.6%.
More banking fun with numbers:
http://www.minyanville.com/articles/C/index/a/14597
#22
Brookhaven – my old stomping grounds!! She’s a tough little thing huh!!
clot i would agree with you on all your points except for the last one.
reech (38)-
Where are the buyers with jumbo approvals?
Please let me know, because I can’t find any.
What’s that line from the movie “Trading Places”? Turn those machines back on!!
As opportunistic as Wall Street firms are, here is the latest hedge to reap benefit on a problem they had a hand in creating — Trading Derivates on Home Values:
“Another measure of the housing market began operating last week when trading in a new derivative known at the Residential Property Index, or RPX, got underway.
Created by Radar Logic Inc., New York, the index is based on single values representing price per square foot on actual residential real estate transactions in 25 metropolitan areas. Trading also will be available in a 25-city composite.
Dealers licensed to offer products in the RPX market include Morgan Stanley, Lehman Bros., Merrill Lynch, Deutsche Bank, Goldman Sachs and Bear Stearns.
Radar Logic, which bills itself as “the home of tradable real estate,” is a technology-driven data and analytics business that produces a daily “spot” price for residential real estate in U.S. metropolitan areas.
At nearly $23 trillion, according to the latest figures from the Federal Reserve Board, the value of U.S. housing is significantly larger than that of stocks and rivals that of fixed income. But because of its illiquid nature, methods for investing and trading in real estate essentially have been limited to buying, holding and selling individual properties.
With the new derivative, however, investors will be able to take positions on the value of the residential property market, creating liquid and efficient opportunities similar to those available for more traditional commodities, said Radar Logic’s president, Michael Feder.
“The launch of the RPX market provides both investors and participants in the real estate industry with sophisticated tools that have not been available to them before,” Feder said. “The granular applications of the RPX-based derivatives should allow substantial utility for all interested participants.”
The company produces daily prices for housing in the 25 markets by capturing actual transaction data and translating the information into the Radar Logic Daily Prices. The Daily Prices, in turn, power the RPX market, where derivatives and other financial instruments are offered and traded.
RPX allows real estate and financial professionals to manage risk, invest in real estate without owning physical assets, and obtain more accurate insight into the residential property market, the company maintains.
Tony Tufariello, global head of the securtized products group at Morgan Stanley, said the derivatives “should provide an essential and timely investment and risk management tool for our institutional and individual clients by offering them the opportunity to express a long or short view on home price changes across the U.S.”
Scott Soltas, the managing director and head of Merrill Lynch Mortgage Sales and Trading, believes that at least initially, RPX trading will be centered around price return “swaps” and simple forward contracts.
Both instruments will be quoted in terms of home price appreciation (HPA) and will vary in length from one to five years. “The variety and flexibility provided by these contracts will enable investors to quickly and easily express views on specific property markets for their desired length of time,” Soltas said.
Rich McKinney, head of Residential MBS Trading at Lehman Brothers, said investors holding securities sensitive to mortgage credit and prepayment performance as well as businesses with exposure to the housing market cycles can use these instruments to hedge their housing exposure.
“Given the current volatility in the housing market, the product launch is extremely well timed,” McKinney said.
In addition to generating daily RPX prices, Radar Logic has developed a series of analytic tools designed to help professionals in both the real estate and financial services industries utilize these derivatives.”
(41)-
The new wing of the Real Estate Casino has opened.
What gets me about this whole mortgage fiasco is the complete 2-faced behavior demonstrated by all parties involved. The lenders were handing out loans that were obviously not going to be paid back or highly likely to fail. The borrowers were taking the obsecenly large loans without actually considering how they would pay them back and then complain about not reading the fine print on the contract that said the rate jump through the roof after a grace period. The government was strongly encouraging banks to forgo lending standards and hand out loans to people who should not qualify for one/or for as large an amount as given in the first place. Now that all of the idiot borrowers are in trouble the government is telling the banks to help people out of the loan contracts that they signed.
The UK is commonly called a Nanny State. Well i think that it is time that the US be added to the list of countries that have become Nanny States.
rant off……
Countrywide stock getting pounded this morning. Down 8.5%
Skeptic,
Maybe that Countrywide listing of 195K yesterday wasnt so accidental
(44)-
My guess: Bank of America take over at $8
#30
Just a guess, but maybe sales fell harder in the NE in Sept because price cuts have been slower in the region relative to other regions where there is more competition from new homes. Buyers are looking for discounts, and as we discuss frequently on this board, are not really seeing them in a major way.
I still can’t understand how these pitiful regional numbers jive with the strong 3Q the Westchester realtors reported earlier this week.
Experts here, when and where do you see the bottom for Countrywide?
MJ #49
The bottom for CFC will occur when Tanzilo is doing the perp walk and the big boys are divying up the scraps like vultures on route 66 at high noon.
Countrywide stock getting pounded this morning. Down 8.5%
3rd Qtr. earnings coming out on Friday. Should be a treat.
From MarketWatch:
Bill tightening mortgage rules wins some support
A bill that would require licensing mortgage originators and standards for subprime mortgages won support from two federal banking regulators Wednesday.
Comptroller of the Currency John Dugan and FDIC Chairman Sheila Bair said they were supportive of the bill authored by Rep. Barney Frank, D-Mass. and others in testimony prepared for a House Financial Services Committee hearing.
However, Federal Reserve Governor Randall Kroszner warned that any new legislation should not restrict responsible lending or securitization of mortgages.
“Getting this balance right is particularly critical now, as many borrowers facing rate adjustments may need to refinance into more affordable loans,” Kroszner said in testimony prepared for delivery. Kroszner said Congress should also not approve any measure that would have a “detrimental impact on the ability of lenders to securitize loans.” \
The House Democrats’ legislation includes a measure that would let homeowners sue Wall Street firms for relief from mortgages that they could not afford.
MJ (49)-
Delisting from the NYSE by the end of 2008.
Mozilo indicted for SEC violations pertaining to the sale of his personal CFC stock. Charges will also be pending for violations of the Sarbanes-Oxley Act.
CFC files for bankruptcy, amidst revelations that they both hold and service billions of dollars in defaulted mortgages that are still reflected on their books as performing loans.
BAC vultures- for pennies on the dollar- the parts of CFC they find useful.
Tangelo Mozilo becomes Bernie Ebbers’ cellmate.
The House Democrats’ legislation includes a measure that would let homeowners sue Wall Street firms for relief from mortgages that they could not afford.
Gotta love the Dems.
You borrowed more than you could afford to replay. You don’t fulfill the agreement you made to repay the loan….and now you are going to sue the person who lent you the money?
This will have a chilling effect on lending. New risk premiums will need to be built into mortgages.
Renting (51)-
CFC should just go ahead and stamp “Exhibit A” on the cover of that Q3 report.
rent (54)-
The bus to hell has now entered the dimaond lane.
rent (54)-
The bus to hell has now entered the diamond lane.
One week old lurker here. Few questions?
– Where did you guys found the past and present house price and sales data?
– Long time renter, interested to know the opinion when is the right time to buy it :)
Clot,
Why I would love to see Tanzillo in an orange jumpsuit it’s not gonna happen.
He covered his basis and predicted the mortgage meltdown back in the beginning of the year. The fact that he sold stock under a perfectly flawed legal system just gives you reason to hate him for being a genious that he is.
My prediction to when the CFC has hit bottom is
“when Ben drops billions from his helicopters and B-52 laser guided cash missiles directed at Mozillo”
and then publicly states that there more where that came from.
What makes you think that Ben has the backbone to allow CFC to go under. They have close to 60,000 employees. They are too big to fall.
Is there a reason that Mozillo didn’t slash workforce by 50%-80% by now and he’s only cutting hundreds here and hundreds there?
(49)
It could be soon; they are due to post Q3 reports and general business updates on Friday–that should drive their stock down further. I don’t know why, but I have a feeling there was language in the BoA reserve fund that will allow for a take over at $X stock price. I’m speculating $8 and then CW will now be BoA.
Question: I have a MMA with CapitalOne. Is it safe? before you laugh, I’ve read some fearful prognistications about money market funds that are heavily invested in SIVs. I know these are funds, but I’m mostly looking to have my fears put to rest — or at least assuaged.
Chi: Care to jump in?
Just got this invite from NYU Stern…
Just got this invite from NYU…
Dear alumni and students,
I would like to extend a personal invitation to you to the NYU Stern Panel Discussion on the Credit Crunch and Subprime Crisis on November 5, 2007.
While the volatility in the financial markets may have temporarily slowed, questions about the credit crunch and the extent of the subprime crisis remain in the forefront of today’s news. We have pulled together what promises to be a very illuminating panel of distinguished Stern faculty, alumni and guests who are also noted scholars, economists, and industry leaders. They will address the impact of financial turmoil on the economy, volatility and risk premia, the credit crunch and much more.
Joining me for this panel discussion will be:
Thomas F. Cooley, Dean, NYU Stern, and Paganelli-Bull Professor of Economics
Rob Engle, Michael Armellino Professor of Finance at NYU Stern and a 2003 Nobel Laureate in Economics
Mickey Levy, Chief Economist, Bank of America Corporation
Mark Patterson, NYU Stern Executive Board member and Chairman of Matlin Patterson Global Advisers LLC
Paolo Pellegrini, Managing Director, Paulson & Co.
Matt Richardson, Charles Simon Professor of Applied Financial Economics at NYU Stern and Director of the NYU Stern Salomon Center for Research in Financial Institutions and Markets
The panel discussion will take place from 4:00 – 6:00 p.m. at the NYU Skirball Center, located at 566 LaGuardia Place at Washington Place South. If you can attend, please RSVP directly via SWAP.
I hope you can join us on Monday, November 5 for what promises to be an evening of engaging dialogue and debate, and even perhaps a forecast or two.
Best regards,
Edward Altman
Max L. Heine Professor of Finance
#17 listed National City Corp not doing so well…I was considering National City Mortgage as a possible lender (when I buy…) since they do/hold their own loans…
any opinions on their status? (all disclaimers understood)
Another goofy thing about option arms is that the banks list the accrued unpaid interest as income!
#60 – If I remember right (and I probably don’t) they had the option to purchase at $18 a share.
Aaron,
Another goofy thing about option arms is that the banks list the accrued unpaid interest as income!
What if the loan is revived, refinanced or sold. Then it’s income. The only question is when do you record it?
Is this a BULL or what. Either he’s a genious or he keeps digging a hole and decided to make it a tunnel.
Oct. 24 (Bloomberg) — Norinchukin Bank Ltd., the biggest holder of asset-backed bonds among Japanese banks, plans to invest about 3 trillion yen ($26 billion) in such securities overseas, saying prices are attractive after the U.S. housing slump eroded demand.
The bank, with 41.2 trillion yen of deposits, will increase investments in debt backed by payments from credit card and auto loans in Europe and the U.S. to about 7.5 trillion yen by March 31, said Toshiyuki Futaoka, global head of strategic asset allocation.
“The market has finally become attractive after recent price falls,” Futaoka, 49, said in an interview in Tokyo yesterday. “The level to which we can build up credit assets is key to our second-half strategy.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGtp4tS0x0gg&refer=home
In the last few weeks, some of the people that I deal with in the commercial finance units of major banks have disappeard (fired) — no big surprise, I guess.
Crazy stats, the 8% drop. However, I just checked the websites of several realtors, and still do not see a good house in a town like Short Hills or Summit for under a million. Take it for what you will.
From MarketWatch:
Centex cuts prices in response to mortgage turmoil
Executives Centex Corp., one of the nation’s largest home builders, on Wednesday said the company is lowering prices as tighter lending standards are making it tougher for buyers to obtain loans and further weakening demand for new houses.
“We in the industry experienced a complete resetting of products available to borrowers,” said Chief Executive Tim Eller during a conference call with analysts to discuss quarterly results.
He said interest rates and qualifying standards on any mortgages other than agency products have become much more difficult.
“We responded quickly by adjusting home prices in many of our neighborhoods to levels that would enable buyers to qualify for FHA mortgages,” Eller said, adding that the disruption affected nearly every region in which the builder operates.
SOmeone earlier made a good point that in NJ high end towns, most require a jumbo mtg unless you are a big hitter on Wall St. So, for a transaction to go down you need a buyer and a seller to qualify for a jumbo. Could get interesting in NJ
Sales in September “were artificially depressed” by credit problems, said Lawrence Yun, senior economist for the real estate trade group.
HA HA HA HA HA HA HA HA HA HA HA….. Mogambo/Booyah Bob style laugh.
Artificial my a$$…..
I remember (back in 2005 or so) when we absolutely had to include YOY declines to point out what wasn’t so obvious month to month, even for seasonally adjusted numbers.
Annual pace – SFH resales
5.04 million – Sep 07
6.18 million – Sep 06
7.20 million – Sep 05
18.4% YOY, 30% YO2Y.
Interesting how sales weren’t ‘artificially bolstered’ when funny money loans were available.
dream (71)-
There’s nothing artificial about waiting at a closing table for a wire transfer of mortgage money to come through…and it never does.
After a few hours, everybody gets up and goes home. That is not an optical illusion.
billz (63)-
Nat City has gone from one of the best to one of the worst mortgage outfits going.
Their previous layoffs left them severely understaffed. 2,500 more in Cleveland means disaster, as their service and delivery was already rendered paralyzed by the first layoff.
Will NJ head the way of California?
CASchwarzenegger Discipline Shattered by Subprime Slump
Oct. 24 (Bloomberg) — Four years after Arnold Schwarzenegger was elected governor of California, vowing to “tear up the state’s credit card,” the actor and former body- builder is about to charge $7 billion to taxpayers’ accounts
http://www.bloomberg.com/apps/news?pid=20601109&sid=abHD9BmVa0Q8&refer=home
Clot,
You sound like the Stephen Roach of the LOD’s.
renting (76), NJ is worse than CA. It never got out of the red during the good times.
Will NJ head the way of California?……NAH Corzine can always borrow from the unions ,or sell something ….any thoughts as to what ?
http://www.leasetrader.com/auto/lease/search/2006_BMW_530Xi_Sedan_118878.xhtml
Sellers comments:
I am owner of a mortgage broker company and business in the subprime market is terrible. I am giving up my lease to try and cut costs so that I can pull through the down market.
Anyone want a 2006 530I BMW. He’s offering a $4000 incentive to takeover his lease.
This guy is a sitting duck for a lowball offer.
Just to give an idea of how far we still need to go:
The MLS for Spring Lake lists 87 SFHs, 55 are priced at more than $1M.
In neighboring, though far less toney, Belmar there are 73 SFHs on the MLS, 26 are above $1M.
Where are the 80 people who want a million dollar shore house in those towns who can afford one, but don’t already have it?
Just as an FYI, the priciest house is Spring Lake is $12M. It has an acre of property.
BC (77)-
What can I say? I’ve gone from thinking we were just in a tough downturn (last Fall) to extreme concern (February ’07) to the realization that a worldwide house of cards is collapsing (now).
The financial sickness (both individual and institutional) that festers beneath the obvious symptoms of the housing market meltdown trumps anything I’ve ever seen. The S & L bailout in the early ’90s was a do-able thing; the numbers, while not pretty, were at least manageable. The country made it through with relatively little pain.
However, I think we all know in our guts that WE- again- are the only ones who can paper over the current mess. This time, though, the losses are going to be astronomical.
Furthermore, the sheer amount of vacant residential properties that will have to be maintained, resold, etc will be overwhelming. Entire sections of cities and communities are going to disappear…forever, as demolition will be the most practical alternative.
Furthermore, the sheer amount of vacant residential properties that will have to be maintained, resold, etc will be overwhelming.
Hey Clot,
Do you think the volume of sales will pick up during the correction? brokers tend to do well in both downward and upward markets it’s the flat ones we are seeing that hurts.
Aaron Says:
October 24th, 2007 at 1:27 pm
renting (76), NJ is worse than CA. It never got out of the red during the good times.
Aaron: I disagree. CA is a devoid of intellect. A population in aggregate committed to fair weather above all other aspects of their life. As a result, abject vacuous stupidity reigns beyond all recognition. Add the caveat that the only thing more common than stipudity, is the arrogance that no one has to compromise anything because people will always come to the “promised land” and hand over their life’s fortune……blue state in the most trite and insipid version….
I don’t understand the Spring Lake/Belmar connection, because there isn’t any.
CF
your point is that the politicians on the take in NJ are smarter than the ones in CA?
make (82)-
The volume has already picked up for agents who can handle short sale/REO/foreclosure. I’m pretty darn busy right now…and expect to get even busier as foreclosures pick up steam.
As affordability returns to the market, transaction volume will pick up, and the benefit will spread to more agents. By that time, though, I think half the current agents in NJ will be long gone from the biz.
WSJ Editorial
Mortgage Meltdown
October 24, 2007; Page A20
Home foreclosures are picking up speed, and right behind them are the politicians promising to save the guilty and punish the innocent. OK, we exaggerate, but only a little. So this would seem to be the moment to sort the good housing ideas from the bad, with the latter describing most of what is now coming from Washington.
The main problem, financial and increasingly political, is that millions of subprime mortgage loans will have their rates “reset” in the coming months. Their borrowers are able to meet their monthly payments today at the so-called “starter” loan rate, but they might fall behind once those rates reset at a higher rate. The dilemma for the big mortgage lenders is whether to restructure those loans on better terms, foreclose on them, or beg politicians to bail them out.
On this score, the most sensible proposal we’ve heard is from Sheila Bair of the Federal Deposit Insurance Corp., the federal bank regulator. Ms. Bair is proposing that the mortgage companies (Wamu, J.P. Morgan Chase, et al.) voluntarily rewrite these mortgage contracts. Specifically, she suggests converting subprime loans that are still performing into fixed-rate loans at the lower variable rate.
Yes, the banks would have to accept a lower income stream, but that’s better than taking the writeoff from a foreclosure. As many as a million borrowers nationwide might benefit from such treatment, and for hundreds of thousands it could mean keeping their home. We understand the delicacy of asking banks to rewrite their contracts, which is why Ms. Bair says this should be voluntary. But if there’s a case of enlightened business self-interest, this is probably it.
A few companies are already responding. Troubled Countrywide Financial announced this week that it will modify the terms of $16 billion in adjustable-rate mortgages through the end of next year. Countrywide has already allowed more than 30,000 customers to restructure their mortgages and will contact an additional 52,000 to offer refinancing options.
This certainly beats the Beltway alternatives, which are either punitive, or put taxpayers on the hook, or both. Among the bailout ideas is a plan that would ask lenders to take a small, 10%-15%, haircut on these subprime loans but then bring in the Federal Housing Administration to insure the rest. This idea has backers on Capitol Hill, and we’re told it even has takers at Hank Paulson’s Treasury.
But if Mr. Paulson embraces it, he’ll be putting taxpayers at risk if housing values decline further. He’ll also be sending a terrible signal to lenders, borrowers and investors — to wit, that Congress will save them from bad decisions. Treasury has spent years warning about the risk to taxpayers from expanding Freddie Mac and Fannie Mae. If it now embraces a larger role for their federal housing cousin, the FHA, Treasury’s credibility on Fan and Fred will be zero.
Meanwhile, the House Judiciary Committee will mark up a plan today to allow bankruptcy filers to treat home loans as similar to unsecured credit-card debt, making it easier for people to remain in their homes while reducing what they owe. This sounds great, except that credit-card debt carries a higher rate than debt on your home for a reason. Guess how eager lenders will be to offer low mortgage rates if they have no better chance of collecting on a mortgage than they do on a credit card?
And not to be outdone, House Financial Services Chairman Barney Frank wants to create new registration requirements on mortgage brokers, and new liability for firms that securitize the riskiest mortgages. This is a sure-fire way to make mortgage lending more expensive, especially for people who lack perfect credit or high incomes. But the trial lawyers are overjoyed.
Mr. Frank’s bailout also gives delinquent mortgage borrowers a new trick to essentially enjoy free rent for up to 30 years. If a borrower has to endure the sad experience of foreclosure, Mr. Frank wants him to enjoy the ability to recover all of the principal and interest paid over the entire history of the loan — as long as he can convince a court that he didn’t have a reasonable ability to pay at the time the loan was originated. It doesn’t take too much imagination to see how this could be abused.
All of these plans reflect the political imperative, or should we say panic, to rescue individuals from bad mortgage decisions. But you can’t bail out borrowers without also bailing out lenders and investors — and down that route lies endless taxpayer liability. Before embracing a radical restructuring of the relationships between American homeowners and mortgage companies, it’s worth reviewing the facts: Roughly 35% of homeowners have no mortgage debt remaining on their homes. Of those homeowners still paying a mortgage, 95% are paying on time. And even in the risky category of subprime adjustable-rate loans, more than 83% are still paying on time.
Crazy stats, the 8% drop…..still do not see a good house in a town like Short Hills or Summit for under a million
Which goes a long way to explaining why sales dropped by 8%. Many sellers simply don’t accept the reality of where the market is.
As Lindsey points out, where are all these $1 million plus buyers going to come from? Who can afford a million dollar home that hasn’t already bought one? It’s not like Wall Street is in a hiring mode right now or we’re creating new dot com millionaires.
When the Otteau reports were public, they showed huge overhangs of inventory in the million plus segment. That was before jumbo loans were tougher to get. Before so-called “affordability” loans (i.e. zero down stated income option ARMs etc.) were scaled-back. Before negative RE stories were plastered across USA today on a daily basis. And maybe most importantly, during a time when trade up buyers were more willing to buy a new house without having sold their own house (after all, their gem should sell in days).
Clotpoll #81,
Entire sections of cities and communities are going to disappear…forever, as demolition will be the most practical alternative.
I know you’re not prescient so obviously you don’t know, but care to give me a few good guesses of sections of cities/communities that will “disappear forever” in the state of New Jersey? Just guesses are fine, no need to justify.
Aaron Says:
October 24th, 2007 at 1:51 pm
CF your point is that the politicians on the take in NJ are smarter than the ones in CA?
A: NJ fails and we get angry at Trenton and our local crooks. CA fails and the populace takes umbrage at Sacramento for wanting change anything. Why? Lack of intellectual curiosity leads to perfunctory understanding of basic state and local budgeting. We know why were are screwed and we are slowly trying to work toward some answers. They just want to go surfing.
syncmaster Says:
October 24th, 2007 at 1:56 pm
Clotpoll #81,
Entire sections of cities and communities are going to disappear…forever, as demolition will be the most practical alternative.
I know you’re not prescient so obviously you don’t know, but care to give me a few good guesses of sections of cities/communities that will “disappear forever” in the state of New Jersey? Just guesses are fine, no need to justify.
sync: Not here, but in Youngstown OH, they are reclaiming entire sections of town and converting them back to greenfield. The local example I can think of is in Camden on the access road from the BFB to 130/38/70. It was an entire run of abandon buidlings, strip clubs and gas stations. They en masse comdemned everything except a Hess Station and now it is all parkland.
Jamey Says:
October 24th, 2007 at 11:36 am
Question: I have a MMA with CapitalOne. Is it safe? before you laugh, I’ve read some fearful prognistications about money market funds that are heavily invested in SIVs. I know these are funds, but I’m mostly looking to have my fears put to rest — or at least assuaged. Chi: Care to jump in?
Jamey: cannot answer without context – any advice is inherently worthless…however in these times your Investment Policy Statement for such funds orders priorities this way:
1. Safety
2. Liquidity
3. Yield
chicagofinance #91,
Youngstown – I’ve stopped there to get gas off Route 80. A miserable looking town from what little I saw of it, but I figured maybe it got better further from the highway.
Interesting, about Camden. I know of places local to me that are nothing but abandoned buildings. A section of South Plainfield comes to mind. And heck, how about Irvington, that whole city could be turned into parkland :)
kettle1 Says:
October 24th, 2007 at 10:41 am
The government was strongly encouraging banks to forgo lending standards and hand out loans to people who should not qualify for one/or for as large an amount as given in the first place.
rant off……
colorless liquor distilled from mash: er…that is a pretty serious charge, and it doesn’t sound right to me…..
sync (89)-
Less demolition here than in other parts of the country, but I’d start with anything in a flood zone being a good candidate for a wrecking ball.
Good for the environment, too.
I don’t understand the Spring Lake/Belmar connection, because there isn’t any.
They are next to each other? The area most people think of as “Belmar” is from about 8th through 16th Ave, the summer rental part of town.
Get north of 8th ave and through 2nd Ave it is full of huge old homes, nice, simple older homes, and the occassional brand new $1-2 million dollar home (like much of Spring Lake). These are primarily year round residents. 1st Ave is where the REALLY nice homes are in Belmar, much like some of the mansions in Spring Lake, plus they back up to the river.
Clot #95,
Speaking of taking a wrecking ball to anything in a flood zone:
Mixed-use project hoped to revitalize Bound Brook
BOUND BROOK — A proposal to build a five-story apartment building on the south side of Talmage Avenue will be heard Thursday by the Planning Board.
Livco Management, of the Somerset section of Franklin, Somerset County, is proposing a 152-unit building called Talmage Commons with 3,441 square feet of retail space on the ground floor. The flood-damaged property formerly was occupied by the Brass Rail tavern and single-family homes.
The property is in the borough’s downtown redevelopment zone, a few blocks west of the train station. The application says the project will be flood-proof.
…
The proposal follows a recent trend of developers building rental properties in downtown areas along NJ Transit’s Raritan Valley commuter rail line.
Aaron,
The point is to show how drastically markets are out of balance.
There are about 600 homes in Monmouth County currently for sale priced at or above $1M, where might the buyers for these homes be coming from?
The month’s supply calculation for $1M homes in Belmar/Spring Lake has been infinite in some months because they have had no sales.
Even at 4 sales a month, it would take 20 months to clear existing inventory, and that’s just one segment of a couple of small towns.
Reality is nowhere near affecting this market.
“As a result, abject vacuous stupidity reigns beyond all recognition.”
I don’t know CF, kinda of sounds like NJ to me.
While I tend to agree with you that many Californians have no clue or care about good government, I actually lived in So.Cal through the recall of Davis and was quite impressed by the fact that he was rightfully tossed out. Voters (both R’s and D’s) finally had seen enough. I don’t think you would ever see anything like that nowadays in NJ. In fact, it seems based on recent voting trends, the more corrupt and financially distressed NJ becomes, the more voters appear to like it, evidenced by the fact that we keep electing the same morons. How else can you explain a corpse like Lautenberg?
Asbury Park and Deal are next to each other. So what?
chifi #83,
… the arrogance that no one has to compromise anything because people will always come to the “promised land” and hand over their life’s fortune
That anything like the arrogance many on this blog demonstrate that Jersey will be ok because we’re close to Manhattan, aka the center of the known universe?
Lindsey, I just didn’t understand the juxtaposition of the numbers. You may as well included Avon and Sea Bright, it would of just helped your point.
Out of curiosity, what has happened to the mil. dollar condos in Long Branch? It had me shaking my head at the time… it is probably worse now.
California isn’t a great place for the middle manager whose top priority is living in a big house in a cookie cutter suburb.
However, California is still a great place:
1. Lots of rich and smart people want to live there. That is why it is the innovation hub of the world. Search engines, iPods, gangster rap, and subprime mortgages – all these things were invented in California.
2. California’s citizens are brave. They capped property taxes, outlawed race preferences, and threw out an underperforming governor. NJ’s citizens are cowards in comparison – we whine but then take no action.
3. It is the world’s culture hearth. Huntington Beach, Hollywood, Venice – these are truly great places.
Monmouth County Short Sale MLS ID# 20736819
I think the original asking price was $2.9M and the seller is now asking $2.495M. Tax Records show it was purchased at $2.7M. Minumim loss is 200k probably much higher given the ever worsening news.
“It is the world’s culture hearth.”
Pret
I was with you until that one. You might want to resharpen your pencil and come back. Huntington Beach is a great place for sure and a surfing mecca, but a cultural hearth? Beach Blvd looks like Route 9 with sunshine.
Spoke with a sales rep at a new Beazer development in NJ. 2 months ago they were offering 20K in incentives. She called back a week ago saying it’s now 30K in incentives and then 1/2 off all options. I said “why don’t you just lower the base price” She immediately replied without hesitation “It would devalue the community” Ok, so let your unsold lots sit.
Out of curiosity, what has happened to the mil. dollar condos in Long Branch? It had me shaking my head at the time… it is probably worse now.
They sold through the intial phase, I don’t know what they are getting when / if they original owners tried to resell them. The next phase is coming up pretty soon. Another 80 condo’s I think, 200 apartments. Their was a story about it in the Asbury Park Press within the last week or so if you want to search for it. The develpoment is called Pier Village.
Too much sunshine bleaches the brain.
OT-
Didn’t know if anyone had seen this one
“The Mom with $135,000 in Credit Card Debt Who Spends $400 a Month on Starbucks.”
http://consumerist.com/consumer/consumers-gone-wild/the-mom-with-135000-in-credit-card-debt-who-spends-400-a-month-on-starbucks-313156.php
Yeah Pret, prop 13 has done wonders for CA. If you make over 40K there you’re paying 9.3% in state income taxes. Compare to NJ where your state income taxes are 6.37% if you make less than 500K. As much as people here resent high property tax bills, it still beats paying city tax and certainly beats CA’s tax regime.
And they don’t read books in CA, do they? I guess if you look that good, you don’t need to ;)
Offtopic: my landlord is fixin to sell the townhouse I’m renting, got 60 days notice today. He wants me to buy it, but I’m not terribly keen on the idea.. Fun week :/
JBJB,
Huntington Beach is still producing, transporting, and storing oil.
The fact that HB can have the same heritage as Linden, NJ, but still host world surfing championships shows what a great place it is.
re: 92
Chi: Forgive my ignorance, or the inartful wording of my previous question. And I *do* have an investment policy statement, at least when it comes to funds that I manage as H-DPOA for my ailing, cognitively-impaired mother: I have money in an MMA *because* I value safety, res ipsa loquitur. Is that a misstaken assumption, even if CapOne’s MMA are covered by FDIC?
Okay, as a generalization, are consumer Money Market accounts with (presumably stable) financial services compaines distinct from the vicissitudes of the Money Market fund markets? So what’s the distinction between the two — is one consumer, the other institutional? Does the latter affect the former, or am I just being distracted by the fact that both products have the words Money and Market?
And California is not an intellectual wasteland. It just looks like one sometimes, because one of its chief cultural imports was Ronald Reagan and the cult that venerates him… ;)
Re: 109.
Bklyn Hawk, if I didn’t know better, that hed sounds like one of those “real men of genius” radio ads for light beer:
“So here’s to you Mom with $135,000 in Credit Card Debt Who Spends $400 a Month on Starbucks (‘ooooverpriced coffee hoooooahhhh!’)”
Starbucks tastes like *ss. How can anyone drink that crap?
Herring,
I’m not saying taxes California’s tax regime is better than NJ’s.
I’m saying that California residents don’t just complain about a tax, the actually change it. I admire that.
What I dislike about NJ is that residents here complain about property taxes, while simultaneously voting for tax increases, if they vote at all.
“Huntington Beach is still producing, transporting, and storing oil”
That’s all fine and dandy, but this does not make HB a cultural hub. Acutally, are you sure you are not thinking of San Pedro or Long Beach?
In fact, I think many even in CA would argue that HB – like most of Orange County is a wondefulplace to live – but essentially a cultural wasteland. Unless of course sitting in traffic in your 75k Range Rover with surfboard attached is your idea of culture.
#116 –
“What I dislike about NJ is that residents here complain about property taxes, while simultaneously voting for tax increases, if they vote at all.”
and they vote for those in washington who want to raise taxes on the “rich” , and then complain that nj sends more money to washington than they get back. never understood that.
re: 117 the Strand is a great place to live but you really must love sunshine, most people don’t swim in the ocean there since it is too cold year round.
The friends that I have living in that area are all fitness nuts, and if you idea of culture is running a half marathon every other weekend than more power to you.
We can argue all day about whether or not Huntington Beach is a culture hearth.
But what about NJ’s culture hearth? Has to be Lodi.
NJ citizen action is hampered by the lack of the initiative referendum.
#103 pretorius Says:
October 24th, 2007 at 2:43 pm
California isn’t a great place for the middle manager whose top priority is living in a big house in a cookie cutter suburb.
However, California is still a great place:
1. Lots of rich and smart people want to live there. That is why it is the innovation hub of the world. Search engines, iPods, gangster rap, and subprime mortgages – all these things were invented in California.
Pre,
you seem to be hung up on the “beautiful” people. While the wealthy and the intelligent are both very important segments of the population and have an effect many times greater then their actual numbers, they are grossly outnumbered by the mundane ugly fat stupid people. I am serious when i ask, do you think that the rich and smart are the most important segment of the market??
the “beautiful” people may ultimately run the show, but they have to stand on someones back… that is until bread and circus run out and then ask the french what happens….. let them eat cake
#119 My college roommate lives in the Newport Beach area and a fitness nut he isn’t. He is 31, the youngest of his group. They are all either single or recently divorced. They appear to make good money (I know my buddy does) and drive expensive cars and party HARD. They blow a TON of $ going out to drink / eat / Vegas, etc. I went to visit recently for a long weekend and when I got back on the plane home I blessed myself and couldn’t wait to get home to my wife and baby.
Our friends definitely run with different groups.
Oh, and I don’t know the area well and don’t know what “The Strand” is, we may be speaking of totally different areas.
Doyle
I know the type well. If you have a lot of cash, Newport is a good place to be. Rodman sets the pace, many there want to be just like him except they don’t have the cash or fame but they sure act like they do.
http://en.wikipedia.org/wiki/The_Strand_(bicycle_path)
Hmm that link is malformed. Here is the corrected link – The Strand
Kettle1 – “do you think that the rich and smart are the most important segment of the market??”
Yes.
In every state, a large portion of the population is mundane, ugly, fat, and stupid. The differentiating factor between states is the top 10% of their population.
That is why California and New Jersey have done relatively well during the past 50 years, while Mississippi and West Virginia haven’t.
“Fat, drunk, and stupid is no way to go through life, son” – Dean Vernon Wormer
Actually, the price is holding well in NE region. the sales drop was as expected.
Now, fed is going to cut rate again on oct 31, which will stablize the market caused by credit crunch in August.
“Regionally, existing-home sales in the South declined 6.0 percent in September to an annual pace of 2.05 million, and are 18.7 percent below a year ago. The median price in the South was $174,400, down 5.5 percent from September 2006.
In the Midwest, existing-home sales dropped 7.0 percent to an annual rate of 1.19 million in September, and are 16.2 percent below September 2006. The median price in the Midwest was $170,700, up 1.4 percent from a year ago.
Existing-home sales in the West fell 9.9 percent in September to a level of 910,000, and are 27.8 percent below a year ago. The median price in the West was $308,900, which is 8.8 percent lower than September 2006.
In the Northeast, existing home sales dropped 10.0 percent to a pace of 900,000, and are 13.5 percent lower than September 2006. The median price in the Northeast was $261,700, up 0.5 percent from a year ago. “
JBJB, it was a beautiful place and sure was fun, but no way in h*ll I could live there. Everything seemed kind of empty if that makes any sense. It was like everyone you met was overly nice to your face but was probably blasting you the second you turned away. At least in NY / NJ they’ll blast you to your face. Plus, I cannot stand talking about $ and that is all my buddy and his friends do. He knows that my wife and I won’t discuss it and I know it kills him. He is dying to know what we bring home, but my Dad always taught me that is was nobody’s business.
I’ll just keep visiting for now…
#127 Thanks Sync.
Total housing inventory inched up 0.4 percent at the end of September to 4.40 million existing homes available for sale, which represents a 10.5-month supply at the current sales pace, up from a downwardly revised 9.6-month supply in August.”
wow 10.5 months supply and growing. when will it break 12 months. this will be the cataclysmic stage. It’s amazing how some sellers have their blinders and act quite jealous b/c they cannot get what their neighbor got 2 years ago.
Many homeowners not talking smack anymore or counting the housing piggy bank anymore.
I have lived in both CA and NYC/NJ, and all things equal, CA rocks. Great weather, get in your car for 3 hours in any direction and you can be in a cool place, Hawaii a relatively short flight away, great skiing/outdoor activities, better lifestyle, etc. People there would rather be sitting on beach or windsurfing or biking than, ummm…. blogging, from my experience. Not that “cultured” there but ignorance is bliss. Just my opinion, so don’t bother trying to refute it.
But NYC/NJ is a fine place to live for the east coast.
Interesting.. In CA, The Strand is a bike path, in NY it’s a bookstore..
And it’s co-owned by the wife of Ron Wyden, one of the few US senators I have any regard for. Go figure.
bi Says:
October 24th, 2007 at 4:24 pm
Now, fed is going to cut rate again on oct 31, which will stablize the market caused by credit crunch in August.
Another classic! Keep em coming…..
does anybody have a feeling option arms will ba as bad as subprime?
I saw a chart on calculated risk and there are quite a few in comming years. considering interest rates are still low they should have only one way to go.
If it does turnout to be bad will there be a bail out??
bi #130
median price is a relative number and can often be misleading. Every indicater is heading down and you seem to suggest that the NE is holding steady. You are such a clown.
Question for realtors out there…
Once a listing is added or changed on MLS, how long does it take for the change to show up on Realtor?
Thanks in advance, Ann
Doyle Says:
October 24th, 2007 at 4:24 pm
JBJB, it was a beautiful place and sure was fun, but no way in h*ll I could live there. Everything seemed kind of empty if that makes any sense. It was like everyone you met was overly nice to your face but was probably blasting you the second you turned away. At least in NY / NJ they’ll blast you to your face.
D: We can argue about everything CA vs. NJ, but you essentially captured the essence of everything here. I am biased, because the social norm there does not work in my life. There are many similar people in NYC, but at least I share a lot of commom background and interests with them. There is also a respect based on things accomplished. As D. points out…it as simple as: who are you? how much do you make? what kind of car do you drive? were do you live? how much $ex can I get from you or because I know you……these are my contemporaries…not kids….
Long time reader of this blog who lived in both places and having family in both LA and NY.
What I enjoyed about LA is that I have option–if I want concert or musical or theater, it’s there. LACMA/Getty/Arm&Hammer museum are pretty major outfits with decent collection and good programs. There are lecture series at UCLA and USC and other establishments. So culturally, you do get less, and a different mix than what you find in NY. But it is there, and sufficient for the average Joe like myself if I want to learn about random topics. Even West LA, the supposed epicenter of that Fake, the Barnes and Nobles in Westside Pavilion is still packed on weekends with normal people browsing and reading in the Bookstore. Affacionados of various cultural pursuit can still manage to find their own community of peers, even if it is buried under the beachcombers.
The North-East is better if you are a serious connoisoir or scholar–say–17th century Italian painting or you want to look at this particular Motherwell or Rothko in MOMA. Or I’ve met people who are here simply because they can binge on the Metropolitan Opera. But since I am not, I find myself enjoy the balance of LA (B+ culture/A+ nature) better than NY (A+ culture/C nature).
By the way…..do you want a SoCal anecdote? Check out the people being interviewed about the wildfires out there…..I’m mean…these are real people……they seem to transcend mega-douchebag-dom….it’s utterly incredible that such rich vacuous bozo disgrace the earth. I do feel bad for them, but I hold insurance stocks, so their loss is mine too.
harry (138)-
Not just a clown.
An a$$clown.
Ann (139)-
Overnight, unless it’s the weekend. Then, the new posting is up on Monday.
So much for those NC-based IBanking jobs….
http://www.bloomberg.com/apps/news?pid=20601103&sid=aE_nK1v.8Bxk&refer=us
ChiFi (142)-
I lived in LA for five years. A completely pleasant and totally vacuous experience.
My next door neighbor on one side used to hit me up for vodka late at night on the weekend (this was a nice neighborhood). My neighbor on the other side broke his leg practicing bank robbery getaways on his motorcycle (no lie).
However, nothing beat putting the top down and buzzing up 101 to Santa Barbara for a little Super Rica and beach time.
despite so weak housing numbers, most home builders are moving up today. it is a good indication that the worst is behind us.
I don’t get it…all the banks screwed up in the exact same way to varying degrees…except for Goldman who supposedly pulled a Dorian Gray and Morgan Stanley just got a little nicked up……yet they are saying we made mistakes…it’s our fault…blah, blah, blah…..NO – you knew exactly what you were doing and the spigot got shut off…big deal….fire some people and reload…and someone tell Dimon, Blankfein and Mack to stop with the freakin’ smoke and mirrors and come clean……and would you fire Prince before C goes into the 30’s….
138#, the median price is significant for sept. numbers since most jumbo loans did not go through in august. even that, the median price held well.
(147)-
A clear signal to further short HBs.
Thanks, bi. You’re helping me make big $$$.
Anyone who takes the other side of the trade vs. bi stands to make some serious jack.
All disclaimers.
#149 bi
Not sure about that. I just researched a prominent town. Searched all deeds for September. Average Sales Price was $1.9M N
Same town, researched first half of October. Avg Sales price was $890k with only one house sold over $1M. Hmmmmmmmmm
Oh yeah, the one house that sold for over $1M appears to be an all cash deal – no mortgage recorded. Hmmmmmmmm again.
Let the puking begin…….
October will be a depression month for Real Estate
To #144 Much Thanks!
I just opened up my email and guess what I found? An email from a realtor, with listings that I met at an open house….. over two years ago. Despite that, the prices that the (ahem…) sellers are asking, still reek of stupidity. I’m sensing that maybe, just maybe it will be a feast in another year or so.
The name of the game is called duck and cover now….if you got assets hold em…if you got cashflow….pay your bills. Cause if you are caught with your pants down in this market….you might be completely screwed. Oh, and we are in recession people.
there seems to be lot of comparision to california today, but I think they are worse off then we. last time I checked 50 percent folks there rent, as they can’t afford house !!!
anyway, picked up economist today at station. lots of article on credit issues and subprime. its also on their cover.
Reduce price buyers will come!! No inventory!!
WOW…
The owner of the Metropolitan condo complex now under construction on Wallace Street has acquired the Broad Street home of Murphy Style Grill, redbankgreen has learned.
Onyx Equities, a real estate investment firm based in Woodbridge, completed the $3 million purchase of 26 Broad Street last month, according to Monmouth County property records. The deal was financed by a $2.25 million loan from Commerce Bank.
Wood framing of the second- through fourth floors of the Metropolitan, which has a steel-frame first floor, is now underway, and the project is on track for a spring opening, Schultz says. Prices start in the $600,000s for the 37 luxury condos, which will be above stores and businesses.
FH (156)-
600K for a wood-framed stack-a-shack in Red Bank?
Yeah, right.
and loads of parking too! LOL
…..with a future roach & rat infestation….
I have no idea why developers continue to come out of the ground with new condo projects in this market.
#147 Bi “it is a good indication that the worst is behind us.”
Guess you are the new idiot in town. The people who have been reading this blog a long time have seen people call the bottom for over two years now.
The worst is not behind for home sellers. It takes many months before sellers understand the serious lack of qualified buyers.
thanks for the return to the original format!
sl
anti Trump, bi is a clown and cant help himself. you bring up a good point about ‘qualified buyers’. Money is no longer free if available at all which means that yesterdays qualified buyer is gone and todays qualified buyer needs several hundred thousand to put down. Gonna get interesting soon here….
for those who are financially literate.
what criteria do you use to verify a recession? what data?
[aside] clot. can you call me at home if you read this? I need to borrow your brain for a moment or two, ok? thanks
sl
A recession is a decline in GDP for multiple QTRS consecutively……
Housing is there for sure but the economy is not…Yet
#147 Bi “it is a good indication that the worst is behind us.”
The largest short sector on the board takes some profits after another abysmal housing report. Sell the rumor buy the news. A few take some profits and short covering aids the sector. How the hell does some short covering indicate the worst is over? Isn’t there a filter that catches this garbage. Just a waste of valuable blog space. However, I agree with Clot. A fantastic contrarian indicator.
http://en.wikipedia.org/wiki/Recession
“September home sales “plunge” to 8 year low”
This is great news.
I love it ;)
Man… do headlines like this excite others as it does me?
SAS
“what criteria do you use to verify a recession? what data?”
Are you, your family members, co-workers, and place were you work seem to be cutting back on their spending?
If yes… we are in a recession.
SAS
I think this guy generally writes a bunch of blather….but this is topical (calm down grim I didn’t say “tropical” you coral- brain)
WSJ – David Wessel
Three-Ingredient Recipe for Recession
October 25, 2007
It was basically a triple whammy: Housing prices kept falling, oil prices kept rising and both lenders and borrowers grew more cautious after five years of incaution. The combination was simply too much even for the impressively resilient U.S. economy. The Federal Reserve saw it coming, but couldn’t move swiftly enough. Still, Fed Chairman Ben Bernanke’s interest-rate cuts helped keep the recession as short and mild as those of 1990-91 and 2001.
There are three rules to keep in mind when reading a recession prediction.
• Rule No. 1: Forecasters rarely call the turn in the economy accurately. Even the wisest business-cycle veterans have a hard time. “There are forecasts of thunderstorms and everyone is saying, ‘Well, the thunder has occurred and the lightning has occurred and it’s raining.’ But nobody has stuck his hand out the window,” then-Fed Chairman Alan Greenspan told Fed colleagues on Oct. 2, 1990, transcripts reveal. “And at the moment,” he said, “it isn’t raining. …The economy has not yet slipped into a recession.” Much later, arbiters at the private National Bureau of Economic Research determined a recession had begun that July.
• Rule No. 2: Once forecasters start shaving their growth forecasts, they tend to keep shaving them. At the end of August, economists surveyed by Macroeconomic Advisers, a St. Louis forecaster, predicted the U.S. would grow at a 2.7% annual rate in the fourth quarter; last week, they were betting on 1.6% growth.
• Rule No. 3: There are always good reasons to argue, “This time it’ll be different.” But “this time” is usually different in specifics, not in the overall outcome.
The housing story is painfully clear. A June WSJ.com survey found that by a 3-to-1 ratio economists thought the worst of the housing bust was behind us. They were wrong. Housing kept sinking. Housing starts in September were 26% below year-earlier levels. That’s a direct hit to economic growth.
Falling housing prices are a second hit. The price of the median existing home sold in September was down 4.2% from a year earlier. That is reducing household wealth, shaking confidence and increasing foreclosures. That’s significant because today’s recessions are triggered more by collapsing asset prices — the bursting tech-stock bubble in 2001, for instance — than by the old cycle of retailers and factories reacting to rising inventories of unsold goods by curtailing orders and production.
“Only twice have we had this kind of housing collapse without a recession, in 1951 and 1967, and both times the Department of Defense came to the rescue, because of the Korean War and the Vietnam War,” Edward Leamer of the University of California, Los Angeles, told the Federal Reserve’s Jackson Hole, Wyo., conference in August. Mr. Leamer and his UCLA forecasting team say this time will be different. They predict “a near-recession experience,” but expect factories, aided by export orders, to avoid recession-inducing layoffs. (See Rule No. 2.)
The energy story is less clear. Oil and gasoline prices are up and look likely to keep rising. That has hurt, but not crippled, consumer spending on other things. But oil at nearly $90 a barrel — $30 higher than at the start of the year — doesn’t seem to have had much impact on global economic growth yet. There’s good reason for that: Oil prices are up partly because China’s growth spurt increases its appetite for oil. You can’t have a recession because you have too much demand. And inflation-fearing central banks haven’t panicked and raised interest rates in response to higher oil prices, as they once did.
But that was yesterday’s story. If oil prices keep climbing because producers can’t or won’t increase supply or because of recurrent tensions in the Middle East, the effects are unlikely to be as benign. The next $10 increase in oil could hurt consumers more than the last $10 increase.
And then there’s the prospect of a credit crunch, the consequence of lenders and investors being burned by mortgages and other loans that turned out to be much riskier than anticipated. As the late economist Rudiger Dornbusch used to say: “The crisis takes a much longer time coming than you think and then it happens much faster than you would have thought.” Rudi was right.
Commercial banks, investment banks and the market itself are tightening lending terms. That may, as central bankers argue, be a welcome reaction to excessively generous lending in years past. But coming on top of housing and energy, the understandable desire of lenders to be a bit more tight-fisted is likely to turn what might have been painfully slow growth into recession.
Now, recall Rule No. 1. What could prove me wrong? Mr. Bernanke talks hopefully about a “two-speed economy” in which housing remains weak and the rest of economy remains strong. After all, the best guesses are that the U.S. grew at significantly better than a 3% annual rate in the quarter ended Sept. 30. The continued boost to U.S. exports from a weakening dollar and continued economic vitality in Europe and Asia could yet offset the triple whammy. But global growth prospects, except for China, look gloomier than six months ago. And, at home, the job market could continue to be strong enough to give consumers the wherewithal to keep spending.
But that’s not the story I expect to be writing in October 2008.
GDP for multiple QTRS consecutively.
******************************************
they’ll revise down in the next quarter and by January, we’ll be full fledged.
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER’s recession dating procedure?
A: Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. According to current data for 2001, the present recession falls into the general pattern, with three consecutive quarters of decline. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, “a significant decline in economic activity.” Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology.
http://www.nber.org/cycles/recessions.html
Lessons from the credit crunch
Oct 18th 2007
From The Economist print edition
Central banks have worked miracles for 30 years. Don’t count on that continuing
Loose monetary policy is partly responsible for the mess the central bankers are now trying to clear up. Other factors contributed to the crunch, including rash lending, securitisation and globalisation: when American subprime loans went bad, banks in Leipzig (which had bought the stuff) and in Newcastle upon Tyne (which hadn’t—see article) were caught out. But whichever way you look at it, central banks kept interest rates too low for too long. That is most true of the Fed, which slashed rates between 2001 and 2003, held them at 1% for a year and then raised them in slow, predictable quarter-point steps, fuelling the housing boom. The results of that are plain to subprime borrowers facing the loss of their homes and to investors who ended up with subprime debt.
Assets and their liabilities
Oct 18th 2007
From The Economist print edition
The case for tackling asset prices—and the difficulties of pulling it off
CREDIT and asset-price booms can leave an awful lot of wreckage behind them. The casualty list after America’s housing crash includes: an overhang of unsold property; a huge fall in construction; the risk of weakening consumer spending as house prices fall; a trail of bankruptcies; big write-downs among the investment banks; and the unprecedented seizing-up of some financial markets on both sides of the Atlantic.
For America, his results are preliminary, but qualitatively similar: more liberal credit has increased housing-wealth effects in the United States too. There are transatlantic differences in both timing and magnitude. He estimates that every extra dollar of housing collateral now translates into six or seven cents a year of extra consumer spending, compared with only three pence in the pound in Britain.
thank you everyone for the info!! :)
sl
But SG 176, all else equal, inflation should be moderating, right about now, correct?
http://fordschool.umich.edu/rsie/workingpapers/Papers451-475/r452.pdf
We’ve had the two years lag on the production players, and the three years lag on the inflation, so how come my grocery bill is still on supercharge?