From CNN/Money:
Recession 2008: How bad it can get
The sputtering U.S. economy has gotten everyone from the financial markets to the Federal Reserve to Congress in a panic.
But here’s a disheartening message for those already worried about economic growth — it could get much worse.
Most economists who believe a recession is already here or at least near are looking for a relatively short and mild downturn, perhaps lasting only two or three quarters.
But many of those same economists say they also can envision a worst-case scenario where spending by consumers and businesses falls off sharply, unemployment heads higher than normal during a typical recession and housing and credit market problems worsen.
“I can easily imagine [the economy] going into a free fall,” said Dean Baker, the chief economist for the Center for Economic and Policy Research. “The danger is that housing prices continue to tumble and accelerate, people’s ability to pull out equity will evaporate, and you’ll see a serious downturn in consumption.”
…
Greenback blues David Wyss, chief economist with Standard & Poor’s, said that among his biggest concerns is that overseas investors could pull back on investing in the dollar and other U.S. assets.
…
House of pain. Edward McKelvey, senior economist at Goldman Sachs, agreed with Wyss that, in a worst case scenario, GDP could fall 2 percent this year..His biggest fear is that home prices could fall much further in the coming months. In fact, Goldman and economists at Merrill Lynch have both predicted that home values could fall another 15 percent, on top of the 10 percent drop from earlier peaks that has already taken place.
…
Bank woes just beginning. Paul Kasriel, chief economist at Northern Trust, said he thinks there’s a good chance that the economic pullback will be much steeper than now widely assumed. This weak forecast is based on his belief that the billions in dollars of writedowns already reported by Merrill Lynch, Citigroup, JP Morgan Chase, Bank of America and other big banks are just the beginning of the problem in the financial sector.Kasriel said that if banks have to report more losses due to bad bets on subprime mortgages, they will be unwilling, or unable, to make large loans to businesses and consumers.
From the AFP:
Rogue trader blamed for 4.9 billion euro fraud at Societe Generale
French banking giant Societe Generale said Thursday that a single rogue trader carried out a massive 4.9-billion-euro (7.15-billion-dollar) fraud — one of the biggest in the finance industry.
Trading in the bank’s shares was suspended on the Paris stock exchange after the revelation of the fraud along with a two-billion-euro loss stemming from the crisis in US subprime mortgage market.
The bank said the losses cut its 2007 profit to 600-800 million euros from 5.2 billion in 2006 and that it had carried out a 5.5 billion dollar capital increase because of the fraud “and in order to strengthen its capital base.”
“I have the duty to inform you that the management of Societe Generale has discovered an internal fraud of a considerable scope, carried out by a member of staff in its financing and investment division,” chairman Daniel Bouton said in a statement released on the bank’s web site.
The bank announced separately that the fraud was worth 4.9 billion euros and that it had also lost about two billion euros because of the US subprime meltdown.
The new rogue trader has not been named but brings immediate comparisons to Nick Leeson, the British futures trader who lost 1.5 billion dollars at Barings, causing the failure of the venerable British bank in 1995.
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.
Aaron Wakling
From the Wall Street Journal:
Plan for a Mortgage Buyer Gains Some Ground
By DAMIAN PALETTA
January 24, 2008; Page A7
WASHINGTON — Senate Banking Committee Chairman Christopher Dodd floated a plan to establish a government body to buy troubled mortgages from banks and investors and move homeowners into loans insured by the federal government or bought by Fannie Mae and Freddie Mac.
Similar ideas have been discussed this year, but the Connecticut Democrat’s support could give the effort a lift in the Senate. Still, the Dodd plan is likely a political long shot as many lawmakers oppose government intervention in the housing market.
Sen. Dodd said his proposal would direct as much as $20 billion toward a new agency that would buy distressed loans at “steep discounts” to help borrowers escape expensive subprime loans. The agency would make 30-year fixed-rate loans, Sen. Dodd said at a news conference. He said the proposal isn’t meant to be a bailout for bankers, investors or homeowners.
“I’m trying to give a haircut to everybody,” he said.
If loan delinquencies continue to climb and other foreclosure-prevention efforts fail, a larger government role could draw more support. Sen. Dodd said the proposal could be advanced soon, though it likely wouldn’t be included in the stimulus measure now under consideration.
A similar plan also was introduced yesterday in the House. Rep. Mark Kirk (R., Ill.) called for the resurrection of the Home Owners’ Loan Corp., created in 1933 to buy troubled mortgages during the Great Depression. The agency was disbanded in 1951. Rep. Kirk said the stimulus bill should include $25 billion to recapitalize the agency so it could potentially buy as much as $300 billion in troubled loans.
“This temporary emergency program is meant to be a lifeline to subprime borrowers, preventing a downward spiral into recession,” Rep. Kirk said. “Its doors will not be opened to allow lenders to dump their assets on the government without taking a loss for bad credit decisions.”
From the Seattle Times:
HouseValues’ CFO quits, 45 positions cut
For the second time in a year, Kirkland-based HouseValues is restructuring its executive team and laying off employees.
In a filing with the Securities and Exchange Commission on Wednesday, the online real-estate company announced its chief financial officer, R. Barry Allen, has resigned and 45 jobs are being eliminated.
Allen came to HouseValues last January during a restructuring that eliminated the chief operating officer position on as well as 60 other jobs. It also closed its Yakima call center in July, eliminating 100 jobs.
Before the most recent round of layoffs, the company employed 540.
The company has cited slowing residential real-estate market for all these changes.
…
Founded in 1999 as a lead-generation business for real-estate agents, HouseValues has struggled to find a viable business model amid competition from newer Web-based firms, including Zillow.
Existing Home Sales due out at 10am this morning.
grim (5)-
Yawn…
Good Morning All,
Just so you know…Having read yesterday’s posts and understanding the issue of excess “noise” while you all are trying to transact business, I will refrain from asking my naive questions that arise from my current reading. Additionally, I learned early on to never, ever mention the word “schools.” I remain an avid reader.
Cindy
P.S. A flyer did come out yesterday, I don’t know all the details, 4.75% – 15 year fixed..5.345% – 30 year fixed. It looks like the banks are beginning to seek out those “solid” loans for their books much like they did in 8/03 when I ran into my “coffe table” refi with Wells.
Cindy,
I hope that was tongue-in-cheek.
Be aware that many times these flyers aren’t being sent or faxed by banks or lenders at all, but by lead aggregators. Lead aggregators will advertise a “too good to be true” deal in an attempt to get customer information that they can sell to lenders. The loans they pitch don’t exist. The web is littered with lead aggregators posing as lenders. I hear it is very lucrative, on the order of hundreds of dollars per closed lead.
I’m not sure if this is the case in your situation. Every time I post an article about lending standards tightening, I seem to get at least one email from a reader that points to a lead aggregator pitching a low-rate zero down I/O or Teaser deal.
“free fall” Thank you. I agree. Anyone else see a period of inflation as the rollercoaster goes to the top followed by a sickening drop into deflation? That’s my worst case scenario.
Recession? Will that keep people from beloved retail stores such as Target, Walmart, Garden State Plaza?
Cindy,
On another note, from Bankrate this morning:
Mortgage Rates Lowest Since March 2004
Mortgage rates dropped for
the fourth week in a row, with the average conforming 30-year fixed mortgage rate now 5.57 percent. According to Bankrate.com’s weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.33 discount and origination points.
The average 15-year fixed rate mortgage popular for refinancing fell to 5.11 percent, and the average jumbo 30-year fixed rate eased to 6.85 percent. Adjustable mortgage rates plummeted, with the average one-year ARM plunging to 5.41 percent, and the average 5/1 ARM sinking to 5.35 percent.
Conforming loan, prime credit, downpayment?
Times are good!
Jumbo? No down payment? Bad credit?
Sorry!
(8) Grim,
I will print out the flyer at work today and email you the details – not post them- so you can check. I did not mean to be irresponsible. Sorry.
California is in a huge mess. I had no reason to believe it wasn’t valid having actually done a deal like that in the past so I will email more info when I have it later today…okay?
grim (8)-
The biggest challenge of all right now is to find a solvent lender who can give you that great rate.
The media has moved on to other, more spectacular stories, but small shops and correspondent departments are still closing up shop at a frightening pace. Last Thursday, MortgageIT (Deutsche Bank) “consolidated” its operations to one office in Madison, WI. Put that shop on deathwatch; office consolidation in correspondent lending is followed 100% of the time with a complete shutdown a few weeks later.
My in-house mortgage outfit sees 1-2 deals a week get cleared to close…only to have the lender bail at the 11th hour. Our processors now keep files unbound, so pertinent documents can be quickly faxed to new lenders when they have to restart the application process. I walked into the mortgage area yesterday and found a whiteboard full of names of lenders I’d never seen before.
The consolidation and workout of this mess is occurring at lightning speed. One can only expect that the top-shelf lenders, like Hudson City, will be the big beneficiaries of all this churn.
out (9)-
We’re already on the deflationary downslope. No amount of inflation can jumpstart the sick patient.
Cindy,
I’m sure it’ll make a good front-pager. Lead aggregators have been pushing very hard as the market has slowed. It doesn’t cost them very much to increase advertising. I know we get at least one of these a day faxed to us at work.
God help the Joe who actually submits his personal information to these groups. The brokers will descend like vultures on carrion.
For all the Giants fans out there:
http://www.youtube.com/watch?v=jJHb9m4ccmQ
A townhouse in Berkeley Heights was listed as MLS 2433196 & MLS 2461486 since mid 2007. It is gone this week from MLS. Can anyone tell if it actually sold or was withdrawn?
grim (16)-
Every time a lender or real estate company upgrades its internet presence and reach, it’s a gutshot to aggregators.
In RE, it’s virtually impossible for an aggregator to intercede between a prospect and a company with a quality web presence.
These outfits must be starving. Their stock performances would suggest as much.
grim: on this mls : 2445420 why do you suspect it is taking so long to close. or perhaps it has been withdrawn
tks.
Rogue trader or scapegoat?
From the AP:
Societe Generale Uncovers Massive Fraud
Societe Generale uncovered a $7.14 billion fraud — one of history’s biggest — by a single futures trader who orchestrated a series of bogus transactions that spiraled out of control amid roiling markets this week, the French bank said Thursday.
Executives said the trader, a French man in his 30s, acted alone. CEO Daniel Bouton said the trader’s motivations were “irrational” and that he may not have benefited directly from the fraudulent deals.
Mark,
The listing information has the anticipated closing set for 02/27/2008.
what do you suspect is the delay
Wow! I am glad we avoided the recession with some quick governmental action. Looks like everything is going to be great! 2.5% daily DOW gains from here on!
“Rogue trader or scapegoat?”
JB,
Cockroach theory.
Recession? Will that keep people from beloved retail stores such as Target, Walmart, Garden State Plaza?
What the heck is a Garden state plaza? Is that some sort hippy garden center?
[21],
By the way, Socgen recently announced its intention to raise $5.5B{Eur}. HHMMNNN.
Mark,
I couldn’t even begin to speculate at why that particular closing is taking place on that date.
Lots of factors play a role, especially if either party is moving up or down. If you pressed me for a guess, I’d say that it’s likely the date was chosen based on the sale or purchase of another property, for either party.
BC,
What I’m amazed by is that everyone seems to be so desensitized by these reports that they don’t even cause a flinch anymore. Cockroach theory indeed, an ideal time to air any laundry that you’ve been sitting on.
A loss like that, any other time, would be the headline story for a week straight.
Today? It gets lost in the mix, $7 billion? No big deal.
# 21 “Bouton said the trader’s motivations were “irrational” and that he may not have benefited directly from the fraudulent deals.”
It makes one wonder whether he had gambling debts he paid off using his job knowledge instead of his kneecaps.
Grim: Thank you very much for your insights.
# 14
Clot,
Interesting view into the current day-to-day life of a RE office.
ING CUT RATES AGAIN!!!!
6 Month 3.65% 01/23/08 Open Now
9 Month 3.65% 01/23/08 Open Now
12 Month 3.65% 01/23/08 Open Now
18 Month 3.65% 01/23/08 Open Now
24 Month 3.65% 01/23/08 Open Now
30 Month 3.65% 01/23/08 Open Now
36 Month 3.65% 01/23/08 Open Now
48 Month 3.65% 01/23/08 Open Now
60 Month 4.00% 01/23/08 Open Now
What recession? I went to Bobby Vans last night, every seat was filled and it was packed when I left at 8:30 pm, last week I went to Harrys for dinner, when I left at 9:30pm it was packed and town cars were circled around the place for pick ups. The stupid consumer who had no money in the first place who was living of OPP is cooked, the guys with the money still have the money.
Why bother with ING?
Hudson City Savings Bank is still paying out halfway decent rates. Although this is online, I have no idea if they are honoring these rates.
91d – 4.8% apy
6m – 4.7% apy
Realize, that at those rates, it is almost inevitable that your CD deposits are funding mortgages being held in their portfolio.
“Today? It gets lost in the mix, $7 billion? No big deal.”
JB,
Leeson loses approx $2B. However, that was in the early 90’s. $7B, you have to account for inflation. No?
Grim – this may be a comp killer in Brigadoon. Can you check the history and see if it’s as interesting as my faulty memory tells me it might be?
MLS 2479347
“Today? It gets lost in the mix, $7 billion? No big deal.”
JB,
There is one market paying attention.
# 34 “What recession? I went to Bobby Vans last night, every seat was filled”
They well may have the cash, or they may not be paying with cash or paying off their Amex bills either.
Hudson City Savings CD’s
1/23/08
Term INT APY
4 Months 4.55 4.65
5 Months 4.55 4.65
6 Months 4.65 4.70
7 Months 4.45 4.55
9 Months 4.45 4.55
1 Year 4.39 4.55
13 Months 3.87 4.00
18 Months 3.87 4.00
2 Year 3.87 4.00
2 YearIRA 4.58 4.75
3 Year 3.87 4.00
4 Year 4.15 4.30
5 Year 4.34 4.50
I renewed two Hudson City Savings CD’s Tuesday at 4.75/2yr. On-line is what they had in branch.
#37
509 Colonial Ave.
Westfield, NJ
MLS 2374736
LD 2/12/07
OLP: $949,000
LP: $899,900
Withdrawn: 5/03/07
MLS 2479347
LD: 1/23/08
LP: $749,900
21% drop from OLP.
njpatient,
Not a comp-killer, but it was listed earlier last year..
MLS# 2374736
Original List: $949,000
Reduced: $899,900
DOM: 80
Withdrawn
MLS# 2479347
OLP/LP: $749,000
$200,000 price reduction so far.
That original list price of $949,000 was based on the results of a myth-driven black box.
Well, jobless claims were down and Xerox is reporting good numbers. If the housing numbers look anything better than dismal, I suspect people looking for any glimmer of good news will bid up the DJIA today. It may have the legs of Popeye’s girlfriend Olive Oyle, but what the hell. Any excuse for a party.
“They well may have the cash, or they may not be paying with cash or paying off their Amex bills either.”
SWF.
Here is a scary screen.
Bankrate.com for NNJ 100K 30yr 20%down no points.
3 lenders left. There used to be pages of rates.
http://www.bankrate.com/brm/rate/mtg_ratehome.asp?params=100000,NJ,236&svyList=&product=1&points=1&pType=f&refi=0&pct=0
My bad thought to my wife this week is “I hope our lender makes it to closing”
SWF? WTF I know, SWF I’dont — a bit of a dinosaur I know.
grim Says:
January 24th, 2008 at 5:56 am
From the AFP: Rogue trader blamed for 4.9 billion euro fraud at Societe Generale
UNFORGIVEABLE – stupid frogs…..the entire risk management hierachy should be immediately terminated
Shore,
Sovereign Wealth Fund. Prince Alwaleed didn’t realize that his investment in Citi would be used for a bailout of Ambac/MBIA. Of course, discussed over dinner at Bobby Van’s, expensed to the Prince.
“the entire risk management hierachy should be immediately terminated”
Chi,
The Fed and ECB?
http://www.marketwatch.com/news/story/freddie-macs-unpaid-principal-balance/story.aspx?guid=%7B5DFFEABF%2D9E89%2D41FE%2DB0E5%2DC696CCB6518C%7D&dist=hplatest
Freddie Mac Thursday said the aggregate unpaid principal balance of its retained portfolio rose to $720.8 billion as of Dec. 31
>>
I don’t know what this means.
New Spitzer Tax;
Mr. Spitzer’s aides say the tax could bring in $17 million a year.
Paying the proposed New York tax — $3.50 per gram for marijuana and $200 per gram for other drugs — would not allow the taxpayer to keep illegal drugs, and the governor does not intend the tax to be a step toward drug legalization, said Robert Megna, who was confirmed as state tax commissioner on Tuesday.
#34 John: some of those money guys will be gone too. The problem with many of the money guys on the “street”, is that many tery and convince themeselves that they and their talents are irreplaceable, the old they willl not get ride of me, because I so this or that.
Many have no idea untile they get the tap ont he shoulder.
According to this article, part of the concern will be that consumers will stop extracting euqity form their houses, and as such spending will decrease?
My question would be if you see prices declining, why would you continue to extract so called equity from your home, while the value continues to decline? It makes absolutely no sense.
grim: did you see the article in todays
wsj ref: weak housing starting in North Carolina of all places.
42, 43
Thanks
“So far” indeed.
Well, it has certainly been an interesting morning here @ 1220 6th Ave.
Of course the big discussion is about bonuses, and how the $7bil loss will affect them. The current rumor is they won’t come at all.
Of course there was also a further 2 Bil Euro write down, but that has been somewhat lost in the shuffle.
Again, a fun interesting morning.
# 49. Doh! Of course. I for one prefer Aquavit but, if it is on an expense account, anywhere good will do.
#49 BC Bob: I mentioned this last night. I do not understand how the Meriil’s and Citi’s etc, who have just been bailed out, are now going to bail out the bond insurers?
Are they now going to traverse the world for a second time with hat in hand to get more money, because they used the original investment to bail out the insurers?
I wonder if they needed approval from theri investors?
Is this the phone converstation:
Hey Prince Wahid is it OK if that few billion dollars you gave us, is it OK if we use that to bail out the bond insurance companies, cause they need cash too? Please let me know, Oh and if by chance would you able to give us a few billion more, cause we just helped the bond insurers? Please let me know ASAP, Talk to you soon, Thanks.
That should be 1221 Ave of the Amer. not 1220. You would think I would be able to remember my own work address….
“the entire risk management hierachy should be immediately terminated”
Or whoever overrode them when they were jumping up and down and screaming…
http://money.cnn.com/2008/01/22/real_estate/homeowner_sos.moneymag/index.htm?postversion=2008012405
Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.
But the couple, who have a 15-month-old daughter, may still lose their three-bedroom Northvale, N.J. home to foreclosure. With gross monthly pay of about $10,000 ($6,000 after taxes) – he owns a trucking business, she’s an MRI – technician they can no longer keep up with the $4,100 house payments.
And Kelly, 31, now wonders why she and Luis, 34, were able to get a mortgage they couldn’t afford in the first place. “I expected that if we were approved for a loan, we would be able to pay it,” she says.
Another person who lacks common sense. If you do not know how much you can afford and have to have someone else tell you, than you deserve to lose your house.
I know how much I can afford to spend every month on rent which would be the same I could afford on a house payment. With an income of 120k you should not be buying a 550,000.00 house. Thats why the rule of thumb was created 2.5 times your annul income is what you should spend on a home.
So thats around 300k for this couple not 550k. But its the banks fault for saying they can afford that much. The bank told me I could afford 350,000 I looked at them and laughed and said no I can’t have a nice day and I walked out.
People need to suck it up and admit they made a bad investment and deal with the outcome. If I went and invested 300k in the stock market and the trader told me what to invest in and he lost all my money, is it his fault and should I blame him because I listened to what he told me?
People need to stop whining about it and suck it up and admit they made a bad decision and deal with it
# 60
Depending on how bad it gets, at least some of the people who get axed will be able to see the building whenever they watch SNL.
57 tosh
you must be right around the corner from me
See you at the Yankee Clubhouse store
Speaking of lead aggregators, look what just popped up in my inbox:
Hello,
My name is [redacted] with [redacted]. We are a National Lead Company that has been in business since July of 1998. As well as members of the better business bureau.
We do direct mailing campaigns across the Nation, and we Just Completed one in your area. We target individuals that are in Adjustable Rate Mortgage, that are due to “reset” within the next 4 months and have requested contact by a Loan officer about a Fixed Rate Mortgage.
Here is the criteria they have to meet:
They have to have less than 80% LTV. At least a 640 + FICO, 15k in revolving debt, and answer these specific questions:
1.) Do you have an adjustable rate mortgage? YES
2.) When is your adjustable rate mortgage due to reset? They had to answer within the next 4 months.
3.) Would you like to be contacted by a loan officer about a fixed rate mortgage? YES
We scrub these against the national do-not call list. Which you will receive a SAN# stating we did so.
We also back these up with a 3 way guarantee.
There is a 100% connect rate on the names, numbers and addresses.
They are Exclusive. (They will not be resold)
Also you have a 90 day money back guarantee. Stating if you do not earn $4,000 in commissions for 100 names then we refund 100% of your purchase price.
I can give you the availability that we have by county.
(*Seniors Requesting Contact for Reverse Mortgages also available*)
Just let me know how many prospects could you comfortably handle in a 90 day period and we can get the ball rolling.
Thank you,
[redacted]
# 62 68$ of income going to the mortgage. Yikes! That degree of stupidity should hurt.
I love the following: “Kelly, 31, now wonders why she and Luis, 34, were able to get a mortgage they couldn’t afford in the first place. “I expected that if we were approved for a loan, we would be able to pay it,” she says.”
This points to a serious problem with the country right now, instead of being independent thinkers looking out for our own selves we are waiting for someone else to guide, protect, rescue us. Now I know bad things happen to people that are beyone their control, and compassion, as well as society’s “self interest,” dictates that we lend a helping hand, BUT THIS is nuts.
“Insurance Superintendent Eric Dinallo, who met with industry executives yesterday, is trying to bolster the bond insurers’ ratings with help from banks and securities firms that posted $133 billion of writedowns and credit losses tied to mortgage securities. He’s received encouragement from Federal Reserve Bank of New York President Timothy Geithner, said a person with knowledge of the matter.
The insurers may get fresh capital of as much as $15 billion, the Financial Times said on its Web site yesterday. The figure may be smaller, said a person familiar with the talks. The infusion would help stave off credit rating downgrades of MBIA and Ambac, the industry’s two largest companies, and the $2.4 trillion of debt they guarantee.”
Let’s see: (1) MBIA and Ambac guarantee a combined $2.4 trillion of debt, (2) Banks and securities firms that posted $133 billion of writedowns and credit losses tied to mortgage securities are going to (3) help out MBIA and Ambac with “as much as $15 billion” although “the figure may be smaller”?
Hardly seems likely to drive a stake through that vampire.
I’ll wager a large bet that the “survey” they provided to prospects looked surprisingly like a loan solicitation. I also have no doubt that it was of the “too-good-to-be-true” variety.
Cindy, #7
by all means ask any questions you want, there are probably other people on the board that have the same or similar questions. besides, you never know when you might spark an interesting discussion….
65 grim
That’s not a very well-written come-on. Do these people work out of a basement in Linden?
68% that is
What are peoples thoughts on the National Lead redevelopment project in Sayreville?
It sounds substantial and my sense is that it can really change the “look and feel” of that area.
From the Home News Tribune:
…waterfront property bisected by the Garden State Parkway, routes 35 and 9.
…2.3 million square feet of “lifestyle” retail space, 800,000 square feet of “big box” retail space and a few-dozen marina slips. It also features a performing arts center, an outdoor amphitheater, a waterfront promenade and 2,000 housing units.
# 70
That reminds me of a posting at a college where a person was advertising their services as an, drum roll please, “English Tudor.”
I’ve been in Canada this past week, and I thought I would share this: I was watching the local news and there was a mention of an upcoming story (which I missed) about how Canadians are going to be impacted by the US recession.
…not the “coming US recession” or the “potential US recession” but THE US recession. It was interesting to me since no media outlets here are talking about it that way here.
# 72 and a view of a tank farm.
#72
Do you really think it’ll go through? I have my doubts about the various re-development projects around the state, now that credit is dried up.
# 72
Hey, what about this, we get a few $ together to put together a nice web site, and we pitch a conversion of the bayway refinery’s tank farm to lofts? A unique property, with easy access to the Turnpike, trains. Minutes from NYC.
Syb #76,
Last I heard, O’Neill was supposed to close in Feb.
LurkerA,
Did you see the title of the thread?!
Does anybody here realize that home price appreciation in many cities in western Canada (Calgary, Edmonton, Saskatoon) was a lot more rapid that it was in Phoenix and Las Vegas?
“57 tosh
you must be right around the corner from me
See you at the Yankee Clubhouse store”
patient,
I think the get together should be in NY.
Shore Guy #77,
And for the active, $10 kayak rentals. They can paddle themselves to Manhattan via the Raritan.
Republican lawmakers agree to hike GSE limits
GSE conforming loan limit changes aren’t going to have a big impact unless OFHEO lifts the GSE investment caps.
The only alternative is crowding out.
Fewer low amount loans will be purchased by the GSE in order to purchase these higher amount loans.
This effectively destroys the GSEs charter to facilitate affordable housing.
Fitch downgrades another (smaller) monoline, Security Capital Assurance.
#64 – I may be. It is easy to forget just how small of a place Manhattan really is.
Anyone have the existing home sales numbers for December?
Existing Home Sales Fall 2.2% in December. Median Price Plunges 6% to $208,400.
(69) Kettle1…no, I have no questions today. But I will share what I have just read in “Crash Proof” by Peter D. Schiff.page 116
“The real estate bubble, easily the worst speculative episode in American history, has been artificially propping up the entire national economy. The unwinding will cause havoc reaching well beyond the stakeholders directly involved.”
“According to a Northern Trust Company report, a stunning 43 percent of the increase in private sector jobs between 2001 and April 2005 were housing related, and these jobholders are themselves homeowners and consumers. But furniture, landscaping, appliances, municipal governments, and nearly everything else depend, directly or indirectly, in one way or another, on real estate. The amount of consumption related to home ownership is almost without limit.”
Ironically, the worst-case scenario, and the most likely, scenario would not be a bust proportionate to the boom. That would be devastating, but natural and ultimately salutory. The worst case would be politically inspired re-inflation aimed at preventing a crash landing. That would mean winding up Helicopter Ben Bernanke’s money printer to keep nominal home prices artificially high. If foreign central banks, suddenly awakened to reality by mortgage-backed security investments gone bad, reacted to U.S. economic woes by backing away from Treasury securities or by releasing a flood of dollars in our consumer markets, hyperinflation would compound the problem, causing an economic coup de grace, with h*ll to pay.”
He goes on to explain on page 117 how “Boobus Americanus” looked around for somewhere to put their money after the Federal Reserve dropped their interest rate…with all those enticingly low mortgage rates..who needed to rent etc. etc….. Then there was the $500,000 capital gains exemption on home sales for couples who had been in their homes for two years, so real estate became the obvious investment ….”in short, a recession was being post-poned, while a stock market bubble was being replaced by a much larger one in real estate.”
Gotta go….I’ll just keep reading for now…
# 87. “Median Price Plunges 6% to $208,400”
Does anyone else find this to be particularly important? We have all seen how by throwing out low prices at the bottom of a list of home sales the median price can rise even as each price on the list declines. I did this with my son the other day, showing him how he needs to be wary of statistics thrown around by other people.
To see the median drop, that seems to indicate some pretty hefty price drops across the board, no?
Re the proposed MOM line:
Most support new passenger rail line
Commissioned by Monmouth and Ocean counties and conducted by New York City-based McLaughlin & Associates, the poll surveyed 150 residents of Ocean County, 150 from Monmouth and 200 from Middlesex about their feelings toward the Monmouth Junction Alignment of the rail project.
…
The telephone survey, conducted Dec. 12 and 13, showed 78 percent of respondents in Middlesex County favor the rail line, while 81 percent in Ocean and 79 percent in Monmouth also want the line.
Existing home sales fall 22.8% YOY in the Northeast with the Northeast median price down 8.9% YOY.
What I find especially interesting (at least based on my observation), is that sellers really seemed to be “working it” this December. While the time between Thanksgiving and the Super Bowl is typically downtime, this year I saw open houses & for sale signs everywhere. With such a significant aggregate marketing effort, I’m surprised the sale statistics don’t looks better.
Stimulus deal supposedly struck. $300 for earners under 75K.
http://money.cnn.com/2008/01/24/news/economy/stimulus_package/index.htm?cnn=yes
Stimulus deal supposedly struck. $300 for earners under 75K
There goes the hookers and blow.
[91] I’ve seen a lot of marketing “action” in Bergen County since Thansgiving- open houses on “off” weeks – plenty of relists with sneaky new pictures. The only problem is that nobody is lowering their prices. I keep saying that the 1st person to price their house lower than the rest of the pack of similarly situated homes will sell quickly and perhaps (hopefully?) induce the rest of the sellers to stop daydreaming and price their houses appropriatly. Its amazing to me that many BC homes are priced anywhere from 100 -150K MORE than similarly situated homes were priced in the Spring of 2007!
[94] Finally someone who has also noticed an uptick in prices in Bergen County from Spring of 07.
[89]& [91] Guess some people find it interesting.
Let me guess Realist you are referring to towns such as Wyckoff, Franklin Lakes, Ridgewood and Glen Rock?
395 jam: Finally someone who has also noticed an uptick in prices in Bergen County from Spring of 07.
An uptick ina sking prices, perhaps (insane as that is), but not an uptick in sales prices, thats not happening.
Realist / Jam,
I’ve seen a few instances of homes on the same street where an owner will lower their asking price and within 24 hours others on that street will also. A couple of homes have even gone back a forth trying to be the lowest on the block. Next it will be neighborhoods and then towns.
You see it a lot more within condo or townhouse developments right now.
Rich
Ahhh, new lead story on the “home” page…
80 BC
Maybe we’ll have to do that one of these days. Next question is midtown or downtown.
Tosh and I and Doyle are in midtown, I think John and 3B are down, can’t remember where you are and I’m sure I’m missing about 25 – 50 city folk.
Three great lies:
This won’t hurt a bit
Yes, I will respect you in the morning
I am from the government (Fed?), I am here to help
“This effectively destroys the GSEs charter to facilitate affordable housing.”
So much of current policy seems intended to have similar effect. Certainly, any policy that (though it won’t work) is intended to prop up home values has that effect. Raising the conforming loan limit would be intended to have that effect. Making RE-related debt cheaper would be intended to have that effect.
Affordable housing is one of those ideas that, in the past 7 years, has become “quaint,” along with habeas corpus, due process, free markets, small government, balanced budgets, freedom and “natural athletes”.
A nice overvierw of the bond insurance problem
http://articles.moneycentral.msn.com/Investing/SuperModels/ABadMarketYouAintSeenNothin.aspx
Regarding 102 patient
I read a piece recently where one of the main premises was that the level of freedom in a society is inversely proportional to the population density. The idea being that the closer people live to one another, the fewer things an individual can do without encroaching on someone else’s liberties. Their ideas actually fit the last 50-100 years of the US very well when compared to US history. I wish i could remember where i read it. it was very interesting and very well laid out…..
“Stimulus deal supposedly struck. $300 for earners under 75K.”
RE is back!
RE “natural athletes”
I usually disagree with the main stream opinion on this one. A lot of world class athletes perform at the level they do because of a genetic anomaly that gives them some various advantage, such as an abnormally high red blood cell count, or muscle growth ability etc.
if this is the case then me being mr average joe cannot compete on a “level playing field” with these individuals since they inherent advantages. So what is wrong with me using various drugs/supplements to achieve chemically what they achieve genetically????
patient [100],
D-town.
“such as an abnormally high red blood cell count,”
kettle,
I have that. Unfortunately, I can’t dunk.
Jam and Rich:
Yes, the upticks, have been in some upper BC towns. and Yes, the upticks are in asking prices – not selling prices – however, there are many people out there who are just not getting the trend here. I don’t know who is at fault. Seller? Realtors? I have a couple of freinds who have put their houses on the market – have let them sit at their current (too) high asking prices and are of the opinion that they don’t care how long the houses sit for – they will only sell for what they want and they don’t really NEED to sell so what the heck. How many other sellers are of this mentality? Meanwhile, I’m hoping that some of these over-priced houses come down in price – but they’re not budging. I guess they don’t NEED to sell. There has been a buyer/seller standoff in BC as far as I’m concerned.
Kettle1,
Of course, but the genetic anomaly is there by chance and not design (right now at least). All of life is based on Darwinism in my opinion and this it it in its purest form (innate athletic ability). They key is that these genetic characteristics are there by chance. Taking drugs or cloning yourself take some of that away. Also a lot of this still goes back to hard work as well. It is just that in today’s athletic world hard work will only get you so far if you don’t have these genetic qualities that let you rise above the rest.
True story: Friend’s son is looking for a house in Morris County. Finds a house that he and wife fall in love with. They lowball at 13% below asking price. Seller is a voluntary relocation, already in a new house, so seller is paying 2 mortgages. Seller refuses to even come back with a counteroffer, insists that they “have to get” LP in order to sell.
I told friend to tell kids to monitor the house for 3 months and then come back with the same offer.
What makes any of these sellers think it’ll be any better if they wait 3 months for a better offer? If I had to sell my house I would start it at 10% below assessed value at peak price in 2005 and listen to offers.
Mike
It is just that in today’s athletic world hard work will only get you so far if you don’t have these genetic qualities that let you rise above the rest.
That is basically my point. I can take HGH or steroids all day long but if i dont get in the gym and lift in a rigorous routine i will never be competitive in say weight lifting.
I guess my philosophy behind this is that everyone is NOT born equally. Some people are smarter, some are taller , some are faster, etc. Effort is ultimately one of the defining aspects of success but it is a false statement that we all have equal chances of success. people should expect an equal opportunity at a given challenge, not an equal level of success or failure.
Jill,
I think one of the big drivers in the insanity is people generally lack knowledge of economics and current economic events. The average joe doesn’t get 1/10th of the issues we debate on this blog, such a inflation vs deflation etc, and they dont have any real interest either as CNN or FAUX news will tell them when it is time to worry.
Jill, Kettle 1:
Shouldn’t the realtors have the knowledge? They’re out to make money if there is a sale. Why don’t they talk to their sellers? Why do they “sign up” houses at an asking price that goes agianst their better judgement? I’ve had a realtor at an open house talk trash about another listing they had that it was WAY overpriced and the seller just doesn’t get it. meanwhile it just got re-listed – nice new picture (it’s a winter scene as opposed to summer) and its listed at the SAME price. So whose fault is that? Why sign them up again? Tell them to move on.
From the LA Times
A tipping point? “Foreclose me … I’ll save money”
A homeowner who can’t sell his house tells the L.A.Times, “Foreclose me. … I’ll live in the house for free for 12 months, and I’ll save my money and I’ll move on.”
Banks and lenders fear this kind of thinking — that walking away from a house could be the smart economic move — appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: “… people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties…”
Calculated Risk notes this is “one of the greatest fears for lenders … that it will become socially acceptable for upside down middle class Americans to walk away from their homes.”
A commenter on L.A. Land this morning writes, “I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.
“Despite all this, I would be willing to stay if the bank would refi the loans to a 30 year fixed, but since I’m not a ‘hardship’ case they’d apparently rather foreclose. I guess the only way I could qualify for loan mitigation is to get my boss to fire me, stop making payments, and wreck my credit. In fact, my bank won’t even talk to me until I miss a couple of payments.
“I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.
“I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.
“I don’t really understand why people view a business decision by a homeowner as a terrible moral lapse. However, when large lending institutions, with access to more sophisticated information than any consumer could imagine, make mistakes affecting thousands of people worldwide, they are not excoriated and vilified with the same righteous zeal.”
emphasis mine; the person has a legit point to me
Realist,
most realtors drink the same koolaid as the average joe.
I said most, clott, not all ;)
kettle
“I read a piece recently where one of the main premises was that the level of freedom in a society is inversely proportional to the population density. …. Their ideas actually fit the last 50-100 years of the US very well when compared to US history.”
Doesn’t explain Siberia very well, though.
115 kettle
I was making the same point yesterday. I don’t understand the moral issue raised by an individual treating a business in the same manner that the business would treat the individual.
118 patient,
the issue is that then businesses cant make nearly as much money off of you :(
Doesn’t explain Siberia very well, though.
I will try to find the link to the paper. They also looked at some historical societies such as rome and the UK. Its premise was that given you start with a free society (lets not beat the term free to death here) you will then see the inverse relationship as the society grows.
several people on this board called out the possibility of skyrocketing rates of jingle mail. Looks like its going to get messy, and considering bushes 1099 exemption, is there really any reason not to walk away?
“That is basically my point. I can take HGH or steroids all day long but if i dont get in the gym and lift in a rigorous routine i will never be competitive in say weight lifting.”
Fair enough, but assuming innate talent, the roids and HGH go a very long way further.
McGwire, Sosa and Bonds, without the juice, hit 35-45 HR/yr. With: 50-75 HR/yr. That’s substantial.
Guy like Knoblauch or Velarde goes from 8 to 18.
The assumption is that you already have a certain requisite degree of reflex, eye-hand coordination, hitting smarts, muscle memory, etc. And now you’re adding in Hulk-like strength and Wolverine-like recovery ability. (And don’t forget that HGH apparently causes greatly enhanced vision).
Re: #115
Too bad that the borrower doesn’t realize that the bank will get a deficiency judgment against him/her for the difference between the current value of the house and what is owed on the underlying note, plus legal fees. The bank will be able to attach the borrower’s wages and other assets.
Just walking away is not a good idea, unless the borrower is one of the lucky few who is still able to file a chapter 7 bankruptcy to get rid of the underlying debt.
“So what is wrong with me using various drugs/supplements to achieve chemically what they achieve genetically?”
I’ve had fathers of high-school athletes tell me that their son, who is a good baseball player, has told them that he needs to juice up because the kids who are nearly as naturally talented as he is have juiced up and now are better than him, and therefore he needs to do roids just to keep the status quo. The answer is that, instead of everybody doing something profoundly unhealthy, we’d be better off having nobody do it. Of course, the worst result is where a portion of folks do something profoundly healthy and those that don’t are in effect punished for it.
It’s a game theory moral hazard problem.
122
we will have to wait and see if banks start to take this route….
124
The banks in NJ did take this route in the early 90’s.
123
hmmm sounds kind of like the last several years of housing ;)
#122
“Too bad that the borrower doesn’t realize that the bank will get a deficiency judgment against him”
Simply wrong. That’s dependent on state law.
In CA, there is no deficiency judgment on a purchase money loan, although folks trying to get out of a HELOC would be subject to one, so the person in the original article is not misguided.
125,
i am not suggesting people actually walk away, and i was in highschool in the last bubble so i do not know enough to discuss how the banks handled it….
127
I didn’t see where it said it was a purchase money mortgage
“Guy like Knoblauch or Velarde goes from 8 to 18.”
patient 121],
Brady Anderson
1995- 16 HR’s
1996- 50 HR’s
Hello!!
129 Grain
Fair enough, though it’d basically have to be a HELOC for the bank to have recourse through a deficiency judgment. And obviously you have a point with respect to states where the individual has a garden-variety mortgage and IS subject to a deficiency judgment, as opposed to Cali. But I would suspect that quite a number of those would be willing/able to go the Ch. 7 route (remember, we already know that many are paying off their CC’s and defaulting on their home loans).
130 BC
Bad example – where the Orioles are concerned it’s just Vitamin B-12.
Taken via injection. In the butt.
patient [132],
Yes, I am corrected.
I guess that’s where Clemen’s learned, in the birdpen, about B-12?
#62, #68
Ya! These people is now being punished by their own stupidity and blaming the thieves who never told the truth.
#109 realist:There has been a buyer/seller standoff in BC as far as I’m concerned.
That will end this Spring?summer selling season.
And also at some pint, Realtors will refuse tot ake the listings, how long will Remax or Weichert, or all the little Mom and Pop realtors sit with houses that they cannot sell,and they have to pay to advertise.
BC Bob Says:
January 24th, 2008 at 1:17 pm
“Guy like Knoblauch or Velarde goes from 8 to 18.”patient 121],
Brady Anderson
1995- 16 HR’s
1996- 50 HR’s
Hello!!
It’s not just that Bost. Then there body flies apart and they bust into little pieces.
Lenny Dykstra, Troy Glaus, Brett Boone, Luis Gonzalez, Nomar Garciaparra
3b: I hope so – I just figured the realtors would have done that by now.
136 chi
add Juan Gonzalez to that list
How about Adrain Beltre ‘roiding up in his salary drive year…..how bad is ths?
Year HR RBI AVG
1998 18 42 .215
1999 15 67 .275
2000 20 85 .290
2001 13 60 .265
2002 21 75 .257
2003 23 80 .240
2004 48 121 .334
2005 19 87 .255
2006 25 89 .268
2007 26 99 .276