From the Wall Street Journal:
U.S. Mortgage Crisis Rivals S&L Meltdown
Toll of Economic Shocks May Linger for Years;
A Global Credit Crunch
By GREG IP , MARK WHITEHOUSE and AARON LUCCHETTI
December 10, 2007; Page A1
The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.
Over the past decade, Wall Street built a market for more than $2 trillion in securities sold globally and backed by loans to U.S. homeowners on two long-accepted beliefs and one newer one. The prevailing logic: The value of the American home would never fall nationwide, and people would almost always make their mortgage payments. The more recent twist: Packaging mortgage loans and turning them into securities would make the global economy more resilient if anything went wrong.
In a matter of months, though, much of the promise of the new financial architecture — together with its underlying assumptions — has proven to be a mirage. As house prices fall and homeowners default on mortgages at troubling rates, the pain has spread far and wide. An examination of the resulting crisis shows that it is comparable to some of the biggest financial disasters of the past half-century.
So far, the potential losses look manageable compared with the savings-and-loan crisis of the 1980s and the tech-stock crash of 2000-02. But the housing debacle could yet take years to work out, thanks to the sheer complexity of it. Until the mess is cleaned up, investors will remain jittery and banks will likely hold back on all kinds of lending — a credit crunch that is already damping global growth and could tip the U.S. economy into recession.
The new financial system — shifting risk from banks to securities markets — has worked “pretty well” up until now, says former Federal Reserve Chairman Paul Volcker. “We’re going to find out if it works well for a major-league crisis.”
…
The ultimate extent of the crisis will depend largely on how steeply the price of the average American home falls. That will play a pivotal role in determining how many people are at risk of foreclosure as payments on adjustable-rate mortgages tick upward and in the size of losses on securities backed by those loans. It will also affect the size of the hit that consumers sustain to their spending power.House prices are down by 0.5% to 10% now, depending on the measure used. If they fell 30% — what it would take to restore their historic relationship to inflation, rents and incomes — $6 trillion worth of housing wealth would be wiped out. Measured against the size of the U.S. economy, that is less than what was lost in the stock market between 2000 and 2002. Initial guesses at total losses on subprime and similar mortgages range from $150 billion to $400 billion.
The latter figure would equal about 3% of U.S. annual economic output. That is similar to the losses suffered by S&Ls and commercial banks between 1986 and 1995. But it is less than half the scale of Japanese bank losses in the wake of that country’s burst stock and real-estate bubbles.
…
But after years of living off the debt-financed increases in the value of their homes, U.S. consumers are in uncharted territory. “A lot of people, including me, have been saying that the country has been spending more than it’s been producing, and that will have to come to an end,” says Mr. Volcker. “The question is: Does it come to an end with a bang or whimper?”
From the WSJ:
Dissecting the Bailout Plan
By ALAN REYNOLDS
December 10, 2007
It is not quite right to describe the new White House plan as a bailout of subprime mortgage borrowers. Actually, it is a bailout for a tiny fraction of those with adjustable-rate mortgages (ARMs), not subprime loans per se. Nearly half of all subprime mortgage rates are fixed-rate loans, and only 32% of ARMs are subprime. With all the misplaced political anxiety about rates being reset, you might imagine that all those victims who signed-up for these mortgages had no idea their rates might actually be adjusted.
The Bush administration claims the plan will help “up to” 1.2 million people. Most of that promised help consists of nothing more than another phone number to call for counseling about refinancing — a redundant service unlikely to prove wildly popular. Refinancing has been soaring anyway, thanks to 30-year mortgage rates dipping below 6%.
If risky subprime borrowers were actually supposed to be the main beneficiaries of such refinancing assistance, then it would have been the height of irresponsibility for President Bush to suggest greater involvement of the Federal Housing Administration, Fannie Mae and Freddie Mac. Shifting default risk to U.S. taxpayers could be very costly.
In reality, the only financial aid in this plan goes to those who qualify for the five-year freeze on mortgage rates — a curiously selective little group, estimated to number between 145,000 and 360,000.
…
On the face of it, these criteria for political favoritism seem only marginally more sensible than limiting special loan terms to, say, short people or redheads.
From Bloomberg:
If MBIA Is AAA, Britney Spears Is Pure as Snow: Jonathan Weil
Fitch Ratings says its business is providing the world with “independent, timely and prospective credit opinions.” Judging by its AAA rating on MBIA, it looks like Fitch is 0-for-3.
On Nov. 5, Fitch said it would spend four to six weeks analyzing whether the bond-insurance unit of MBIA Inc. and six other so-called monoline insurers are worthy of the AAA imprimatur. Four to six WEEKS? Can anyone tell me a good reason why it should take four to six WEEKS to figure this out?
Then there was the big news on Dec. 5 from Moody’s Investors Service. A month after saying MBIA was “unlikely” to fall below its AAA capital benchmarks, Moody’s changed that to “somewhat likely” and said it would opine further on MBIA and the rest of the bond-insurance industry within a couple of weeks. Standard & Poor’s also is studying the matter.
“When we have concluded our analysis, we’ll publish on it,” Moody’s managing director Jack Dorer says. “What we’re trying to understand is the risk-adjusted nature of the portfolio.”
Somebody here, please just state the obvious: If MBIA is a AAA credit, then Britney Spears is fit to rejoin the Mousketeers.
From Bloomberg:
Pending U.S. Home Sales Probably Fell in October to Record Low
The number of Americans signing contracts to buy previously owned homes probably fell in October to the lowest in at least six years, pointing to further weakness in housing.
The National Association of Realtors’ index of pending home sales decreased 1 percent, according to the median estimate of 23 economists surveyed by Bloomberg News. The measure unexpectedly rose in September following the biggest back-to- back decline since record-keeping began, in 2001.
The jump in mortgage delinquencies and foreclosures has made it more difficult for some prospective buyers to get financing. Federal Reserve policy makers, who’ve said they are concerned the turmoil in credit markets will limit lending, are forecast to lower the benchmark interest rate tomorrow.
“Mortgage conditions weren’t any better than they were in September and that’s going to weigh on buyers,” said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. “I don’t think it got any better in November.”
The Realtors group is scheduled to issue the report at 10 a.m. in Washington. It will release its latest forecast for the housing market for this year and 2008 at the same time.
Estimates in the Bloomberg News survey ranged from a drop of 3 percent to an increase of 1.8 percent.
From Inman News:
When will market hit bottom?
For economist Dean Baker, the next U.S. economic recession is more a matter of when than if.
“I don’t know how we avoid a recession,” said Baker, co-director of the Center for Economic and Policy Research, a research and public education organization.
While Baker is less optimistic about the fate of the housing market and U.S. economy, market predictions by even the most optimistic real estate and economic analysts have generally grown gloomier in the past several months as troubles in the mortgage and credit markets have boiled over.
That has led many housing-market experts to reach a common conclusion: It’s worse than we thought.
The bottom of the housing market is likely deeper and wider than previously imagined, they say, so the housing slump could drag down the economy with greater force and further delay a recovery.
Problems ranging from foreclosures and unavailable mortgage loans to subprime mortgage-company bankruptcies and skyrocketing losses associated with mortgage-related securities have sent shockwaves from Main Street to Wall Street.
Home sales have dropped off substantially and home prices are falling in many markets.
The global nature of mortgage financing has entwined the course of the United States’ real estate downturn with factors outside of this nation’s control, and troubles in the U.S. housing market and economy may likewise signal a host of international financial problems.
…
Economist Robert Shiller said during a presentation in late November that a recession is more likely than not, and he also said it would not be a surprise to see massive home-price declines. “I think we are in a period of exceptional uncertainty about the value of our homes.”
The Standard & Poor’s/Case-Shiller U.S. National Home Price Index — an index that Shiller helped establish — dropped 4.5 percent in the third quarter compared to the same quarter last year and dropped 1.7 percent compared to the second quarter, which represents records in the 21-year history covered by this index.
And the Office of Federal Housing Enterprise Oversight reported the first quarterly decline in average U.S. home prices in 13 years for the third quarter — down 0.4 percent — based on a separate price index.
Another index released by the National Association of Home Builders and Wells Fargo found that the national median price of new and resale homes sold in the third quarter dropped 3.6 percent year-over-year, and the National Association of Realtors reported a 2 percent year-over-year decline in the resale home price in the third quarter.
The U.S. Census Bureau and Department of Housing and Urban Development reported that the median sales price of new homes slid 13 percent in October compared to October 2006, and the Realtor group reported that the median price of U.S. resale homes fell 5.1 percent year-over-year in October.
National home sales have been dropping, too, while the volume of foreclosures has been rising.
The foreclosure problem will likely be with us through 2009, said Mark Dotzour, “The foreclosure situation nationally ramped up pretty dramatically in 2007 and will continue all the way through 2008 and well into 2009 as well, and then it’s going to fall off pretty abruptly in the first quarter of 2010,” said Mark Dotzour, an economist at Texas A&M University.
…
Nicolas Retsinas, director of Harvard University’s Joint Center for Housing, said it appears this housing slump is more severe than most, and it may be 2009 “before we start to see even a modest recovery.”
If it weren’t for the credit problems in the mortgage market, housing may have been ripe for a recovery in 2008, he said. “Credit is the lifeblood of housing in this country, and the squeeze basically shut off demand.”
A surge in foreclosures could be “the last shoe to drop” in this downturn, he said, and could lead to a “more dramatic falloff in prices.”
Jobs are a key indicator for the economy, Retsinas said, and if the nation continues to add jobs then the economy could weather the impact of the housing downturn and avoid a recession. “If people are still working we will find our way through this.”
…
Actions by Congress or federal regulators that are aimed at assisting distressed homeowners may realistically have more of an impact on the next real estate market cycle than on the current one, said Jonathan Miller, executive vice president and director of research for Radar Logic Inc., a New York-based real estate research and analytics company.
“I think there will be more quick fixes in the election year than there will be long-term solutions,” he said.
Miller, who notes that local real estate markets are unique and some are faring quite well, said that nationally he doesn’t expect to see the market hit bottom until 2010. “I think we’ve got more than two years — probably two-and-a-half years to go,” Miller said.
“This is not a short-term situation. The inventory overhang is so significant and sales have dropped so much over the last year and a half that it’s going to take a long time to absorb the inventory.”
Miller last year wrote in his blog that he expected the nation to enter a recession in 2007 or in early 2008, and “I still believe we’re going in that direction,” he said.
“One of the things that has always amazed me in discussions about the economy … is that we have this disconnect from what the housing market is actually doing and what its potential impact to the economy is.”
The health of the housing market is vital to the health of the economy, he said.
…
Whether or not you believe the United States is headed for a recession, the answer will likely become more clear in the first quarter or second quarter of 2008, said Josh Bivens, an economist for the Economic Policy Institute, a nonprofit, nonpartisan economic think tank.
“I expect the housing market to be awfully tough through the entirety of 2008,” Bivens said. “My guess at a recession in the next year is at about 50-50 — housing is the number one reason why I’m that concerned about it.”
It remains to be seen how heavily the economy relied on mortgage-equity withdrawals, as “soon that’s going to fall to zero,” he said. If nothing can replace those withdrawals as an economic engine, “then we’ll have a recession.”
Home prices will probably continue to fall into 2009 as rental prices and home prices close a gap that had dramatically widened during the housing boom, Bivens said, adding that he wouldn’t be surprised if home prices remain “really flat for a long time.”
Soaring home-price growth of the up-cycle has led us to “uncharted waters,” and if the nation does enter a recession then prices could fall steeply. “How much will home prices fall? It has me worried.”
If you apply the same type of price correction relative to past market cycles, Bivens said it is possible prices could fall 25 percent nationwide.
“Historical experience says that’s definitely a possibility and how the economy responds to a fall like that is a real worry,” he said.
From the Daily Record:
Morristown condo hearing tonight
Pulte Homes is to present its plans to construct condominiums on the steep hill on Court Street where six 19th-century homes once stood. The homes were cleared to make room for this project.
…
The Pulte plan has been modified for this hearing.
Original plans called for 62 condominiums, four townhouses, an outdoor terrace, a fitness center, 133 underground parking spaces and a circular driveway at the 1.3-acre site.
The revised plans scrap the townhouses and call for 66 condominiums.
Jim Mullen, a development manager for Pulte Homes, said the change was made to attract a few more willing condo-buyers.
“They are more marketable and efficient,” he said.
From the AP:
New Jersey eyes eliminating gifts for legislators
Time may be running out for New Jersey legislators looking for freebies.
The state Senate on Monday was set to approve a proposal barring legislators and their staff from accepting gifts from lobbyists.
Last year, state legislators received $45,500 in gifts from interests ranging from lobbyists to unions to public utilities. Those gifts included free meals, hotel rooms, golfing outings, train rides and Philadelphia Eagles tickets.
New Jersey law currently prohibits legislators from accepting gifts worth more than $250 from lobbyists. The state, though, has seen continued concern about government corruption, with more than 100 officials convicted on federal corruption charges in the last five years.
UBS gets big cash injecton from Singapore and Oman. 10B subprime writedown.
UBS gets big cash injection from Singapore and Oman. 10B subprime writedown.
JB [1],
From Herb Greenberg’s blog, a mortgage veterans take on the bailout plan.
“The Government and the market are trying to boil this down to a ’sub-prime’ thing, especially with all constant talk of ‘resets’. But sub-prime loans were only a small piece of the mortgage mess. And sub-prime loans are not the only ones with resets. What we are experiencing should be called ‘The Mortgage Meltdown’ because many different exotic loan types are imploding currently belonging to what lenders considered ‘qualified’ or ‘prime’ borrowers. This will continue to worsen over the next few of years. When ‘prime’ loans begin to explode to a degree large enough to catch national attention, the ratings agencies will jump on board and we will have ‘Round 2′. It is not that far away.”
“Sub-prime aren’t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure. The latter three loan types mostly were considered ‘prime’ so they are being overlooked, but will haunt the financial markets for years to come.”
“Most sub-prime loans in existence are refinances not purchase-money loans. This means that more than likely they pulled cash out of their home, bought things and are now going under. Perhaps the loan they hold now is their third or forth in the past couple years. Why are bad borrowers, who cannot stop going to the home-ATM getting bailed out?”
http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/
Clot [7],
They just rearranged the letters from UBS to;
SUB
Prime.
Clot 7 source?Haven’t read that.
mike [11],
Look at JB’s main stories today, the third one down.
Clot,
Check your emails.
Where’s all the congressional uproar re Dubai buying that chunk of Citibank? They were all up in arms when they tried to run our ports.
Address for MLS# 2398302 Wife like stone houses I would like to have my own version of Tom Hank’s the money pit. She wants to do a drive, but I don’t want to contact the realtor we used to work with since she will think we are actively looking again. Any help is greatly appreciated.
10:00 – Pending Home Sales
The National Association of Realtors index of pending home sales tracks purchase activity by looking at signed real estate contracts for existing residences. The index is viewed as a leading indicator of existing home sales.
The October figures come out on Dec. 10, after the overall September index stayed pretty flat, rising just 0.2% from August. However, there was some variation across the four main regions with the Northeast posting a 10.1% drop and the Midwest up 5.4% on a monthly basis.
On a yearly basis, pending home sales were off 20.4%, slightly better than the 21.5% decline of August. That’s in line with the 20.7% drop in actual existing home sales. Another leg downward in the pending sales index would stir up deeper concerns about the housing market’s decline and its ability to pull down the rest of the economy.
http://www.maltzauctions.com/auction_detail.php?ID=375218
This is by the far the best stone house for sale period!! It is a foreclosure.
My God I know my grammar can be awfull in a comments section but that is terrible. Replace “Wife like with wife likes stone house and” and also She wants to do a drive with she would like to drive by the place” Any comments on my poor English and rightfully deserved. Sorry
Clot Sorry, just jumped right in after 1st one.
Iceskating being held in my driveway today,
the country is great.
#18
Just remember, “May even Need to be gutted” really means “Absolutely , positively will need to be gutted and it may even help to have a priest perform an exorcist after the gut job”
John Says:
This is by the far the best stone house for sale period!! It is a foreclosure.
Note real estate taxes of $5,500 on this. It would be at least $25,000 in Jersey
Painhrtz Says:
I would like to have my own version of Tom Hank’s the money pit.
You’ll need 100% of your own cash to consider this. Forget about getting any kind of mortgage. I would estimate the value of the property based on the land value only. The house sounds like 4 stone walls and nothing else.
Pain,
316 Glenwild
Not worried about the absolutely would have to be gutted part,I’m construction savy and would take the place down to the beams and studs regardless. I’m more concerned about the location in Bloomingdale. The rest of it is blood and sweat.
Many thanks JB
Interesting property in Summit. A flip gone horribly flop?
200 Summit Ave, Summit
MLS# 2322943 (Multiple Relistings)
Originally Listed: 3/27/2006
Original List: $2,399,000
Reduced: $2,100,000
Sold: 1/23/2007
Sale Price: $1,837,500
Currently for sale and rent:
MLS# 2458513 (Multiple Relistings)
Originally Listed: 4/24/2007
Original List Price: $2,195,000
Current Asking: $1,545,000
Or rent for $10,000/mo
I suppose it stings a bit when you finally realize that the sucker at the table is you.
MBIA shares just halted…details to follow
Sounds like their aaa rating is no more ;)
My apologies if this has already been discussed. But since one quote is extra special, I’ll copy it and plagarize it often.
http://www.charlotte.com/business/story/391703.html
“…spokesman for Los Angeles-based TCW said he could not comment on clients. In an interview with the Wall Street Journal in August, TCW Chief Investment Officer Jeffrey Gundlach said he expects some debt could reach “levels of epic cheapness.” The special mortgage credits fund has raised $1.56 billion from investors..”
Levels of epic cheapness.
Now that’s my cue. Honey, get the checkbook!
Could anyone provide me with an address and history for MLS# 2443107? Thanks in advance.
Or capital. Perhaps of the Middle Eastern variety?
“Federal Reserve Chairman Ben S. Bernanke may have to risk becoming the proverbial “fool in the shower” to keep the U.S. economy out of recession.”
“Renewed turbulence in financial markets puts Bernanke, 53, under pressure to open the monetary spigots wider to pump up the economy. Traders in federal funds futures are betting it’s a certainty the Fed will cut its benchmark interest rate from 4.5 percent tomorrow, and they see a better-than-even chance the rate will be 3.75 percent or below by April.”
“The risk of a financial accident is vastly greater than it was three months ago,” says Crandall, whose firm is a unit of ICAP Plc, the world’s largest broker for banks and other financial institutions. “A lot of firms are running on Plan C in dealing with the turmoil, and they don’t have a Plan D.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8pNSTc5X_DE&refer=home
From MarketWatch:
Pending home sales index rises 0.6% in October
A gauge of future home sales increased 0.6% in October, the second straight increase, a real estate trade group reported Monday. The pending home sales index is down 18.4% compared with October 2006, the National Association of Realtors said. The index increased a revised 1.4% in September. Pending sales increased 16% in the Northeast and 8.4% in the West. Pending home sales fell 7.8% in the South and 1.4% in the Midwest. Pending home sales track signed sales contracts, which typically close in one or two months, when they are reflected in the existing-home sales data released by the realtors.
Shares of MBIA MBIA IncMBI
30.14 0.14 +0.47% NYSE
Quote | Chart | News | Profile | Add to Watchlist
[MBI 30.14 0.14 (+0.47%) ] were halted Monday amid speculation that the world’s biggest bond insurer may announce plans to shore up its capital base.
The company said last Thursday that it was looking for capital after rating agency Moody’s Investors Service said the insurer was “somewhat likely” to require additional capital.
Bond insurers are broadly boosting their capital levels as the subprime mortgage crisis has forced them to set aside more money for losses and pay out more claims.
The insurers have multiple ways to boost capital, including issuing securities and reducing their new insurance volumes. To the extent that the companies insure fewer bonds backed by consumer debt, borrowing costs for everything from mortgages to credit cards could rise.
Activist investor William Ackman said last week that the bond insurer could be insolvent as soon as the second quarter of 2008. Ackman’s Pershing Square Capital has sold MBIA shares short, in a bet they will decline.
Moody’s said Wednesday that a review of MBIA’s residential mortgage-backed portfolio showed the company was at greater risk of falling short on capital than the agency had previously believed.
MBIA said in a statement that it has been “pursuing capital contingency plans, even in the absence of any immediate rating agency requirements.” Spokeswoman Liz James declined to elaborate beyond the statement.
The company said it was not changing its quarterly dividend of 34 cents a share. Companies looking to boost their capital levels sometimes cut their dividends.
For most bond insurers, increasing capital levels is crucial for maintaining triple-A credit ratings, which are in turn crucial for staying in business.
Bond insurer CIFG received $1.5 billion of fresh capital from Banque Populaire and Caisse d’Epargne in November.
Bond insurers generally have low capital levels relative to their exposure, and a few large defaults could stress their capital.
MBIA has outstanding insurance on about $673 billion of municipal and structured finance bonds, compared with about $14.3 billion of claims-paying ability as of Sept 30.
Capital Options
Robert Genader, chairman and chief executive of bond insurer Ambac Financial Group, said last month if his company needed more capital it could write more insurance on bonds that require less capital, such as municipal bonds, and less insurance on securities requiring more capital, such as asset-backed securities.
Ambac could also write less new business in general, or use reinsurance, to increase capital levels, Genader said in a presentation on Nov. 28.
MBIA said in a quarterly statement with regulators filed in November that capital raising was possible. “The Company may undertake capital raising initiatives or other measures to raise or preserve capital, even in the absence of any immediate rating agency requirements,” the filing said.
http://www.cnbc.com/id/22182658
PHS data from the NAR:
http://www.realtor.org/Research.nsf/files/PHS.pdf/$FILE/PHS.pdf
Pending home sales index rises 0.6% in October
By Rex Nutting
Last update: 10:00 a.m. EST Dec. 10, 2007Print RSS Disable Live Quotes
WASHINGTON (MarketWatch) – A gauge of future home sales increased 0.6% in October, the second straight increase, a real estate trade group reported Monday. The pending home sales index is down 18.4% compared with October 2006, the National Association of Realtors said. The index increased a revised 1.4% in September. Pending sales increased 16% in the Northeast and 8.4% in the West. Pending home sales fell 7.8% in the South and 1.4% in the Midwest. Pending home sales track signed sales contracts, which typically close in one or two months, when they are reflected in the existing-home sales data released by the realtors.
A technical question: is a house considered pending as soon as the terms are agreed upon or does the term only apply whe the buyer obtains any necessary funding? Is it pending before any inspections occur or only after?
Is there any historical data on the percentage of homes that go “pending” and then, for one reason or another, fail to close?
From the WSJ:
Pending-Home Sales Climb in October
By JEFF BATER
December 10, 2007 10:08 a.m.
[snip, same as above]
The NAR index, based on signed contracts for previously owned homes, was 18.4% below the level of 106.8 in October 2006.
The NAR’s pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.
By region, the Northeast increased 16.0% in October from September; it fell 11.1% since October 2006. The Midwest fell 1.4% in October from September; it fell 11.7% since October 2006. The South decreased 7.8% in October from September; it dropped 25.3% since October 2006. The West increased 8.4% in October from September; it plunged 16.9% since October 2006.
Pending sales of existing U.S. homes rose modestly in October but took a tumble from a
year ago and demand should remain flat next year, a real estate trade group said.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in October, was up 0.6 percent to 87.2 from an upwardly revised index of 86.7 in September.
[snip]
http://www.cnbc.com/id/22182560
If the realtors are saying flat, YIKES!
Is there any historical data on the percentage of homes that go “pending” and then, for one reason or another, fail to close?
I have a few spreadsheets that look at correlations between signed contracts and closings. Contracts start to show some ability to predict once you begin to aggregate up to the county level. To get a good correlation, you really need to aggregate up to a multi-county level. The wide range in timeframes between signed contracts and closings, along with low sample sizes, make simple linear regressions based on town level contracts useless.
Those black boxes sure are fun though!
Post by a New Jersey resident on another forum. Clot, you might want to avert your eyes:
“We are in the process of selecting a realtor to sell our home. Each of the realtors state that the buyers are out “fishing” because the media is portraying the real estate market worse than it really is. They are offering ridiciously low offers. Realtors have advised if you can afford to, hold firm with your price, as long as it is reasonably priced.
The serious buyers will look at reasonably priced homes and make a reasonable offer. Those buyers influenced by the “media reports” will just keep making low ball offers until they find someone desperate.”
lishoosh #42,
Sounds about right to me. Sellers who need to sell (“desperate”) will reduce prices to sell. Sellers who don’t need to sell won’t.
# 41 What about, say, 3-month (6-month) moving averages?
#42 lisoosh
That must be city-data.com, I’ve seen that too.
I like this one from another post
“One realtor told us about buyers who are offering $100K less than asking price! He said the buyers think the market is a lot worse than it is.”
The serious buyers will look at reasonably priced homes and make a reasonable offer. Those buyers influenced by the “media reports” will just keep making low ball offers until they find someone desperate.”
Interesting to note, the realtor says “until they find someone desperate”…not “until they give up and get serious” or “until they get frustrated that no one will accept their offer and go home”. The implication is that a “lowball strategy” can be successful if you are patient and flexible on your choice of home.
And why does that make one an “unserious buyer”? I would classify most sellers as “unserious”; fishing for a big payday rather than seriously trying to sell their house.
#46: “And why does that make one an “unserious buyer”? I would classify most sellers as “unserious”; fishing for a big payday rather than seriously trying to sell their house.”
Bingo. I have watched a number of homes sit on the market for more thn two years. I suspect thay are hanging out saying “If I can get someone to give me this much, I will move. Otherwise i will just stay.”
Wow, 23 months in jail for Mike Vick.
http://thebiglead.com/?p=3873
http://tinyurl.com/3br9gb
AP:
Realtors’ Forecast Bucks Common Wisdom
“Bucking conventional wisdom, a trade group for real estate agents on Monday said the battered housing market is on the verge of stabilizing and inched up its outlook for 2007 and 2008 home sales…”
#43 Sellers who don’t need to sell won’t.
Seems to me like an incredible waste of time, to have your house on the market for a year or more, in hopes that some one will pay your price.
How many serious Realtors want those kind of listings, they have to pay to advertise the listing, and all the rest.
As far as people bidding 100k less, why not if nobody blinked any eye when prices were going up 50k to 100k a year, why the shock and outrage that soembody would bid a 100k off, when prices are one the way down?
#49
Stu,
Is that the same report in which they revealed that Santa DOES exist? I think he may be at GITMO and is feeling the pent up demand for presents.
http://www.cnbc.com/id/22182658
MBIA, the world’s largest bond insurer, will receive up to $1 billion in new capital from Warburg Pincus.
Shares of MBIA were halted Monday amid speculation that the world’s biggest bond insurer may announce plans to shore up its capital base.
The company said Thursday that it was looking for capital after rating agency Moody’s Investors Service said the insurer was “somewhat likely” to require additional capital.
Bond insurers are broadly boosting their capital levels as the subprime mortgage crisis has forced them to set aside more money for losses and pay out more claims.
The insurers have multiple ways to boost capital, including issuing securities and reducing their new insurance volumes. To the extent that the companies insure fewer bonds backed by consumer debt, borrowing costs for everything from mortgages to credit cards could rise.
Ackman Selling Short
Activist investor William Ackman said last week that the bond insurer could be insolvent as soon as the second quarter of 2008. Ackman’s Pershing Square Capital has sold MBIA shares short, in a bet they will decline.
[snip]
I know it’s a ‘trade’ report. I just figured I would share it with the group here for laughs. I think this trade group probably also performs the number counting for the monthly employment reports.
NorCal Man Arrested For Massive Weapons Cache
ALTURAS, Calif.
Clot i didnt know you were a california resident
placed the weapons, ammunition and four 500-gallon fuel tanks in strategic places on his property and stockpiled enough food to last two years
NAR Chief Economist quotes are banned, especially Yun, except if used as part of a disparaging retrospective.
How dare he store 2 years worth of food and fuel.
Was probably sick of paying higher prices at the checkout and pump.
He deserves to go to jail for trying to hedge against inflation, a vile anti-American…
If you think the price of milk has been skyrocketting, take a look at the price of bullets. I’ve resorted to buying ammunition at discount sales. Picked up a case (500rd) of 9mm at Dicks on Rt 10. for $100 yesterday.
Should keep me stocked for at least two years.. Boy, I sure hope I’m not incriminating myself by posting this.
Getting a mortgage is getting more expensive, even for borrowers with good credit, thanks to the subprime crisis.
Fannie Mae and Freddie Mac, the two government sponsored entities created to promote homeownership, are slapping new surcharges on loans they either buy for their portfolios or for which they provide guarantees.
The fees have sparked outrage among mortgage brokers and home builders. The new surcharges, which some lenders are charging now even though they don’t take effect until March 2008, range from 0.75 percentage point to two whole percentage points on the value of the loan. That raises the cost of a $200,000 mortgage by anywhere from $1,500 to $4,000.
Fannie & Freddie’s Charges
Credit Score Points Charged
Grim,
It kind of funny how people who legally own fire are, but have “stockpile” are generally persecuted. A buddy of mine collects weapons and has authentic fire arms from every major war for the last 200 years, i think he has over 50 rifles alone. Its a very impressive display really. the real problem is that you might scare the sheep.
ramble off, uggg monday morning :(
http://www.cnbc.com/id/22183392
A little more on topic….
it will be interesting to see what effects the current economic mess/crisis has on the national crime rates. if you look at the crime rate data, various trends can be correlated to large scale economic events. So in about 5 years we should be able to see the trends unleashed by this economic event….
kettle,
He was arrested because he was a felon who was prohibited from owning firearms, in addition, he owned illegal guns and other prohibited weapons (hand grenades?).
The fact that he had a more than 1 gun is irrelevant here, as far as I know there is no state or federal limitation to the number of guns any single individual can own. Nor are there limits on owning any quantity of ammunition.
However, the guy is clearly a lunatic and I’m glad he is in prison.
From the article in 57/59: “The charges hit the least credit-worthy the hardest. They apply to all borrowers putting down less than 30 percent — which is just about everyone — and with credit scores between 620 and 680. These were previously prime borrowers.
Boulder, Colo., mortgage broker Lou Barnes says neither government sponsored entity has ever imposed such a charge and that this will hurt.”
The 30% figure struck me as interesting. Humm, we have Fannie and Freddie feeling uneasy about people with less than 30% skin in the deal. Humm, we have GS calling for 30% declines. Humm, we have homes somewhere around 25% above where they would be if l-ng-term historical trends had continued without a bubble.
I have an apointment tomorrow to see a beach house in Monmouth county. At 30% off its current price, it is about right.
Oh, and incase you thought about not paying your subcontractors…
http://tinyurl.com/2db24d
ok will stop spamming now…
CNBC is reporting that Bank of America froze an institutional money market fund.
63, it has a Jackson Pollack quality to it. Of course, compared to a kneecapping, they got off easy.
61 grim
Yep, i read the article, just being contrary on an ugly gray monday morning
Does anyone know how the mortgage mess if affecting VA Loans? I am eligible for one and am curious how banks are approaching VA loans with he clamp down
Re un-serious sellers:
SO many out there. I’ve noticed a few of them have pulled their listings now for the winter. If the house is on market for over 6 months and they haven’t sold, can you really be considered serious?
I suspect they will be back in the spring because they really do want to sell, but they are in denial it is (almost) 2008, not 2005.
Being an unrealistic seller seems perfectly rational to me.
Seller gets a free option. Costs them nothing to list their home. No legwork, no expenses.
If they get their unrealistic price, they cash out, if not? Nothing lost, nothing gained.
69, grim
That is true about sellers. If it even cost 10 bucks a month, I bet a lot of them would pull their listings.
I guess the same could be said for “unserious” buyers. It doesn’t cost anything to go look at homes. If it cost 5 bucks each time, people might be more decisive.
lisoosh (42)-
>
How true. The only thing is, the sellers who actually manage to sell these days are about 100% desperate.
Of course, if your wife just got laid off by an I-bank and found immediate reemployment at McDonald’s, this does not apply. She’s part of our economy’s “surging job growth”.
I will now clip my fingernails with a band saw.
Question for the Group re: Builder costs. I am looking at a house. Builder bought lot for $450k. Built house 3500sq ft. Very high end cabinets,flooring bathrooms etc. Asking price is $1.45M.
What do you think the builder’s breakeven point is ? I know this is somewhat vague data but all responses would be appreciated.
Thanks in advance
Ugh! Moderated…
#69 grim:Seller gets a free option. Costs them nothing to list their home. No legwork, no expenses.
True, but doesn’t it cost the Realtor?
Here’s an example of an unrealistic seller. This townhouse is in my neighborhood, market price for these units are no more than mid 300s at the moment. Asking price is 465k.
Why not ask for it? Someone might pay.
http://homes.realtor.com/realestate/piscataway-nj-08854-1084537859/
ps. the pic with the pool is a fake.
grim,
Please unmoderate.
syncmaster Says: Your comment is awaiting moderation. December 10th, 2007 at 12:01 pm
#10 BC Bob
They just rearranged the letters from UBS to;
We used to call them “Unemployed Banking Services” as they cycled through the 90s merging and purging staff.
An appropiate title in the current conditions.
For those griping about this (so far) almost non-existent housing bailout, just you wait…in a few years the Social Security bailout will make this look like chump change.
Once again, those who have planned ahead, lived within their means, and done the right thing will end up paying for those who haven’t.
%uck You!
“This is no time for Fannie Mae’s business interests to take precedence over its mission responsibility,” said Jerry Howard, chief executive of NAHB.
WASHINGTON – Sen. Carl Levin (D-Mich.), Chairman of the Senate Permanent Subcommittee on Investigations, today introduced legislation to help prevent price manipulation and excessive speculation that are leading to high energy prices for U.S. consumers.
The bill targets energy commodity markets that are currently exempt from government oversight under the “Enron loophole,” a provision inserted at the behest of Enron and other large energy traders, without debate, into the Commodity Futures Modernization Act of 2000. The “Close the Enron Loophole Act” would subject those energy markets to Commodity Futures Trading Commission (CFTC) oversight to prevent price manipulation and excessive speculation.
“Right now, the Enron loophole makes it impossible for regulators to prevent major price distortions in U.S. energy markets,” said Levin. “The result has been higher energy prices for millions of Americans. Stable and affordable energy prices are vital to our national and economic security – to heat and cool American homes, generate electricity for lighting, and power U.S. manufacturing, agriculture, and transportation. We need to put the cop back on the beat in all U.S. energy markets with effective tools to stop price manipulation, excessive speculation, and trading abuses. The legislation I am introducing today is critical to ensuring fair energy prices that reflect the fundamentals of supply and demand.”
Since 2001, the Subcommittee has investigated the vulnerability of U.S. energy markets to price manipulation and excessive speculation. Earlier this year, the Subcommittee released a report, “Excessive Speculation in the Natural Gas Market,” which found that a single hedge fund named Amaranth dominated the U.S. natural gas market during the spring and summer of 2006, and that its large-scale trading significantly distorted natural gas prices from their fundamental values. The investigation examined millions of trading records from the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) to track and analyze natural gas trading in 2006. The report concluded that the current regulatory system was unable to prevent price distortions and excessive speculation, because much of Amaranth’s trading occurred on an unregulated market. The report recommended closing the Enron loophole to restore the CFTC’s ability to police all U.S. energy markets.
At a Subcommittee hearing in June 2007, the American Public Gas Association and the Industrial Energy Consumers of America testified that Amaranth’s trading activity increased hedging costs for natural gas purchasers, which ultimately led to increased costs for American industries and households. The Municipal Gas Authority of Georgia calculated that Amaranth’s excesses increased the cost of its winter gas purchases by $18 million.
“Amaranth’s massive trades turned the natural gas market into a giant electronic casino,” Levin added, “where all natural gas buyers and sellers were forced to bet either with or against Amaranth. American businesses and consumers were socked with higher prices for natural gas last winter as a result. We cannot afford to let large energy traders continue to play speculation and manipulation games with U.S. energy prices and supplies. It’s way past time to close the Enron loophole and put the cop back on the beat in all U.S. energy markets.”
A 2006 Subcommittee staff report entitled, “The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat,” also analyzed the extent to which increasing financial speculation in energy markets contributed to the steep rise in energy prices over the past few years, especially for crude oil. The report concluded
“[s]peculation has contributed to rising U.S. energy prices,” and endorsed the estimate of various analysts that the influx of speculative investments into crude oil futures accounted for about $20 of the then-prevailing crude oil price of $70 per barrel.
Bill Summary. Key provisions of the Close the Enron Loophole Act would:
Require energy trading facilities (ETFs) to register with the CFTC and comply with the same standards as apply to futures exchanges, like NYMEX, for trading futures contracts, except for standards governing retail trading since ETFs are restricted to large traders trading amongst themselves. ETFs would function as self-regulatory organizations under CFTC oversight in the same manner as futures exchanges.
Require ETFs to establish trading limits on traders, such as position limits or accountability levels, to prevent price manipulation and excessive speculation, subject to CFTC approval, in the same manner as futures exchanges. Position limits set a ceiling on the number of contracts that a trader can hold at one time on a trading facility; accountability levels, when exceeded, trigger a review by regulators of a trader’s holdings in order to prevent price manipulation and excessive speculation. The CFTC would ensure that position limits and accountability levels for similar contracts on different exchanges are on parity with each other and applied in a functionally equivalent manner. The CFTC would also ensure that a trader’s positions on multiple exchanges, when combined, are not excessive, and that trading limits are not circumvented through a trader’s use of an unregulated market.
Require large-trader reporting for domestic trades on foreign exchanges. Large trades of U.S. energy commodities taking place from the United States on foreign exchanges would have to be reported to the CFTC. Traders would be relieved of this reporting requirement if the CFTC reached agreement with a foreign board of trade to obtain the same information.
Define an “energy trading facility” as one that facilitates trading of contracts in an energy commodity (other than in the cash or spot market) between large traders (“eligible commercial entities”), and either provides for the clearing of those contracts or provides a price discovery function in the futures or cash market for that energy commodity. Clearing services, which are already subject to CFTC oversight, generally provide payment guarantees for trades. A trading facility performs a price discovery function when its prices become publicly known and affect the prices of subsequent transactions.
Define “energy commodity” as a commodity which is used as a source of energy, including crude oil, gasoline, heating oil, diesel fuel, natural gas, and electricity, or results from the burning of fossil fuels, including carbon dioxide and sulfur dioxide.
#71 Mr Potter –
I think $150 to $200/sf for nice quality construction is typical in Northern NJ (Bergen County for example). I also think 20%+ is what contractor attempt to make (and have, an far in excess over the past few years). I would suspect that your 3500sf house cost about 6-700k to build, so all in 1.1m, putting margin at 30% or so.
#60 Kettle
I agree – you see it a lot more in the news these days too. More bank robberies, convenience store hold-ups, etc. I may have to switch my views on guns soon!
I know I posted it earlier today so it probably got overlooked, but I was wondering if anyone has information on MLS# 2443107 in Montville? My wife and I found this online last night and was wondering what the story was before looking at it. Thanks
#79
I agree, $200 per sq ft is typical for higher end properties. This gives you $1.15M build/property cost and then another $100K carrying costs for the year or so of construction. $200K profit right now it looks like.
#76
Any potential SS bailout is going to me a bloody disaster. You are going to have the 25 – 40 yr old segment of the population that knows we are never going to see any substantial benefit from the SS program who are not going to want any bailout to happen. Its going to turn into quite a fight .
Oh and there is no “trust fund”! SS expenses are expected to exceed receipts sometime between 2020 and 2050 depending on who’s estimate your read, and then the SS system is supposed to run off of its “trust fund”, these excess receipts that have been taken in for over 2 decades now. The only problem is that the “trust fund” was placed in treasury securities. So the government has actually spent all of the money already and must now come up with the money when we are already up to our neck in debt.
The GAO does a tour and presentation called the Wake-up Tour about how much trouble the country is in fiscally. here is a link to it.
http://tinyurl.com/2gwndn
From the GAO Q&A
Q: What’s the bottom line of your message?
A: The worst-case scenario is that, if the United States doesn’t come to our senses and get our act together, we could eventually suffer the same fate as Argentina . That nation defaulted on its debt, which had a significant adverse effect on the country’s economy and the living standards of most of its citizens. We must not allow this to happen here, and with committed, candid, and capable leadership, it won’t. My view is that we will wake up and start making tough choices, I’m just trying to make sure that we do it sooner rather than later.
Q: What’s the best-case scenario?
A: We will ultimately make some tough choices in reforming entitlement programs such as Social Security and Medicare, restructuring and constraining other spending, and raising more revenues. This will require some pain and shared sacrifice. However, the sooner we start, the less we will have to do—and the more time people will have to adjust to the needed changes. The simple fact is, it’s better to treat our fiscal cancer sooner rather than later in order to avoid much more painful and undesirable outcomes.
http://www.cnbc.com/id/22184173. Ouch.
Get a look at the declines in investment/corp banking.
Bank of America, the second-largest U.S. bank, is winding down a $12 billion money-market type fund that’s tailored toward institutional investors, CNBC has learned.
The fund, the Columbia Strategic Cash Portfolio, saw its net asset value fell below the $1 per share that all such funds try to keep. The fund invested in short-term debt and got hurt by the subprime meltdown.
The move is the latest blow to Bank of America Bank of America Corp which last month said it expects to write down $3 billion of debt in the fourth quarter because of subprime mortgage losses.
Bank of America also said in November it was setting aside $600 million to help money market mutual funds exposed to risky debt maintain the $1 per share net asset value. It also was reserving $300 million for a troubled investment, and setting aside more money for other housing-related losses, including to homebuilders.
Bank of America is among a growing number of banks, including Citigroup, Merrill Lynch and Morgan Stanley, to get hit with multibillion-dollar write-downs for exposure to mortgages and other debt instruments that investors are no longer willing to buy.
In the third quarter, Bank of America’s profit from corporate and investment banking fell 93 percent, depressing overall earnings by 32 percent.
Chief Executive
grim Says:
December 10th, 2007 at 11:05 am
NAR Chief Economist quotes are banned, especially Yun, except if used as part of a disparaging retrospective.
Testing: NAR Chief Prickonomist
http://www.cnbc.com/id/15840232?video=605469024&play=1
Down from 7 million to 6 million.
Says the realtor: “The smart money knows this is a great time to buy. You get the same house for a million less, why wouldn’t you buy.”
Answer, because it may be worth 500,000 less in 6 months?
ShoreGuy,
Two weeks ago, this was a $33B fund.
86, a billion here, a billion there, pretty soon you are talking real money.
87, the bigger the hit and the more shareholder dilution you have to take, the more your stock goes up lately. Unreal! We are in the midst of one of the biggest real estate disasters of all time, heading into a recession (if not in one already), and credit is pretty much nonexistent now. Sure, stocks should go up in this environment (sarcasm off now).
Anyone think we’ll see a Glen Rock house drop to 300k? I do.
Give it five more months.
Realtor.com has one for $389k today.
That was unheard of two years ago.
Kettle – #67
there was some recent appraisal info re: “During periods of rapidly increasing or declining real estate values, it may become more difficult to establish an estimate of the current fair market value.”
http://www.homeloans.va.gov/circulars/26_07_4.pdf
Too bad it can’t be appraised before making the offer.
DebtVulture Says:
December 10th, 2007 at 1:17 pm
87, the bigger the hit and the more shareholder dilution you have to take, the more your stock goes up lately. Unreal! We are in the midst of one of the biggest real estate disasters of all time, heading into a recession (if not in one already), and credit is pretty much nonexistent now. Sure, stocks should go up in this environment (sarcasm off now).
Vulch: I understand the vitriol, but I don’t necessarily subscribe to your conclusions. You are only considering a certain group of market observations. Ultimately, anything that increases transparency is going to be considered positive news. Market old prices to the new expectations given clarity is logical.
2 Points;
1. the NAR is a marketing group? If so, of course they say their product is great, regardless of the circumstances. I’m in sales and I say my stuff is good too! Do you expect anything less?
2. Social Security will probably be there. Assume the “trust” is $0, incoming receipts from current workers can provide 75% of benefits to retirees. so as long as folks are working, we are 75% there.
Also, I have been paying into SS for 30 years..I’d better get something!!
#94, the NAR is a trade group that furthers its cause every day. The problem with them is that they have very little credibility left as none of their recent forcasts have come true. In addition to that, most of the propoganda is opinion based vs fact based which makes it harder to take them seriously.
Subprime mortgage holders
When the house value depreciates way below the loan value what incentive does someone have to not walk away from the loan and start over again a few years from now?
#94 Condo.
Also, I have been paying into SS for 30 years..I’d better get something!!
thats not how it works. SS is a ponzi scheme. Literally. You are paying for the people who are currently on SS. If/When you pickup SS, you will not be “getting your money back”. you will be receiving a portion of the working generations pay check. And here in lies the baby boomer problem. More and more people want their cut of my (inclusive) paycheck.
There has been a long running argument over whether t SS is even constitutional as there have been claims by legal professionals that it violates the 5th amendment. There have been a few court cases shortly after SS was started, but the courts dodged the issue.
“Mitchell Says:
December 10th, 2007 at 2:37 pm
Subprime mortgage holders
When the house value depreciates way below the loan value what incentive does someone have to not walk away from the loan and start over again a few years from now?”
Other than ones honor and a desire to avoid a ding to one’s FICO score, there is no incentive whatsoever to keep paying when one is under water.
Jingle mail, deed in lieu of foreclosure..
“When the house value depreciates way below the loan value what incentive does someone have to not walk away from the loan and start over again a few years from now?”
Mitchell,
Many of these were underwater from day 1. The media/politicians seem to miss the point. The major issue is declining prices not resets. Was there a problem in 2004,2005 or 2006 when adjustables were renewing? No, prices were rising. Now that we are in the beginning stages of a multi year decline, resets become the headline story.
You are right, there is zero incentive for them to stay in a period of declining prices. Why sink money into a depreciating rat hole. They can walk now or walk later. One thing is certain, if/when they are underwater, they’ll be walking.
harry (95)-
And, all that makes me- as a Realtor- hopping mad over NAR and the ridiculous statements that keep emanating from Lereah, Yun and their stooges.
These fools keep hitting me up for donations, all the while claiming how much they’re “helping” me. Well, thanks for helping me by destroying my credibility and convincing the public that I’m an idiot…before I’ve even had a chance to meet my prospects.
Nice to see that December’s housing predictions for NAR amount to sort of a royal flush of shame: wrong, 12 out of 12 months.
BC,
It’s like trying to blame the failure of a ponzi scheme on external market factors instead of focusing on the model.
While those factors may have played a role in the demise, the model was broken from day 1. The model was doomed to fail, the only question was when.
This ponzi scheme was predicated on ever skyrocketing prices. As long as appreciation was soaring in the double digits, credit quality, resets, subprime, and predatory lending were all irrelevant.
#94, SS is “not a ponzi scheme”, it is a pay as you go defined benefit system (yes I have a degree in Actuarial Science). Future retirees, based on current law, will get paid out of funds collected from future workers. If there is $0 in the trust fund, approximately 75% of benefits are anticipated to be available from the FICA collections.
#93 Chi: I agree with you, but things are still pretty opaque out there. One still doesn’t know where the next big hit will come from. Even UBS said that they don’t know what their remaining exposure is worth. And the more we know, the worse things seem to be getting. That all doesn’t bode well for future stock prices, IMHO.
103 Condo,
“ponzi scheme” is indeed an inaccurate description, but the fact remains that you expect something out just because you put something in and that is not how SS works; the current workers (you and I) pay for the current retiree’s, you are note making payments towards your own retirement. I would also suggest that you try telling a group of seniors on SS that you are cutting their benefits by 25%. Let me know how that works out for you. Its going to be an ugly debate because SS isnt the only problem, medicare is an even bigger problem according to the GAO and already has 30 TRILLION in unfunded obligations. Do you have an extra 30 TRILLION handy?
I stumbled across your blog during a Google search. I’m watching the market and simply trying to summarize my own situation.
In 2006, I sold my rental condo in Perth Amboy. Purchased in 1994 for $85,000, sold in 2006 for $200,000 (although I had to pay cap gains taxes).
In 2007, I sold my townhouse in Burlington Township. Purchased in 2003 for $177,000, sold in 2007 for $260,000.
I just closed on a new house in Chesterfield. House with chosen options cost $485,000 appx. I got a seller’s credit of $35,000 off the bottom line, and with my down payment, I’m left with a mortgage balance of $355,000. So basically, the house was purchased for around $455,000 after discounts. But now I’m seeing the builder offer even more aggressive discounts on spec homes. As a result, I’m sure the value of my home has declined.
On one hand, I feel if I had known prices would have dropped like they did, I could have held out for a better price on my new home. On the other hand, I feel like my condo and townhome sold quickly, and close to my asking prices, and had I delayed the sale of those properties, I may have received less money on their sales and possibly taken much longer to unload them. Given all that, should I be upset that someone could come in today and buy my current home for less money than I did?
Mike #106,
… should I be upset that someone could come in today and buy my current home for less money than I did?
No.
I hear you, syncmaster 107. I was leaning that way myself. ;)
“WM 19.88, +0.85, +4.5%) plans to raise $2.5 billion through a preferred stock offering and will cut its dividend to 15 cents from 56 cents in moves designed to generate $3.7 billion in additional capital. In addition, the Seattle bank will cut $500 million in noninterest by reducing its Home Loans business and other expenses. It will discontinue all remaining lending through its subprime mortgage channel; close 190 of 336 home loan centers and sales offices; and eliminate 2,600 Home Loans positions, or about 22% percent of its Home Loans staff. The company noted the moves at its Home Loans business and the related non-cash charge will result in a net loss for the fourth quarter. The company will also close WaMu Capital Corp., its institutional broker-dealer business, as well as its mortgage banker finance warehouse lending operation.”
Mike – I’ll second that no.
You did well in the run up – free money – which you used to purchase the house you really wanted. As long as you are happy with the home, enjoy it.
Washington Mutual Plans to Raise $2.5 Billion, Cut 3,150 Jobs
By Elizabeth Hester
Dec. 10 (Bloomberg) — Washington Mutual Inc., the largest U.S. savings and loan, plans to raise $2.5 billion and cut about 3,150 jobs as losses from the mortgage market increase.
The Seattle-based lender will sell convertible stock and close 190 of 336 home loan centers, the bank said in a statement on Business Wire today. It will also cut its quarterly dividend to 15 cents a share from 56 cents.
To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net .
But WaMu’s news is likely to be less well received, considering the dire forecasts the bank is making. WaMu said it will close more than half the home-loan unit’s sales centers, as WaMu prepares for a 40% drop in 2008 U.S. mortgage originations. The company plans a $1.6 billion goodwill writedown on its home loans business, a fourth-quarter loan loss provision of $1.5 billion to $1.6 billion, and a first-quarter loan loss provision as high as $2 billion.
Just a month ago, WaMu was projecting total loan losses for the fourth and first quarters of around $2.6 billion. Now it sees those losses about a billion dollars higher. The shift brings to mind comments CEO Kerry Killinger made at last month’s investor day. “We’ve taken every measure possible to mitigate the effects of the current environment,” he said, but “no one knows for sure what’s going to happen.” That’s all too obvious by now.
Mike,
Sounds like you did well. I wouldn’t worry about it at all. If it is a home you love and you are going to stay there for a while, then all is good. You win some, you lose some. You made money and yeah, you may have bought a little high on this one.
We bought in 01 and just sold. We sold lower than the peak 05 price, which kind of stinks when I think about it. But it could be worse too.
BTW – look our for some big speed bumps come Jan/Feb – had lunch with a sr. big 4 FS partner today and asked him if he is getting some serious consulting money from the subprime fiasco. Was told ZERO – everybody with that type of experience is assigned to the external side to review the BS of the big external audit clients with lots of financial exposure. Firm does not want to end up with liablility and wants to make sure the numbers are all correct prior to issuance of 4Q and the K and SOX certifications. A fine tooth comb on those year end numbers should be interesting don’t be suprised to see a WM or CFC with a big fat MW come sign-off time.
Yeah, Social Security Crisis. Must be an election year …
One possible approach: Eliminate the cap on SSI taxable income (currently $100k). Apply a graduated tax to income above that number (e.g., 6% below $100k; 2% to 300k; 1% above that). There, “liquidity crisis” solved. And we didn’t even have to get on the topic of means testing.
It’s not an investment fund, it’s a defined-benefit program. A really, really popular one at that. Now can we move onto Medicare, which is seriously in danger of actual insolvency?
Oh wait, Bush already “tackled” Medicare…
#101 Clot
“And, all that makes me- as a Realtor- hopping mad over NAR and the ridiculous statements that keep emanating from Lereah, Yun and their stooges.”
So are you a fully signed up gun toting member of the NAR?
Thanks, lisoosh 110 and ann 113. The house is wonderful. Not too big, not too small, and I plan on living in it for many years to come.
Medicare really isn’t a big issue, anymore. Now that all the Drugs or key components under the Bush administration are only available from China, most people on Social Security (who take drugs) won’t live to see Medicare.
PGC,
It is very hard to be in this business and not be.
#100 Walking away while underwater….may no be as simple as you think..I was underwater on my condo for all 12 years i owned it..to walk away meant having credut rating destroyed, possible/probable lawsuit, other assets could be attached, probable IRS issues, besides the fact that you are not meeting your committments…
Amazing how those living within the law can be so easily destroyed by the law, Yet those outside the law like our Government, Corporate Executives, Illegal Aliens, etc., are untouched by it’s rules.
Confused..not always. Every once in a while, somebody gets pinched.
Look at poor McGuire.
Waa, Waa. I want my options back. I got my hand slapped, now let me have my cookie.
If it wasn’t for the periodic Enrons, nobody would want to play.
John, you’re getting BS from the Ptr.
Everybody knows what’s on the numbers. The forecast was adj’d by Sept.
It’s just the education process that has to occur over the next few months.
BC (109)-
WM clearly beginning to circle the drain. I feel like f-in Nostradamus. My one ’07 prediction seems to be coming true.
PGC (116)-
As an owner of a Re/Max franchise, it is compulsory that my agents and I be members of NAR.
Wish it were otherwise.
And, yes, I have considered letting the franchise go, simply to get off the rat-infested Ship of Fools.
clotpoll rocks the house….day in and day out…imho
but what in god’s name does clotpoll mean???
Essex, #127
Supersized intellect.
From WSJ:
http://online.wsj.com/article/SB119724657737318810.html
From Bloomberg:
Bear Stearns Mortgage Unit Accused of Predatory Loan Servicing
Bear Stearns Cos., the second- biggest U.S. underwriter of bonds backed by mortgages, and its EMC Mortgage unit were accused of predatory loan servicing that particularly harmed Hispanic and black borrowers.
“EMC routinely and systematically mismanaged Hispanic and African Americans’ mortgage loans by charging them unauthorized fees,” four minority borrowers said in a complaint filed today in federal court in Connecticut. “Many borrowers were trapped into a downward spiral ending in foreclosure.”
EMC Mortgage, based in Lewisville, Texas, is a Bear Stearns unit that specializes in buying and servicing troubled mortgages. U.S. home foreclosures almost doubled in October from a year earlier as subprime borrowers failed to make higher payments on adjustable-rate mortgages, Irvine, California-based RealtyTrac Inc. said Nov. 29.
The plaintiffs, who seek class-action status for their complaint, accuse Bear Stearns and EMC of violating the U.S. Fair Housing Act. They seek unspecified damages.
Home prices are “still significantly overvalued,” Abbott wrote, adding that further home-price depreciation is expected and that it will hurt consumer spending and put more stress on businesses.
Houses are way overvalued. Prices are tanking lower. Maybe in 12 months rents will be comparable to home payements, been a long time coming.
Breaking news from the Asbury Park Press. Metro Homes has suspended construction on The Esperanza luxury condo project on the Asbury Park beachfront.This project was to lead the revitalization of the Asbury beachfront.All deposits are being held in escrow. John Oates of Hall & Oates fame had put a deposit on a unit last summer.
I came close to purchasing a “penthouse” unit over at Wesley Grove this summer. I am glad I did not. The unit was lovaly BUT the street away from the lake looked like the South Bronx on a bad day back in the ’70s. The Building itself was heavily vandalized, with broken windows and grafitti (much of it very angry and directed at the new residents).
About the Esperanza at Asbury Park, here is a link to the implosion of the ugly unfinished hulk that loomed over the boardwalk for years, which was torn down to build Esperanza: http://www.app.com/apps/pbcs.dll/article?AID=/20071210/VIDEO01/71210054&referrer=FRONTPAGECAROUSEL
Orion Says:
December 10th, 2007 at 9:44 pm
Essex, #127
Supersized intellect.
Undersized phallus.
Ha ha … no moderation :)
Supersize me.